The tightly-knit community of Park Falls in the Northern highlands of Wisconsin earns much of its livelihood from the forest products industry. All seemed lost when the town’s pulp and paper mill went bankrupt last year.
But a team of investors with resilience and vision fought to keep the plant from liquidation. By empowering its employees and partnering with experts from the public and private sectors to invest in cost-cutting process and reliability improvement projects, Flambeau River Papers reopened. The mill is exploring new frontiers in energy independence, and concepts such as process control, production efficiency and social responsibility now resonate within its organization.
The company’s resurrection, recent accomplishments and ongoing transformation, as well as the opportunities it promises its employees, investors, community and society, have earned Flambeau River Papers our recognition as Plant Services “Survivor USA” Plant of the Year.
Park Falls is perhaps the most geographically isolated community in Wisconsin. The city’s 2,800 residents live in a region distinguished by vast forests, abundant lakes, hiking trails and wildlife. The pulp and paper mill is the largest employer in the area and is one of just a handful of manufacturers. There are only two traffic lights in the entire county, both installed to accommodate traffic trucking raw materials in and finished paper out of the mill.
Pulp and paper were first manufactured in Park Falls in the 1890s. During the next 100-plus years, the mill’s name changed several times, but the faces largely remained the same. Many employees spent their entire working career at the mill.
Tom Ratzlaff, Park Fall’s part-time mayor and a full-time beater engineer, has been employed at Flambeau River Papers since 1979. Dan Detko, president of Local 2-0445 of the United Steel Workers of America, the union representing the mill employees, graduated from high school on a Sunday and walked into the mill for work the next day.
When Smart Papers acquired the mill from Fraser Papers early in 2005, the goal was to expand its position in the premium specialty segment. Things soon got shaky because of rising costs and price pressures. Energy costs were the primary concern, rising from $400,000 to $1.4 million per month. In March 2006, barely a year after buying the mill, Smart Papers declared bankruptcy.
“It was a devastating blow to the region when the mill went down,” says Detko. “The mill is a huge part of the Northern Wisconsin area economy.” Flambeau River Papers purchases 140,000 cords of wood per year and produces 22 to 27 truckloads of product per day. The bankruptcy touched not just the mill employees, but logging companies, those who truck the logs and the final product, and other local companies in support roles.
“The mill’s closing was huge. Finding new jobs for the 300 displaced employees in a town of 2,800 people was next to impossible. Some found new jobs or moved away, but many stuck around to see if efforts to re-start the mill would be successful,” says Ratzlaff.
Escape from liquidation
A team of investors led by Butch Johnson of Johnson Timber acquired the asset from bankruptcy court in July and reopened the mill as Flambeau River Papers on August 9, 2006. “We were the only party that wanted to keep the mill open. Everyone else wanted liquidation,” says Johnson, the CEO and majority owner of Flambeau River Papers. The main challenge was financing. “The banks didn’t greet us with open arms because they weren’t sure we’d stay around and be profitable.” Loans and grants ultimately helped with reopening. Financing for the purchase included a $4 million loan from the Wisconsin Department of Commerce.
Staffing the mill was easier. “We lost a couple of key people when the mill went bankrupt, but the vast majority returned. They hung on to rumors, later validated, that the mill would reopen,” says Randy Stoeckel, the mill’s vice president and general manager. The mill reopened with no change to the labor union agreement: No wages were reduced and no benefits were cut. “We decided if we were going to make it work, we would do it with better operations, not on the backs of the employees.”
A new management philosophy immediately took root. Johnson has been in the forest products industry since 1973, but this was his first venture in paper mill operations.
“From our perspective, Johnson’s inexperience in operating paper mills was a blessing.” Ratzlaff explains. “His outside-in view enabled him to see the mill differently, without predisposed ideas. While previous owners wanted to see a profit before they would make capital investments, Johnson’s team was willing to make the necessary, positive investments. In addition, he valued the employees’ knowledge and brought them in as advisors even before he actually owned the mill.”
Achieving long-term viability would require dramatic change. Energy costs were running well more than $1 million per month, and half of that represented natural gas.
A primary concern was a drastic reduction in the mill’s reliance on purchased fossil fuels, and the new owners envisioned eventually becoming self-sufficient by using the mill’s own resources to generate energy.