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Mar 16, 2010

Gay, Gunns and logging -- just what nobody wanted to talk about

Gunns chair John Gay is fighting back days out from an election. His bid to fend off concerns over corporate governance issues is a pivotal development in Tasmanian environmental politics, writes Bob Burton.

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John Gay, the chairman of Australia’s largest wood-chipping company, has launched a desperate public rearguard campaign against demands by institutional investors that the three long-term Tasmanian directors of the company resign. The outcome of his bid to fend off concerns over corporate governance issues by attempting to rally parochial political support for the Tasmanian directors is likely to be a pivotal development in Tasmanian environmental politics.

Gunns business strategy is in tatters: it’s much touted proposal for a pulp mill can’t attract joint venture partners or funders, Japanese woodchip customers are insisting wood supplied to them be certified by the Forest Stewardship Council, the company’s woodchip mills have been subject to rolling shutdowns over recent months and the company has a reputation so toxic it makes tobacco companies look saintly.

Compounding this are the long-standing concerns about corporate governance. Last year Gay relinquished his dual role as CEO and company chairman and was left with management responsibility for the development of the pulp mill proposal. Since then, the pulp mill proposal has gone nowhere other than frequent announcements that finance and partners will be finalised soon.

In early December 2009, Gay sold off 3.4 million Gunns shares for an average price of just over 90 cents. Then in late February, Gay reported the company’s profit for the six months to December 31 was down 98%, triggering a share sell off by stunned investors. Where Gunns shares sold for just under $1 in mid-February, they are now trading around 57 cents. Not surprisingly, institutional investors are getting antsy.

Even if Gay and his fellow Tasmanian directors pull off a Houdini-style escape and survive in the short term, the writing is on the wall for Gay, former Tasmanian Premier Robin Gray and fellow Tasmanian director, Richard Millar.

In the middle stages of the Tasmanian election campaign, both the Labor and the Liberal parties locked themselves into supporting the New Forest Industry Plan, a logging industry policy wishlist featuring support for the pulp mill, wood-fired power stations and relaxed planning restrictions relating to forestry. The plan, put together by the Forests and Forest Industries Council (a government-funded advisory group that includes major timber industry companies and lobby groups) claims over 2,000 jobs can be created if only the industry’s preferred policy prescriptions are followed.

All that could be made redundant by a newly-constituted Gunns board which excluded the old environmental warriors of Gay and Gray. It is conceivable a new board could retreat from support for sourcing its timber from high-conservation forests or even native forests entirely and abandon the proposed pulp mill and associated wood-fired power station. It would also be under pressure to change its most controversial management practices such as aerial spraying and the poisoning of native wildlife.

It’s also more likely to drop the Triabunna 13 legal case against those involved in a December 2008 protest at the company’s Triabunna woodchip mill. After having retreated from the humiliating debacle of its Gunns 20 legal action, it’s likely a revitalised board would decide the last thing the company needs now is another expensive legal distraction from the numerous problems facing the company.

A new board is also likely to dramatically reshape Gunns position in Tasmanian political landscape. As an initial step to improving its reputation Gunns could well retreat from making donations to major political parties and opt for a more neutral position. It could also cut off funds for, or insist on major policy changes to, the lobby groups it is involved with. The Forest Industries Association of Tasmania (FIAT), of which Gunns is the dominant member, would be the first cab off the rank.

The combination of this would leave Forestry Tasmania (FT), the government’s own logging agency, with most to lose from a less confrontational approach over native forests logging, far more isolated in the political landscape. FT would suddenly see a dramatic slump in demand for timber from its native forests logging operations at the very time that either a minority Labor or Liberal government would be under pressure to increase the financial returns from the poorly-performing government business enterprise.

The last dominoes to fall would be Labor and Liberal parties, which could find themselves in the position of having advocated support for a set of logging industry policies that less than a month later were no longer the priorities of the largest player in the industry.

By going public in the last days of the election campaign in a bid to save himself, John Gay may just have shifted the focus back on to the very topics that the Labor and Liberal parties least want to talk about: Gay, Gunns, the pulp mill and the future of native forest logging.

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27 thoughts on “Gay, Gunns and logging — just what nobody wanted to talk about

  1. Liz45

    ROBON – “I am not in any position to argue about your comments about forestry issues, but the comments about loads of shit going into Bass Strait really are grossly exaggerated. I am close enough from a neutral point of view to have looked into that.”

    Did you read that again before you clicked ‘post comment’? You don’t know enough about forestry issues but know about what’s going to go into Bass Strait? Are you serious? Where have you been? If you believe anything that comes out of the mouths of the pro-pulp mill, then you’re really gullible. I’ll take the word of Peter Cundall and others anytime – thank you! There’s a good article in the SMH Good Weekend where he explains exactly what’s going to go into Bass Strait – if you’re silly enough to drink it, good for you! Why would you believe a company or a govt, where the company was allowed to write the legislation, and then added bits as they went along, which included conning the people and lying when needed?

    So where did you look? In a different place than Peter Cundall no doubt! He’s followed this from the beginning and got himself arrested(and his wife too) for his trouble – his local member put the police onto them – they weren’t obstructing anything – they made sure of it! He’s a man of integrity! Those in favour of the mill are traitors/terrorists? They don’t give a s**t about Tasmania, Australia or anything except money, power and greed!

    By the way, who said any levels of dioxin were safe? Gee, do you still believe in the tooth fairy too? sigh!

  2. Liz45

    VENISE – I have much sympathy for your view of Tasmania – I remember the fight over the Franklin Dam – I could not understand what sort of madness was in operation – the answer of course is greed, power and money, and to hell with the rest. What a campaign that was. I can still remember the decision of the High Court – pure bloody joy!

    The “hick state full of rednecks” you refer to aren’t just found in Tasmania. Look at the forests on the far south coast of NSW? I saw it at Eden about 15 yrs ago, I hate to think what it looks like now – I found it really distressing – it just looked so bereft, it was like being hit – hard! My eldest son was with me, and we were both shocked – talk about the ‘scorched earth’ policy. I bought a Tshirt with all the towns on the south coast that have been vandalised by the timber industry – heaps of names, sadly!

    Isn’t Peter Cundall a darling? A man with an interesting past and heaps of guts! I’ll aspire to that when I’m 82 – get arrested for trying to save something from the greedy bastards! His wife was arrested too! Good on her!

    BOGDANOVIST – I think if you read Venise’s comment again, she didn’t refer to the “place” but the people! I agree! They’ll probably vote Liberal! I also agree with the comments re Paul Lennonox? Tasmania is a beautiful place. How long it stays that way is the question. Perhaps I should save up for a visit before Gunns stuffs it up for good! Gunns aren’t going to use positive practices via the environment, and what surprises me is why the Victorian govt so quiet? All that filth into Bass St each day? Are they mad? What damage is that going to do? And the effects on the wine industry, and tourism etc How can any sane govt allow such destruction?

    I know that VENISE is more than capable of standing up for herself, but I happen to agree with most of her points of view! Perhaps our perspective on life is from a different angle than yours!
    Let me guess? Another male who thinks it’s his job to use paternalism re women – a good ‘smack’ is what she needs? Bad girl! (sigh)

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