Timber Firm’s Plan for Mexico Mill Draws Fire : Forest Products: The new plant, which could employ 1,000, goes against the grain of many of Louisiana-Pacific’s employees in California.

When he heard the news, Walter Smith, a 40-year-old, second-generation logger, stood with environmentalists and union leaders on the county courthouse steps to attack the major source of his livelihood, Louisiana-Pacific Corp.

This “latest assault is the most painful,” he said, “since it comes from the very people who should be most concerned for our welfare: our employers. The workers I’ve talked to feel betrayed.”

The “assault” is Louisiana-Pacific’s plan to build a new mill at the port of El Sauzal, near Ensenada, Mexico.

Louisiana-Pacific, the world’s largest producer of redwood lumber, has managed to bring a new level of bitterness to the ongoing arguments about Mendocino County’s dwindling forests. Now even some traditional timber industry supporters, who had long cited the threat of lost employment when environmentalists called for slower cutting and more preservation, have become exasperated over the company’s Mexico plant, with its potential to create 1,000 jobs across the border.

Jim Eddie, chairman of the Mendocino County Board of Supervisors, says a budding effort by some local lumbermen to modify the industry for long-term survival on the North Coast has been overshadowed by Louisiana-Pacific’s move. “It’s all blown up,” he sighs.

“They’re ruining it,” choes Raymond Flynn, president of Windsor Mill, a much smaller company and sometime competitor of Louisiana-Pacific. “Instead of saying, ‘Let’s solve the problems. . . . Let’s put the investment in our own country,’ they’ve taken the short-term outlook . . . for short-term profits.”

For its part, Louisiana-Pacific blames much of the furor on misinformation and a parochial view of sweeping changes coming to the forest-products industry.

Company spokesman Shepard Tucker dismisses as “ludicrous,” for example, legislation proposed by state Assemblyman Byron Sher, chairman of the Assembly Natural Resources Committee, that would ban the export of whole logs from California.

In the larger picture, says Tucker, “we’re making a transition from an old-growth to young-growth forest and also in the type of product (marketed).”

As happened generations ago in southern U.S. forests, the California timber industry is changing in part to accommodate smaller new-growth trees as old-growth trees have been cut.

“You can’t cut a 2-by-12 (board) out of a tree that is only 8 inches in diameter,” says Charles Jourdain, vice president of technical services for the California Redwood Assn.

Timber companies have lately developed alternative wood structures to meet builders’ needs, and Jourdain and other industry observers consider Louisiana-Pacific to be at the forefront of these “engineered wood products.”

The products come from low-value wood material--smaller trees, tree species that have heretofore been considered non-commercial, shavings, chips, flakes, wafers or particles--which are bonded with adhesive under high pressure. They can be formed into panels similar to plywood, made into wooden beams or even formed to resemble such dimensional lumber as the common 2-by-4.

The processes involved, however, are often labor-intensive, which critics cite as a big spur to forest-products manufacturers to open operations in Mexico.

Louisiana-Pacific’s new mill will operate as a maquiladora, a manufacturing plant exempted by the United States and Mexico from import-export duties and designed for both countries to take advantage of low Mexican labor rates.

Tucker insists that Louisiana-Pacific is merely expanding, not moving its operations south. The company plans to first open a drying and final planing facility in Mexico to finish rough redwood, primarily for the Southern California market. Currently, Tucker says, these rough planks are sold to other firms for processing. Louisiana-Pacific wants to add the value of further processing as one response to industry changes. And the less humid Mexican climate will allow drying in open air instead of in energy-consuming kilns.

Louisiana-Pacific also sees an advantage in moving its lumber south by barge. It now depends on trains that Tucker says can be unpredictable in winter.

(Such concerns were a surprise to the railroads. “I’m not aware of any major rail difficulties that have been conveyed by (Louisiana-Pacific) in connection with service either provided by Eureka Southern or Southern Pacific,” says Tom Brueckheimer, assistant vice president, lumber products, for Southern Pacific railroad.)

If this first $12-million investment in Mexico is successful, a $100-million project is likely.

Louisiana-Pacific expects the first plant to create 60 new jobs, the larger complex, if approved by its board, will mean 1,000 jobs.

Typical wages in the California mills run $12 to $13 an hour. For similar work in El Sauzal, where the minimum wage is 79 cents an hour, wages might run $1.10 to $1.50 an hour, according to Kristin A. White, a Chula Vista attorney who represents owners of maquiladora plants.

“Louisiana-Pacific’s plan is a way to make money at the expense of the American worker,” complains Mendocino Supervisor Norman de Vall. “With an 11% unemployment rate in the county, they have the audacity to put this stuff on a barge and take it to Mexico. They have said that the only reason they’re going to Mexico is to air-dry their material faster. I contend that it will air-dry at San Diego at virtually the same rate.”

De Vall has asked Sens. Alan Cranston (D-Calif.) and Pete Wilson (R-Calif.) to look into a ban on re-importing California redwood, to prevent Louisiana-Pacific from bringing its finished product back into Southern California.

Jobs aren’t the only issue.

Tucker argues that Louisiana-Pacific has no choice but to operate in a worldwide economy and points to the more than 2,000 other maquiladora operations in Mexico.

But Flynn, of Windsor Mill, which for most of its 17 years of operation has shown a steady 20% annual increase in sales, believes that U.S. companies fail to encourage employee productivity. Louisiana-Pacific is taking the easy route to competitiveness by opting for low wages rather than training its American workers to work more efficiently, he contends.

He also worries that this short-term advantage can bring long-term damage to America’s forests. Any company competing with Louisiana-Pacific, he says, will have to follow them to Mexico or cut expenses somewhere else.

And like many in Mendocino County, he blames financiers.

“Wall Street likes the way Louisiana-Pacific runs their business,” says Flynn. “Yet you get a company like Weyerhaeuser; Wall Street doesn’t like the way they run their business. Yet they’re doing the right job. They grow a lot of trees. They make the thing work. They treat their employees right.”

Corporations in general are not well regarded among some in Mendocino County these days.

“The more your personal destiny is tied up directly with the land, the better off that land is,” says Linda Hager Bailey, the county government representative on the Mendocino County Forest Advisory Committee, which this summer will deliver its plan to stabilize and eventually increase the county’s timber resources.

“But the whole corporate structure is a distancing of that,” Bailey says. “The stockholders of Louisiana-Pacific, I assure you, have no idea that the lands of Mendocino County have any relationship to the profits that they realize.”

Meanwhile, politicians, environmentalists and labor leaders predict that Louisiana-Pacific’s new plant is just the beginning of a larger move.

Indeed, Richard N. Sinkin, managing director of InterAmerican Holdings Co., the San Diego-based maquiladora management company on contract to Louisiana-Pacific, describes an ambitious five-year plan, depending on “how well we do in these early stages.”

First comes the drying and planing operation, says Sinkin. Then would logically come plants for making pallets, fences, defect-free and finger-joined wood for molding, a particle-board plant, a veneer-slicing plant, a wooden I-beam plant and, finally, a door and window factory.

At least one other big redwood lumber company has set up its own project in Mexico. Georgia-Pacific last month bought the maquiladora plant of one of its customers, across the border from El Paso.

Louisiana-Pacific barged its first load of rough lumber, some 2 million board feet, to Mexico last month. In four to five months, Tucker says, the planing operation will begin.

Meanwhile, the de facto alliance of environmentalists, workers and some wood-products manufacturers could be fragile at best.

“Workers and environmentalists are natural allies,” maintains Betty Ball, coordinator of the Mendocino Environmental Center and vice chairwoman of the Redwood Chapter of the Sierra Club. Demonstrations are planned. But they are unlikely to include manufacturers.

Although Flynn of Windsor Mill may be angry with Louisiana-Pacific, he hasn’t completely buried the hatchet with his new allies.

“You can overlook some of the things you don’t like about your own industry,” Flynn said, “because the environmentalists are so wrong. . . . I don’t know how I would (manage the timber business), but they’re just so wrong.”

Meanwhile, Smith, who denounced Louisiana-Pacific from the courthouse steps, has resigned from the small timber-cutting outfit that he co-founded, concerned that it could suffer for his stand.

“I have no idea what I’ll do next,” says Smith. “All the companies care about is the bottom line, not good logging.”