This is the second of a six-part auto-biographical series about the Cape Breton Development Corporation (DEVCO) by Gerald Wright, who was from 1989 to 1992 a senior policy advisor to the federal minister responsible for DEVCO.
The Mulroney government took office in 1984 promising to build a strong, competitive national economy and re-order government’s place within the economy. Ministers were tasked with piloting major initiatives, such as sales tax reform, financial institutions reform, free trade with the United States, deregulation and the privatization of pubic corporations, together with a hoped-for measure of deficit reduction. The policy environment did not favour propping up struggling companies.
DEVCO was clearly struggling, beset by continual deficits, a low level of coal production, declining international prices, acrimonious relations with unions, an apathetic workforce prone to absenteeism (out of a workforce of 3,000 approximately 400 were off the job every production day), a large unfunded pension liability, some of which dated back to the days of private ownership, and uncertainty over the fate of the aged Lingan Mine, which then employed 1,350 men. Politicians and union leaders battled for the continuance of Lingan, though it had been so extensively mined that miners spent a good part of their day just travelling to and from the coalface.
DEVCO’s operations were conducted under the sea, which raised its costs and made it impossible to meet and compete with world prices that were trending lower. A surplus was forecast for the Company’s 1988-1989 fiscal year, but flooding in the Phalen mine and a twelve-week strike on the part of the railway employees, forcing the company to lay off the entire workforce, turned that into a deficit of $29.7 million. By 1989 DEVCO had absorbed nearly $1.4 billion in federal government funds, to finance operating losses and new capital expenditures.
DEVCO’s difficulties were by no means unique. In early 1991 The Economist reported that since 1984-1985, the year of a strike led by Arthur Scargill to oppose colliery closures, 102 out of 170 collieries had shut down in the United Kingdom. The workforce had been cut by two-thirds. Having to sell coal at prices that were low in relation to costs, British Coal was a constant drain on the public purse.[1]
Since the advent of the Mulroney government, DEVCO had been required to become more commercially viable and to aim for self-sufficiency. The new direction was shaped by the government’s free enterprise orientation, combined with the need to rein in its own spending and a desire to break with the experience of preceding decades. Progress toward the desired end had been, to say the least, halting and it fell to Tom Hockin to ensure that the message was loud and clear, leaving no room for misinterpretation or backsliding.
The minister charged the company and its workers with two paramount responsibilities: DEVCO would have to manage with government funding of $32 million per year, not a dollar more; and workers and management would have to agree on a long-term contract and a unified plan of action, so as to ensure labour peace and substantially greater coal production. When union leaders, management and municipal officials descended on Ottawa en masse that was the message they got.
Riding on the negotiations between management and the four DEVCO unions, as Hockin made clear, was whether Lingan would continue in operation. A request for an additional $18 million for that purpose, which had received strong support from Premier Buchanan, was not approved. DEVCO would have to stick within the approved funding level. Later versions of the minister’s message, which was repeated a number of times, stressed the importance of DEVCO’s self-sufficiency, to be achieved by the end of the planning period. The ultimate goal was a lean, competitive coal company devoting its primary energies to standing on its own feet without government subsidy, and acting solely out of business interests with no more regard for its impact on people than would be expected of a normal firm. This objective was not proclaimed from the housetops – too many sensitivities would have been aroused if it had been – but those of us in the trenches knew that the company was being challenged to escape from its cycle of deficit and despair and turn itself into a viable commercial operation.
Another unspoken corollary was that the minister would deal with DEVCO at arm’s length. The whole community, not just the miners, being prone to make “end runs” to Ottawa to further their complaints, henceforth they would find Ottawa unresponsive. The United Mine Workers of America (UMWA) and the other unions would still try to draw the Minister into discussion of their grievances: the supposed inequities of a 1988 early retirement deal, the controversial privatization of DEVCO’s trucking operation, Ernie Boutilier’s personnel assignments, to name several. Their entreaties would fall on deaf ears.
The minister’s stern message, casting him in the role of distant disciplinarian rather than comfortable backstop, jolted the unions but the result, achieved at the end of 1989 after some tortuous bargaining, was new four-year contracts and, one could hope, support for the desired new direction. There would be a controlled decline in employment, to be largely achieved through expected attrition and early retirements, and a system of retreat mining[2] implemented at Lingan to extend its life. Responding to the agreement, the federal government’s spending estimates for 1990-91 included the promised funding for DEVCO,
The Hockin strategy placed responsibility for DEVCO’s future, if DEVCO had a future, squarely on the shoulders of management and unions. Characteristically undramatic, Ernie Boutilier was careful to describe the outcome of the bargaining as “an opportunity to perform”, dismissing suggestions that DEVCO had been given any guarantees.[3] Joe Burke, then president of District 26 of the UMWA, under a cloud for being a Conservative candidate in the last provincial election, boldly claimed that Lingan’s future was now assured.[4] In fact, there was no commitment to the mine’s continuance beyond the first year of the agreement.
The battle had only just begun. We were up against deeply entrenched forces: divergent regional interests avidly pursued within and between governments; the obduracy of union leaders hardened by the experience of industrial strife; and, in the wider community, a conviction that Cape Breton deserved special treatment combined with resentment of outsiders. Trying to build a competitive company that could stand on its own would shake the foundations of the region’s social and economic structure. At the same time, the attempt could be bedeviled by politicians wedded to the old ways.
Retired after a career in government, universities and a private foundation, Gerald Wright is Senior Fellow of the Norman Paterson School of International Affairs of Carleton University. From 1989 to 1992 he was senior policy advisor to the federal minister responsible for the Cape Breton Development Corporation (DEVCO).
Notes:
[1] “Britain: A cruel choice,” The Economist, February 9, 1991.
[2] When the limits of submarine mining are reached, retreat mining recovers the supporting coal pillars, working from the back of the mine through to where mining was first started.
[3] “No guarantee for Devco: Boutilier,” Cape Breton Post, March 6, 1990.
[4] “Devco gets federal funding,” Cape Breton Post, February 23, 1990.p
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