BUSINESS

TANGLED NETS

THE EAST COAST FISH INDUSTRY IS SUFFERING AS CATCHES SHRINK AND PLANT CLOSINGS SPREAD

September 4 1989
BUSINESS

TANGLED NETS

THE EAST COAST FISH INDUSTRY IS SUFFERING AS CATCHES SHRINK AND PLANT CLOSINGS SPREAD

September 4 1989

TANGLED NETS

BUSINESS

THE EAST COAST FISH INDUSTRY IS SUFFERING AS CATCHES SHRINK AND PLANT CLOSINGS SPREAD

Gordon Cummings, the outspoken 48-year-old president of National Sea Products Ltd., recalls that he felt the tension as soon as he entered the room. It was just before 5 p.m. on Aug. 17, and, only minutes before that, National Sea chairman William Morrow had summoned him to his sixth-floor office in the company’s mirrored headquarters overlooking Halifax Harbor. Cummings had always had a friendly, relaxed relationship with Morrow and with the other man in the room—David Hennigar, a Halifax stockbroker who masterminded the plan that kept National Sea out of bankruptcy in 1984. But, that Thursday, the pair greeted Cummings with strained formality. As soon as Cummings was seated, Hennigar told him in flat, unemotional tones that he had “lost the confidence” of National Sea’s board of directors. Then, Hennigar asked Cummings— whom many had viewed only two years ago as the ruling genius of the Canadian fishing industry—to resign. “I was shocked,” Cummings

told Maclean’s last week. “I honestly had no idea this was coming.”

The resignation of Cummings, a blue-eyéd, six-foot Montreal native, came after five years at the helm of North America’s largest seafood company. And his ouster was more harsh evidence of the deepening crisis facing the $2billion East Coast fishing industry. Stocks of

cod, flounder and other fish, which have drawn fishermen to the North Atlantic for centuries, have fallen to alarmingly low levels. Declining fish catches have already triggered plant closures and job losses across Canada’s poorest region. At the same time, competition for the dwindling stocks is fuelling a growing international conflict. Overall, the outlook is so bleak that, last week, Newfoundland Premier Clyde Wells travelled to Ottawa to plead for federal aid to ease the loss of 3,000 fishing jobs in his province alone, resulting from declining fish stocks and reduced quotas. Concluded Victor Young, 44, chief executive officer of St. John’sbased Fishery Products International Ltd. (FPI): “The situation for the Atlantic fishery has never looked more worrisome.” Still, Atlantic fishermen have navigated through rough waters before. During the 1970s, the industry overexpanded in anticipation of large profits expected when Canada increased its coastal fishing zone in 1977 to 200 miles from 12 miles. Instead, fish prices dropped as interest rates rose, and the entire eastern fishery collapsed and had to be rescued by the federal government in 1984. The restructuring resulted in the formation of two supercompanies—National Sea and FPI—from the remains of several smaller companies. Although the industry is failing now, the bailout originally worked, and the Atlantic fishery went through a rapid turnaround. A cheaper Canadian dollar and a growing U.S. appetite for high-quality Canadian fish dramatically increased exports and earnings. Just as important was the deftness with which National Sea’s Cummings and FPl’s Young piloted their companies back to profitability. But last week, Cummings, the father of two children with his wife, Barbara, was at his two-storey, 4,000square-foot home in the Halifax suburb of Bedford, making and receiving phone calls. “I have a few leads on a new job,” said Cummings. “A lot of people have phoned to express their sympathy.” Cummings has yet to reach a settlement with National Sea and says he hopes he can avoid going to court over the issue.

But, like Cummings, the entire industry is now being tossed by turbulent seas. The problem is that Atlantic waters are simply running out of fish. Each year since 1984, Ottawa has tried to stabilize fish stocks by reducing the

allowable catch. Even so, Canadian government scientists shocked the industry earlier this year when they reported that overfishing had reduced the northern cod stocks—the backbone of the industry—to far lower levels than the government previously thought.

Fisheries Minister Thomas Siddon agreed to cut quotas by 12 per cent—to 235,000 tons from 266,000 tons annually—rather than by the 53 per cent that biologists had recommended. But even that smaller cut forced the industry to take drastic steps, including buying fish

from other countries to keep plants busy—and, when that failed, simply to close the facilities. National Sea lost $3 million during the first six months of 1989, compared with a profit of $4.7 million for the same period a year earlier. It has announced plans to close one plant permanently and has temporarily shut down seven others in Nova Scotia and Newfoundland this year, putting more than 3,500 people out of work.

The situation has also been serious at FPI, which suffered a bitter nine-week strike last winter and lost $2 million during the first six months of 1989. Capital spending has been cut, and at least 40 people in its office staff were laid off. And Young told Maclean ’s that plant closures could lie ahead if fish quotas are cut further. Said Young: “If you have too little fish and too many trawlers and plant capacity, then you have to cut back.”

At the same time, declining Atlantic fish stocks and overfishing are also causing international friction. Earlier this month, a Canadian fisheries patrol boat requested permission from Siddon’s office to fire warning shots to halt a U.S. ship seen allegedly fishing illegally in Canadian waters off Nova Scotia. Earlier this year, in a highly contentious decision, Canada only reluctantly agreed to allow French fishermen from the French islands of St-PierreMiquelon to maintain their cod quotas in the Gulf of St. Lawrence. And Newfoundland fishermen continue to blame the 70 fishing boats from Spain and Portugal, which work at the edge of Canada’s 200-mile limit, for the overfishing of cod and other species on the resource-rich Grand Banks.

Despite the general turmoil in the industry, Cummings still maintains that he does not know the real reason for his dismissal. After 15 years with management consultants Woods Gordon, Cummings, an accountant by training, was brought in to help restructure National Sea in 1984 and accepted the chief executive’s post a year later. During his four-year tenure, he embarked on an aggressive—and g expensive—expansion into g South America, the continental z United States, British Columbia ° and Europe. When contacted by Maclean’s last week, National Sea officials declined to give rea-

sons for the firing. Cummings himself could only speculate that the last two company board meetings indicated that directors were not pleased with the performance of some recent foreign acquisitions. “It looks like I just misread things,” he said. One thing that appears certain: Cummings will not be the last casualty as the Atlantic fishery tries to navigate through the raging seas ahead.

JOHN DeMONT with RUSSELL WANGERSKY in St. John's