EDITORIAL & OPINION — Employees may be worse off as owners — The cold-eyed view

Anyone watching the play in the Canadian airline industry, as Onex Corp. tries to merge Canadian Airlines with Air Canada, is getting a free, and valuable, lesson in employee ownership.

Air Canada, the quarry, is aggressively courting its employees to back its counterattack against Onex’s hostile offer by signing up for shares. Employee ownership has its uses, even for management.

In our business, the high-profile employee ownership story is at Royal Oak Mines’ Ontario division and its Giant mine, near Yellowknife, N.W.T. At both operations, the local unions representing the employees are examining the possibility of an employee buyout to preserve jobs.

Local 4440 of the United Steelworkers was given until Sept. 15 to come up with a plan to save the Pamour mine from closure, after successfully applying to the courts for a chance to look at employee ownership. Local 2304 of the Canadian Auto Workers, the bargaining unit at Giant, has until Sept. 22 for a similar decision.

The Ontario Court’s decisions to give the two locals time to examine the economics of the operations means nobody can reasonably suggest that all the alternatives for saving the operations weren’t tried. The unions are showing they are serious about keeping the operations open, and would consider putting their money where their mouths are.

Saving your job is an easy decision, when it’s the only decision. Paying your own good money to save it is a more complex one. In a buyout, the employees become investors, and if they are buying out a troubled operation, their own bank accounts become as important as their job security. The CAW’s national president, Basil (“Buzz”) Hargrove, saw it clearly when he commented, in reference to an employee buyout at the airlines, that “people already invest their lives in their work so it may be too much to ask for their money.” In short, a miner or mill worker with an insecure job doesn’t need a bad investment to go with it.

It’s inconvenient, but true: some orebodies are just better than others. Technical wizardry, smart scheduling and management, and good teamwork can give a marginal mine a fighting chance, just as poor management can destroy a good one. But not even the best management can save a mine that is uneconomic in the first place.

That is what the Royal Oak unions have to consider. Pamour and Giant were not money-losers when Royal Oak went into receivership. They were marginal producers, and it may well be that both can be made more profitable than they were under Royal Oak’s direction. Certainly Royal Oak’s singleminded cost-cutting didn’t turn the two into profitable producers, and the workforces, who went through much in the Royal Oak days and whose livelihoods are at stake, deserve a chance to see if there is a better way.

There may not be: these operations may simply be too hard to squeeze costs from without crippling them, in which case there is nothing for employees to gain in ownership. There is, as well, a nasty wild card at Giant: 260,000 tonnes of arsenic trioxide, which poses a massive environmental liability for any future owner. Estimates of $230 million are fanciful; it would take a much smaller liability to kill the mine’s economics.

The public information on these mines’ efficiency is scanty — partly, it seems, as a result of Royal Oak’s own unwillingness to shine much light on its pre-receivership finances — so we can’t be sure whether these mines are potential turnarounds, or very expensive trouble. But it behooves the courts, the receivers, and the employees to find out. To the court’s considerable credit, it has made sure the employees are not being offered a pig in a poke.

We don’t want to see Timmins and Yellowknife each lose a mine; nor do we want to see 400 mine and mill employees lose their jobs. But the cold-eyed view, which usually turns out to be right, is that people put their capital into mines to make a return, not to provide jobs, even for themselves, or sustain towns, even their own. Both Pamour and Giant will succeed or fail as gold mines on that measure alone, and to shrink from that realization may cost the workers money they cannot afford to lose.

In their own members’ interests, the local unions at both Pamour and Giant should take that cold-eyed view when deciding whether investment in the Royal Oak mines is worth their members’ money. Are these mines worth saving? If they aren’t, nobody’s job will be saved in the end anyway.