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GP&T's strategy team updates Rep. Annie Kuster on mill plans

On Friday, 2nd District Congresswoman Annie Kuster was welcomed by CEO Dick Arnold, center, to the Gorham Paper & Tissue mill, a company in Lynn Tilton's Patriarch Partners portfolio of American manufacturing companies that is trying to develop a pathway to profitability. Berlin Mayor Paul Grenier was also on hand. (Photo by Edith Tucker) (click for larger version)
February 25, 2015
GP&T's strategy team updates Rep. Annie Kuster on mill plans

By Edith Tucker


GORHAM — CEO Dick Arnold, CFO Wayne Johnson, maintenance specialist Bill Everleth, and chemical engineer Denise "Dee" Carsley gave a snapshot view of the "state of the business" at the Gorham Paper & Tissue mill on Friday, Feb. 20, to Rep. Annie Kuster as well as Berlin Mayor Paul Grenier and Beno Lamontagne, DRED's North Country resource specialist.

Arnold said the GP&T's goal must be to focus on where three circles intersect: the Owner, Customers-Suppliers, and Operations - intersect.

"We must be One Team…One Focus…One Direction," he said.

The pathway or staircase to profitability start with volume and fiber that comes from up to 300 miles away, plus a re-established customer base; a product mix that includes recycled fiber to meet customer demand plus operational improvement; product development that features higher margins, along with the possibility of developing its own retail business, Arnold said, noting that he's been out on the road visiting customers and former customers.

Consistent volume, reliability and stability are key elements in the 2015 plan along with reducing waste and energy costs.

Unfortunately, the no. 9 Mr. Nibroc toweling machine had to be shut down at 6 a.m. because of lack of orders.

"We ran the machine for a day without orders, but that's all we can do," Arnold explained.

The state-of-the-art no. 6 tissue machine was in operation, however. But Arnold expects that the tissue market will tighten as more machines come on line.

The mill's prime goal is to run the no. 6 and no. 9 paper machines as close to 24/7/365 as possible.

Everleth added that running the two machines consistently represents "right sizing."

The no. 1 and no. 4 flat paper machines are not now part of the mix.

Some new products are being worked on with strategic partners, explained Carsley, a 1992 UMaine at Orono graduate. The bath tissue, a.k.a. toilet paper, now being produced is at the higher end of the quality and price scale.

"We might dabble in retail products," Arnold said. "The aging of the Baby Boomer generation could open up some opportunities."

Energy costs work to the disadvantage of New England manufacturers, he stated. Although the cost of natural gas has not spiked any near as high as it did in the winter of 2014 when its costs shuttered the mill, it does cost far more than does in warmer months.

Fortunately, the cost of oil has plummeted, however, and on Friday it was fuel oil that was being burned.

AVRRDD's landfill gas has been a big help, but availability is still sporadic, Arnold said.

There are now 130 workers on payroll, but union members are apparently feeling jerked around by the machines' unpredictable on-again-off-again schedule. The age of the average worker is over 60, and they're concerned and frustrated, worried they won't retain their jobs until retirement.

"We have a solid plan for the future," Arnold said reassuringly. "We're not a black hole; we're not 'distressed.' Workforce development still remains key to the mill's long-range viability."

Everleth said that manufacturing skills, such as welding and millwright-machinists, would be needed in the future.

Everett Duschenes, formerly of Old Town Fuel and Fiber, has just been hired to manage Human Resources (HR) at the mill.

Kuster, who serves on the House Agriculture Committee, explained that the Farm Bill of 2014 could provide federal funds for rural community colleges, including White Mountains in Berlin.

Farm Bill monies could potentially be used to build dormitories at WMCC to house students drawn from across the state to these kinds of hands-on programs that lead to well-paying jobs, Kuster said.

Cost containment for big ticket items such as employee health insurance and workers' comp are also essential components of reducing the mill's high fixed costs of operation, Arnold said.

He's looking to see if Burgess BioPower is interested in providing hot water to the mill as had been discussed as a quid pro quo trade when GP&T gave the power plant an easement that it needed immediately.

"Eventually, we'd like the Burgess plant to burn our paper sludge," Arnold said, noting that this is the norm in the paper industry.

Later that afternoon, Bloomberg News reported that Lynn Tilton and her private-equity firm Patriarch Partners are facing potential enforcement action from the U.S. Securities and Exchange Commission (SEC) over its management of three pools of risky corporate loans — collateralized loan obligations (CLOs) that it had created. Bloomberg reported that Patriarch had sent a letter to investors in these CLOs saying that it had hired an investment banker to begin talks with them about restructuring the CLOs. Bloomberg reported: "The SEC is accusing the firm of giving investors improper financial statements for the CLOs, in part because it misstates the fair value of the underlying loans, according to the letter. Patriarch said in the letter that it disagrees with the SEC's position and has 'employed what it believes to be a conservative methodology' for valuing its loans because it recognizes neither gains nor losses."

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