Out of the fire
By GORDON PITTS
Tuesday, November 8, 2005 Posted at 11:51 AM EST
From Friday's Globe and Mail
For 32 years, Frank Dottori, CEO of Tembec Inc., was the growth-happy warrior of the forestry industry, creating a diversified, billion-dollar company from its roots in an employee-owned pulp mill in Temiscaming, Quebec. At the end of this year, the 66-year-old onetime engineer will step aside for veteran company executive James Lopez. Dottori leaves a debt-laden company reeling from the high Canadian dollar, new competition and U.S. lumber duties that, he says, have cost Tembec $300 million. Still, Dottori remains unrepentant about his aggressive strategy for growth.
Did you expect to leave when the company was doing poorly?
No, I didn't, but this is a cyclical business. I think this particular decline turned out to be significantly worse than anticipated. It's now going into its fifth year; it normally lasts three years. There are some new factors, particularly in the pulp business, which has been hit the hardest. It's an issue of Third World production becoming about the same size as Canadian production, and therefore a major factor in global pricing.
You've been depicted as someone who adheres to a strategy of growth at all costs. Is that fair?
I don't think we've bought anything that doesn't fit in strategically, contrary to what some analysts have written in the past. There was criticism levelled at us when we bought some sawmills two to three years ago. But we said this is a business that we have to look at long-term, and ensure our wood supply. Today, we're lucky we bought these sawmills.
Do you find the criticism hard to take?
That's one of the negative sides of our business. At one time, it was more of a long-term thing: You invest in multimillion-dollar projects, which can only be done with 10- and 15-year horizons. But most mutual fund investors are thinking quarter to quarter. That's incompatible, especially in a cyclical business. So I think you'll see a lot of companies go private.
Will you still stay on as a director of the company?
As the founder of the company, and as a fairly dominant, opinionated type of personality, I think my presence as a director would create undue stress on the new CEO. I just think this makes it clean cut. It's his show now, but if he wants any advice, he can call me.
What will you do with your time?
I bought a cottage recently, and rebuilding it should keep me busy for six months. I get requests to sit on voluntary boards. So I think I'll do a couple of those things, and maybe a few corporate directorships.
You have been called a genius at employee buyouts. What was your best deal?
Along with its employees and townspeople, we bought the Spruce Falls, Ontario, newsprint mill in 1991; that was a hell of a good deal. At the same time, we were taking tremendous criticism on the pulp side, which was doing terribly. So I had a split personality--half of me was bright and half of me was dumb.
Does employee ownership still work?
You can't ask your employees to be loyal to the company and make the extra effort unless you do something to protect their jobs and their security. Today, with this ruthless competition, it's tough saying, "I'm going to eliminate 30% of the jobs and I want you guys to keep working hard and be loyal and make an effort." And they're going to say, "Why don't you protect our jobs?"
But hasn't Tembec embarked on aggressive cost-cutting measures?
Yes, but there has never been anything like a Friday afternoon where we go whack. I think it's part of the culture of Tembec, that if we do good planning and use attrition, we shouldn't have to do it on a Friday.
Do you have any regrets?
Three to four years ago, we were trying to make some significant mergers and acquisitions, but I succumbed to public pressure. If we had just gone ahead and done a few of the transactions, we would be the biggest wood fibre company in Canada. I think if I had a bit stronger character and marched on, and said the hell with the analysts and the hell with the worrywarts, we'd be an extremely successful company, and I'd be sitting here today at the top of the heap.
