MONTREAL - Newsprint giant AbitibiBowater has taken the first step towards becoming a leaner company by streamlining its management team as it looks to aggressively further reduce costs to address deteriorating market and economic conditions.
The senior executive team has been reduced to six from nine people, with more head-office cuts to be announced in the coming weeks as the Montreal-based company restructures under court protection from creditors.
"The fact that the executive team has been reduced by one-third is an important first step in the process of reducing our overall costs and all things are being looked at as part of that, inclusive of head count," spokesman Seth Kursman said in an interview Thursday.
Two of the three executives involved will offer transitional support in the short-term before leaving the company. The third person will head the international sales team but no longer be a senior executive.
The head office operation includes 750 people, including those under full-time contract. About 450 of that total are located in Montreal.
AbitibiBowater wouldn't indicate how many positions it is looking to cut, nor how much money is expected to be saved from the exercise.
The new executive team will now examine other layers of management to develop the appropriate leaner corporate structure.
Expenses other than salaries are also being examined as the insolvent company looks to trim sales, general and administrative costs. These include dramatically reducing memberships in associations, consolidating office space, cutting the number of consultants and obtaining savings from suppliers.
"We are working aggressively to reduce costs both at headquarters as well as in support of our operations and everything is being looked at, including our relationships with vendors," Kursman said, refusing to elaborate.
Kursman said the goal of the exercise is to better deal with market and economic realities while it restructures to re-emerge as a more viable and strong organization.
The six-member executive team will be headed by CEO David Paterson. The forestry company is also looking beyond its headquarters to streamline operational costs. Many plants and paper machines have been idled as AbitibiBowater has aggressively reduced capacity in the face of dramatically lower demand.
Kursman declined to indicate what operational changes are being considered.
But industry analysts said the company will have to join others in further reducing capacity in light of a US$210 per tonnes cut in the price of newsprint since May, which has bled AbitibiBowater of more than US$500 million of sales on an annualized basis.
"Now with the pricing going below $500 then you can expect there will be more closures," said an observer who didn't want to be named.
Higher cost mills in eastern Canada are particularly vulnerable, especially if the Canadian dollar continues to appreciate in value compared to the U.S. greenback.
Efforts to trim head-office expenses are a small part of a larger corporate effort to reduce costs, he said.
"The fundamental is to right-size the company."
AbitibiBowater went into bankruptcy protection in April after failing to reach debt restructuring agreements with its creditors. It is expected to cut jobs, sell-non core operations, raise new investment money and streamline its mill operations to reduce operating costs".
AbitibiBowater produces newsprint, commercial printing papers, market pulp and wood products. The company owns and operates 23 pulp and paper mills and 30 wood products plants in Canada, the United States, the United Kingdom and South Korea.