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Tasmania

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.

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 comments

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

  1. Frank Campbell

    The recently-pulped Peter Garrett backs Gunn’s mill- the single most destructive project in Tasmania, home of environmental vandalism. 80% of Tasmanian votes were never weaned off the great fantasy teat of industrialisation. So much hydro power, so little interest. A century of sucking on nothing, while Tasmania’s true assets were trashed. You know what they think in Taswegia? “Jeez, we wouldabeen the Ruhr of the South without those ratbag Greens” – the Miranda Devine theory of the world. Alas, the Greens have only chipped the concrete bunker of Tasmanian developmentalism. The inbred pathological clique that rules Tasmania lives on, snot hanging from its nose, pulling at Canberra’s pocket.

    And what a relief to read about the real environment on Crikey, instead of endless, repetitive harangues about anthropogenic global warming.

  2. Bogdanovist

    Frank, there’s a point about Garrett and the mill that you’ve missed. The provisions that he insisted upon being met before final approval (which contrary to popular myth has not yet been given) are a major factor in Gunns failing to get finance for the project. They haven’t been able to convince anyone that these will be met.

    Garrett had no legal ability, even as minister, to flatly reject the proposal at the previous stage. Instead by tightening the environmental provisions on the mill he made it impractical for Gunns to get finance and hence final approval, which is about as much as he could have done.

    Other than that I agree that we all need to focus on the broader environment, not just AGW, although the only reason that this particular message is replayed endlessly is because there remains all too many like yourself who don’t want to listen, and the problems won’t go away just because you don’t want to believe they exist.

  3. Liz45

    I support Peter Cundall’s call(SMH, Good Weekend article – 82 and still fighting?) – that there should be a Royal Commission into the Pulp Mill debacle – in his view, it came about due to the alleged corrupt actions of previous Labor govts and upheld by both the present govt and opposition. I didn’t know the amount of timber required let alone the amount of clean water and the billions of s**t that would end up in the ocean each day? I also learned about the felling of native forests, how after the trees are chosen, fires destroy what remains, including all the birds and animals who are killed either immediately or due to lack of a place to live etc. I had no idea it was so ruthlessly horrific, although I’ve always been sickened by the scorched earth remains!

    How damned stupid is it, to support the science re global warming, while we continue to tear down native forests? I understand, that it takes 5 yrs for newly planted trees to make a positive difference to Co2 emissions!

  4. Tom McLoughlin

    One thing the mainstream need to consider of central concern. Every wet forest logged to dry schlerphyll regrowth is a wildfire simply delayed. It’s a recipe for disaster, even decades later.

    We need a law banning the logging of wet forest. And we need it fast. Like to see Opp Minister Greg Hunt demand the PM go into the parliament “right now” and address that.

  5. Jim Reiher

    A very good article thanks. Even left me feeling a little optomistic… first time in a long time. I do despair for the forests of Tassie and the bloody-mindedness of Liberal and Labor down there. But this article shows that all might not be lost. I hope you are right. Thanks.

  6. davidk

    Wood fired power station, how brilliant is that? Contribute to the problem and remove the solution all at the same time. Talk about killing two birds with the one stone. I propose we rename Tasmania The Rotten Apple Isle. The name of the worm is Gunns.

  7. Venise Alstergren

    It used to be the Hydro-Electric Commision that ruled the roost, now it is Gunns plus now the government has its very own Forestry Tasmania.

    I too read the article in Good Weekend and am delighted to find one Tasweigan who is prepared to stand up to the bastards.

    Paul Lennox was, after Joh Bjelke Petersen, the most venal and corrupt premier that Oz has ever produced, and much as I would like to believe in Bob Burton and his optimism, I can’t see it happening. Tasmania is a hick state full of red-necks. How does one change that?

    In Oz the real crooks are seldom brought to justice.

  8. Venise Alstergren

    PS: It is to be hoped the commentariat remembers the vital product those giant native trees and our unique wildlife are being slaughtered for.

    Lavatory paper.

    The wood is pulped by Gunns and sent to Japan. We buy it back as paper and turn it into lavatory paper. Which seems to reveal something about the Van Demonians, Tasweigans, whatever. From majesty to crap, in one round trip.

  9. Bogdanovist

    Venise, you have the subtlety of a drunken elephant and the rhetorical flourish of a cement truck.

    I’m not a Tasmanian, but I’d point out that it is the state which brought the Australian Greens to life, and still supports them far more strongly than in other states. I visit the fine place frequently and know many intelligent, artistic, creative and well educated people living there along with the red-necks that exist everywhere else as was.

    To disparage the entire place as ‘a hick state full of red-necks’ is ignorant, incorrect and unhelpful. Pretty much like most of your posts (I’ve been a long time reader, first time responder…).

  10. nicolino

    For too long the crooked major parties have been running Tasmania as a private fiefdom and now that the Greens are becoming a threat they are thrashing about trying to find some way Of dsicrediting them. The latest is that the Greens plan to legalise heroin use if they win.
    Good riddance to John Gay, Robin Gray and that waste of space, Paul Lennon.