Several newfoundland fishing communities are bracing for bad news this winter as the province’s largest fish processor mulls yet another round of plant closures. And with shutdowns in the forestry sector already affecting rural regions in the province, this is the last thing Newfoundland needs right now.

In mid-January, fisheries workers from the Burin Peninsula converged on Marystown to demand answers from Fishery Products International Ltd. , which is rumoured to be considering shutting down its processing plant in that community, as well as one in the nearby town of Fortune. Together, these plants employ more than 1,000 people.

What the protesters failed to take notice of were the serious issues facing FPI. These include the high Canadian dollar and competition from China, which is exporting fish into the U.S. at a fraction of the price FPI demands. Cheap labour and new, modern processing plants in China have hobbled FPI’s ability to compete. At the same time, prices for groundfish — such as cod, haddock and flounder — remain stagnant.

Last year, FPI closed its plant in Harbour Breton on Newfoundland’s south coast and pledged to upgrade the Marystown and Fortune operations. Harbour Breton, which relied upon raw fish imported from Russia and northern Europe, was deemed expendable if the closure secured the future of FPI’s remaining groundfish plants.

But the company may not be able to keep its commitment. FPI’s balance sheet has been bleeding red ink as its debt load ballooned to $288 million in 2005 from $75 million in 2002. And, in the third quarter of 2005, FPI recorded a net loss of $5.1 million on sales of $206 million, compared with net income of $4.9 million for the same period in 2004.

In November, FPI CEO Derrick Rowe announced his departure and dividend payments were suspended. In a statement, Rowe said FPI would conduct a review of its operations and make decisions concerning the direction of the company early this year.

FPI’s troubles are providing fodder for Opposition Liberals, who have been looking for an issue to garner rural support. Opposition leader Gerry Reid is accusing the company of financial mismanagement and suggests its board of directors may be trying to drive the firm into bankruptcy. Some board members control other seafood companies, primarily in Atlantic Canada.

“There are many fishing companies in this province that are experiencing the same problems experienced by FPI,” Reid says. “These companies are not experiencing the same dire impact as FPI. Is the master plan to drive this company into bankruptcy so its competitors can come along and pick up its assets at a reasonable price?”

A complicating feature is that, unlike in almost any other Canadian company, the government of Newfoundland and Labrador has the power to intervene in FPI’s decision-making process. These extraordinary oversight powers came about with the creation of FPI in 1983, when federal and provincial governments bailed out several ailing fish producers by combining them into a single entity.

The government has used this power three times in the past five years, most recently last year when it approved creation of an income trust and closure of the Harbour Breton plant.

Now FPI faces the spectre of a political backlash should it decide to close more processing plants. But the alternative — keeping costly plants open and continuing to lose money — could lead to a deepening crisis within this deeply troubled company. IE