For The Labourer is Worthy of His Hire

The APPM Dispute

Chris Oldfield

My knowledge of Sociology can best be summed up by the fact that my senior lecturer for three years was Brian Howe. I remember my final year's paper, which he lost---I actually failed final year. When he found the paper, I passed.

The F17 freeway which some of you would know as a 6 or 8 lane freeway that winds up in a suburban street in North Fitzroy, is one of the more bizarre examples of road planning ever seen. Brian Howe had his entire final year Sociology class doing work on this freeway. It became evident why, because he lives on Alexander Avenue where it runs into. We didn't know that until we were invited to his house for a cup of coffee one night and here is his house on the end of this freeway. I do not think he would be lost to the world of Sociology when he joined politics. Neither was I, by the way.

The other interesting thing I would like to say is about Robe River. When we started this exercise at APPM we went to great pains to say that this is not another Robe River and we really went to a large degree of effort to make sure that was seen as the case. One night about 2 or 3 weeks ago I was having dinner at a friend's place in Hobart. I have one of these little mobile phones and I forgot to turn it off. At about 10 o'clock the phone rang. It was a journalist and he said "I am from the ABC---We have just done an interview with a guy who reckons that this is another Robe River". By this stage I have had just enough to drink and I said "Absolute rubbish. I am sick and tired of hearing about bloody Robe River. This is not another Robe River." I said "Who said it." He said "Michael Porter, he says it is not a Robe River because if the result is the same as Robe River you will have job security for 100 years the place will run like a bird." Of course he is quite right.

Just before I start there is a phrase that sums up what we are trying to do. It was a quote from an American President some years ago, where he said, that "the best way to create enemies is to create change," and at APPM, which is the forestry and paper arm of North Broken Hill Peko Limited, that's what we are trying to do. We are all trying to create change and we try to create change in something of a hurry. Now the reason for doing this---and we need to go back into history a little bit--- APPM has been going as a Company for 54 years. We were the first Company in the World to use eucalypt to make paper. Prior to that, most fine paper was imported into Australia. By fine paper I mean quality paper, writing and printing paper. Now that's what we are about, we are not really into packaging for agents or things like that. So prior to our advent all of our fine paper was imported and about 54 years ago we started to develop a technology to use eucalypt. APM started doing it about the same time. So from that period forward we have had a major share of the domestic paper market in Australia and for a long time we have treated our customers accordingly---we have treated them on the basis that we have had the paper and they have wanted it. So for many years we really haven't gone to the customers and asked them what they have wanted. We have said to them that this is what you are going to get and if you are not happy we won't give it to you. That really has been the approach we have followed for many years. We could get away with it because there was a lot of tariff protection on paper coming into the country. There was the problem with transport in getting the stuff here. We could survive, make lots of money and treat our customers, I think, reasonably poorly and not worry about imports or work practices too much. Unfortunately that has all started to change. The domestic paper industry has become tight. There is now floods of imported paper coming in to this country. The tariff is going to disappear totally in 2 or 3 years and we have been jolted into a sense of reality.

To deal with that threat we have invested heavily into quality in our operations. Our major problem is our volume but we have been very hesitant to spend any money on increasing our volume. In other words the capacity of our machines is very small. We have 7 or 8 paper machines and we turn out 230---240 thousand tons of paper per year and probably 60 or 70 different grades. We have some people just back from America from a mill in Georgia where one mill turns out 900 thousand tons of paper per year, making the same grade of paper, day in day out. For us to combat that is incredibly difficult. What we have to do is try and get to an acceptable level of production. This is where we get ourselves caught in a bit of a quandary. A lot of companies in Australia want to export because export is good for export reasons. We want to get to a stage where we can export because it is the only way we can justify putting in world scale machinery. If we don't put in world scale machinery then we cannot hang on to our domestic markets. So it is a bit different to iron ore exporters, or whatever.

So we are now facing these big machines with very large efficiency from Europe, from North America, and more recently from Indonesia and Brazil. Brazil by the way still picks up a 5% developing country preference on tariffs from paper coming in here and yet they have got one of the most advanced paper industries in the world. We have found ourselves in the last few years with this dilemma. We have decided that we would rationalise our product range. We would invest heavily in quality and we have invested in recent years 50---60 million dollars a year to maintain our quality, and I think we have done that reasonably well.

In relation to becoming a true exporter we have tried to develop the Wesley Vale pulp mill, which some of you would no doubt know about. I am not going to talk about that today. Just to make the point; that project did not fail any environmental assessment. There simply was not any assessment process capable of dealing with the project and over the last 3 years we believe that we have resolved most of those points. We are actually waiting on three things now, to get this project going again. The first is resource security legislation. We are currently having a rather intense battle in Canberra and, regrettably, our battle at the moment seems to be with the Coalition, not with the Government. It is still hopeful that this can be resolved. Once that legislation is passed, we have to find a partner, and we won't find a partner until that legislation is passed. Finally we need the Commonwealth Government to finish it's environmental studies on Tasmania's forest and we believe they can do that very quickly. So that is what we are doing to become internationally competitive.

In relation to our domestic business, as I have said, we have invested heavily. We have got involved in award restructuring over the last 3 years at our mills and to some degree we have been successful in achieving some gains in the context of award restructuring. However at our Burnie mill a lot of those gains will take 3 years to come to fruition, and there is a capital investment on our behalf of some ten million dollars alone if we are to warrant our obligations under award restructuring.

The view that we have taken in recent months is that the progress we have made in reviewing awards and in improving the performance of our employees and our staff simply has not been going quick enough.

A few months ago we took the measure of examining all the restrictions on our business in terms of work practices and over award agreements and we established a working party. Some of you would know some of the people on that. One of our advisers was Herb Larratt. We spent about a year going around all our sites, having a look at where we believe we could do better. Having decided where we could do better, we then took a legal look and decided what things we could do legally and what we couldn't do, and what was discretionary. The decision was made that we would give 30 days notice to our unions on 3rd March this year (1992) that we would withdraw from all over award agreements with four exceptions, which were:

(a) the 25% over award weekly payment made to our employees;
(b) a 35 hour week which applies to most of them;
(c) our contribution to a fund which is known as the APPM ACTU Superannuation Fund;
(d) and payments under our redundancy agreements.

So those four things, which are industry standards anyway, we decided, at this stage, not to withdraw from. At the end of the 30 day notice period all other agreements we would cancel and our legal advice was that 'we could do that quite legally'.

We have now come to the end of that 30 day period, last Friday in fact. I think it is worth recapping to see what has happened over those 30 days, and the reality is, not much has happened at all. We took a very conscious decision from the staff that we would sell our message both in terms of why we had taken the action and what we were actually doing, as strongly as it could possibly be put. We have learned the lesson, probably better than anybody else, what happens when we do not communicate properly to your employees and to the public. The Wesley Vale Pulp Mill cost us and our partner 21 million dollars. One of the major reasons that we lost that, was the inability we had to sell our message, so we learnt that lesson and we made sure, this time, that it wouldn't happen again.

On the 3rd March we sent letters to every employee covered by an award in the Company. We put up notices on all our mill notice boards and we held a major media conference in Hobart where our chief executive, Bill Post, explained in detail to the Media precisely what we were doing. We have maintained our position with the Media ever since and we believe that it's gone a long way, certainly in the public eye in Tasmania, to addressing some of the concerns and in fact only on Friday I received the latest public opinion survey. There is still about half the State which does not know what we are doing, but of the half that do, about 80% support our actions, and that is about the best we can possibly hope for.

So over that last 30 days the Unions really haven't been too sure how to handle it. The smarter Unions have decided that the Company is very very serious and the smarter guys picked it up very quickly. The not so smart ones I guess still haven't understood that. A day or so after we made these announcements, our two Unions, the metal and engineering, and the PKIU made application to the Industrial Relations Commission for a dispute to be found and that was heard in Sydney on about March 6th or 7th. The Commissioner then was Deputy President Reardon. He suggested the parties go into conference---we agreed and we sent our solicitors. They answered some questions that the Unions raised---the matter was reconvened a couple of days later in Melbourne. He decided that he could not handle the matter any further due to his work commitments and passed it over to D.P. Munro.

The Unions then made an application for a compulsory conference and that was heard 3 weeks ago in Melbourne. Munro ruled that he could not order a compulsory conference. He said there was no value in doing that if there was no willingness to negotiate. We always said that we wouldn't negotiate away these points so he would not rule a compulsory conference. Two days later the Minister for Industrial Relations, Peter Cook, got involved and wrote a rather intriguing letter to Munro saying that he wasn't attempting to comment on the merit of the dispute or otherwise but he was concerned about the threat of industrial action and he suggested that the Commission have another look at it. The Deputy President then immediately wrote to all the parties and said---I am paraphrasing this---'I am somewhat confused. There is no current application before me. There was for a compulsory conference and I have dealt with that. That matter I have re-listed for hearing again, on April 7th, so I don't really understand what the Minister wants me to do but would the parties please advise me'. That was 3 weeks ago---nothing has happened since. The matter rests to be re-listed again for this Tuesday and we will see what happens.

The Unions have 2 or 3 times threatened to bring on industrial action in operations. That has not happened. We have spent an enormous amount of time having meetings on the sites explaining to our employees why we have to do what we are doing and I think we have a pretty broad acceptance from them. A lot of them don't like it, but they have understood that if we do not touch the 25%---the 35 hour week, the actual effect on the hip pocket is very very slight. To a lot of guys who want to come to work and want to be seen to be reasonable and want to get on with it, don't want these restrictions any more than we do. They find demarcations, the rorts that go on, I think, just as frustrating as we do. I am not naive enough to think that we have the entire workforce on side. We certainly have a fair chunk of them and I think a lot of them understand why we are doing it.

Over the last 30 days we have continued our campaign of informing our employees. We have responded to each and every criticism raised in the media by the union movement and we have been quite pro-active in doing that. Over the last couple of days I guess as the date came closer for these changes to be introduced, it has started to heat up. Martin Ferguson has been invited down to Tasmania to address a series of stop work meetings tomorrow. We have steadfastly refused to discuss this matter with the ACTU. We were invited initially 3 weeks ago, and we said no, and then almost from shock I think on the ACTU's behalf, they couldn't believe that we had been invited to attend and we refused. So they have invited us twice since and each time we have refused, and said 'no, there is nothing to discuss.'

We are not prepared to bargain away our future! So Ferguson is coming down on Monday, as long as he can get an aeroplane I guess, with the fuel shortages. Which I kind of suspect he wouldn't be all that unhappy if he couldn't get there. I don't think the ACTU wants to be involved in this particularly. They are certainly critical of the way we have gone about this, but I don't believe they're critical so much of what we are trying to do. Anyway Ferguson arrives tomorrow to hold a series of 2 hour stop work meetings and we have done a couple of things. We have put up mill notices and we took out full page advertisements in all the Tasmanian Newspapers yesterday and have said quite clearly to our employees that we have had a lot of people come to us to say that they want to work so we will provide work and we will use staff. We will do whatever we have to do to keep the operations running.

Secondly if people do not come:

a) they won't get paid when they come to work, and
b) we will argue that they are in breach of their contract of employment and we will take disciplinary action.

Thirdly, we have written to the ACTU, on Thursday, and have said if these stop work notices have come under their signature that we would reserve our right to take action against them to recover any loss or damage that we might incur. That has certainly got the attention once again of the media, at a national level, for almost the first time. We are quite serious and we will do that if we can demonstrate that we have suffered loss.

One other thing we announced on Friday---which was described to me yesterday by quite a few media representatives as being provocative---is that if we lose market share due to industrial action we will never recover it. If we are out of the market place for some months due to prolonged industrial action we will never get those customers back. We have taken every step we can to maintain our market position and we have done that by making stock and also by supplementing our stock with some paper from the United States. That paper arrives in Burnie in what we call an unfinished form---that means that it still has to be cut in sheets and packed over the next couple of days. We are not saying how many tons of paper there are. It is sufficient to say that there is a lot of paper. We also put that in our advertisements yesterday saying that we are very serious---we are not going to lose market share. If we lose market share, ultimately, we will lose jobs. We are not prepared to see our workers suffer---so we have done everything we can to supplement our stock. The unions have described that last night and this morning as being naive but they haven't explained why we were naive in bringing in paper. Again, we will do anything we can to get that paper across the wharf into our mills, wrapped and packed and ready to go if we need it.

In fact, in all of this, I had my most difficult interview last night with a journalist from 'The Mercury' in Tasmania about 10 o'clock at night, which I guess is not a good time to talk to journalists. Certainly our ads yesterday have been seen to be provocative. My point is that they are honest and that we have told people what we are doing and then individual workers can make up their own minds as to what they want to do tomorrow.

So to round off, I need to explain in some detail why we are doing this. It is not a cost cutting exercise. We cannot go out and simply say---we want to save x%---it's not that simple. There is a different arm to this as well. In the bush we are also taking efforts to reduce our costs. We have notified our bush contractors who supply us with logs that we want to reduce costs by about 20%. We believe we have done that with the log hauliers working up on the east coast. We have already taken 10% out of their costs and will now peg their costs until inflation eats away the other 10%. Up the north west we still have 15% to go. The contractors have handled that well. In fact the chairman of the Tasmanian Logging Council has come out and said that this is now a challenge to all logging contractors to reduce their costs. He believes they can do it. So that's gone reasonably well. In relation to our paper operations, it's simply not a cost cutting exercise. It's about really trying to create a whole new culture of work---a new way of working, a new way of doing things and allowing people to reach their full potential and allowing us as managers to run the show properly. One of the criticisms we have copped from the union movement is that we have taken this drastic action and we are not even in a loss making situation. That's exactly why we are doing it. We are trying to do it before we go into a loss. We think if we wait until we are in the red then we would be held accountable to our shareholders for destroying the business.

What we are about, really, at the moment is trying to make enough money to re-invest. We are making a profit, but it is no where near enough for our investment program. The minute we stop investing, that's when we are really going down the tube rapidly, and we are not prepared to see that happen so it's more than just simply, as I said, an exercise in cutting costs. It's about creating a new culture, it's about creating a new way of doing work. All we are trying is to get us to a level of profit performance that we can re-invest and offer long term job security. Now what will happen over the next few weeks, I don't know. To a large degree that will be determined, I think, by what happens tomorrow, because if people do take stop work action against us tomorrow, our argument is that's not consistent with our aim of having people who want to work in this new environment and we would certainly look at what action we could take. That may turn the whole exercise up a couple more notches, but we are not prepared to back down. The company is very very serious in how it goes about this and hopefully, with the support of a lot of our work force, we will see our way through this.

Thank you for your time today. I think it is important that we get this story across on what we are doing in case it does start to take on a national profile. So if this does develop over the next few weeks, at least you have got some background to what we are doing.