You Had a Job for Life Read online

  Unknown to the Groveton mill community, Diamond was fighting for its life, and Wemyss was under tremendous pressure from the Diamond board. Greg Cloutier, son of two mill workers and nephew to a dozen or so others, was an engineer who had recently directed the installation of the first large industrial wood-fired boiler at Georgia Pacific’s Gilman, Vermont, mill. One day Jim Wemyss Jr. paid him a visit. Cloutier remembered: “[Wemyss] basically says, ‘Hey, we’re trying to build a wood-fired boiler in Groveton, and it’s killing us. It’s not running.’”

  Not long thereafter, Wemyss flew Cloutier down to a Diamond board meeting: “Mr. Wemyss says, ‘This guy doesn’t work for us. He’s got no skin in the game. I want you to hear him out. He’s making it work.’ At the time I was doing a lot of ice climbing. I just got done with a predicting avalanche class, certifying to do some guiding. Jimmy’s kind of rubbing [the Diamond engineer’s] nose in it a little bit. I come in, and the crescendo of the meeting is this guy says, ‘Tell me this, if you’re so smart, how do ice crystals plug up those feed conveyors and it doesn’t flow? Why shouldn’t it just slip?’ I said, ‘Clearly, you don’t know or understand the metamorphosis of a snowflake.’ The guy was completely taken aback. I could list at that point the four dynamic phases of ice crystal formation changing to a grain. And I then said, ‘That’s why you don’t have wood falling into the boiler.’ The guy was completely dumbfounded, and Mr. Wemyss said, ‘See, he knows what he’s talking about.’ Then I left the room. [Soon Wemyss] came out, and he said, ‘Oh! That was so good! That story you made up on the metamorphosis of a snowflake was terrific! We’ve got the money to make the modification.’ I don’t know if it was then or on the way back home, he made me an offer to come work for Groveton for substantially more money than I was making at Gilman. I think the fact that I volunteered to do something for Groveton without pay was important to him. He was always convinced that [my] family was all bullshitters. This confirmed a theory he already had.”

  After Cloutier had had an opportunity to study the Groveton boiler conversion project, he told Wemyss it would be necessary to make substantial changes in the design of the fuel delivery system and the method of removing the wood ash. Three million dollars later, the wood-fired boiler started up in November 1982, a year behind schedule. The boiler produced two hundred thousand pounds of steam an hour and was expected to supplant 85 to 90 percent of the mill’s fuel oil requirements. The mill saved money and was buffered from OPEC oil price swings and embargoes. The boiler consumed about fifty tons of chips—roughly two and a half tractor-trailer loads—an hour.3 A huge pile of chips appeared in the wood yard where the pulpwood piles had been prior to the closing of the pulp mill in 1972.

  “A wood-fired boiler was tough for the men who ran it,” Cloutier acknowledged. “It really meant that they had to work. Making good paper on the paper machine was an art; firing wood was, in my mind, the same thing. You get a feeling about the system you are running. If [the crews] weren’t paying attention, it was tough.”

  Cecil Tisdale, a boiler room supervisor, thought it was the “worst thing they ever did.” “We had more trouble with that, more maintenance,” he grumbled. “Wood causes problems. As far as I’m concerned, the equipment they put in just didn’t work good. They never could get the steam pressure they wanted because the boiler would smoke all the time. Call-ins in the middle of the night. Conveyor’s gone. Motor’s burned up. They used to have a conveyor to take all the ash out. That blew up twice. Once I was headed in there to find out what the trouble was. I opened the ash house door, and it blew right then. Whoa, I got back outside pretty fast.” Eventually the ash house burned down.

  While the mill was grappling with the fallout from the oil crisis, Anglo-French financier Sir James Goldsmith had embarked on a campaign to take over and dismantle Diamond International. Late in April 1980 Goldsmith offered to buy shares of Diamond International for a “premium.” When Diamond’s stock jumped $3.25 on April 28, the Wall Street Journal took note. Rumors of an impending sale swirled. On April 30, the Coos County Democrat headline asked: “Diamond’s stock sold?” The brief page-one article noted that Diamond’s corporate headquarters had no comment, and Jim Wemyss was out of town.4

  Few in Groveton realized that Diamond was fighting a losing battle for survival, but they could feel the gloom descending upon the mill. To boost morale, mill managers launched an in-house newsletter, the Papermaker. Jack Hiltz, production manager, wrote in the December 1980 inaugural issue: “One of the reasons for having a newspaper is to keep people informed about events that affect their lives and the society in which they live.”5 An unspoken additional reason was to allay fears stoked by the local rumor mill.

  The Papermaker published four to six times a year until 1992. It reported on promotions, retirements, safety issues, new mill projects, the mill’s bottom line, and birthdays. It also included cheerful prattle and quirky photos of employees in Halloween costumes as it tried to put the best face on an increasingly hostile economic environment. Vice president and general manager L. J. Alyward wrote in that first issue: “Our company has been very fortunate in obtaining enough business to operate fully (with one exception) during the past year.”

  To improve its competitiveness, in 1980 the mill began to experiment with making alkaline paper. The traditional acid paper was made by adding common alum to the pulp. Alum allowed papermakers to add rosin to the mix; rosin improved paper’s ability to absorb ink without blotting. Papermakers also added white clay to the stock to fill pores and make fine papers smoother. Since clay is cheaper than wood pulp, the more clay fill used, the lower the production costs.

  When chemists developed a substitute for rosin, it became possible to replace the acidic alum with an alkaline system that used calcium carbonate, or lime, instead of clay as filler. Alkaline paper is stronger than acid paper; it lasts far longer, and it does not turn yellow and brittle. It is cheaper to produce because a higher percentage of lime filler and a correspondingly lesser amount of pulp can be used in the process.

  Early in 1981, the mill made a trial run of the alkaline process on Number 1 paper machine, using high-quality, finely ground calcium carbonate from Vermont’s marble quarries. A writer in the Papermaker hailed the trial run as an “outstanding success.” A subsequent alkaline trial was a disaster. “We had a young man here who wanted to change to alkaline paper, which is more or less the standard of the industry today,” Jim Wemyss explained. “I said, ‘That’s a good idea. Let’s see how it works. Take the smallest paper machine and make a small run, package, and distribute it, and let’s find out what the reaction is.’ What did he do? He put the whole mill on alkaline. We ended up with a million dollars worth of paper that we had to burn or bury, and almost lost one of our biggest customers [Gestetner] because of his arrogance in doing such a thing. He left the mill, and I happened to come back into the mill. The people said to me, ‘What are we going to do? This is god-awful. We can’t run the paper machines.’ The whole place was chaos. We were hauling it to the dump. All the [fine-papers] machines were terrible. I said, ‘There’s only one thing to do. Dump all the chests, and we’re going to put it back on acid in the next—[raises voice] immediately! [Pounds desk] Right now!’” Wemyss fired the manager. “If he’d been there, I would have been upset with him, but I would not probably have been as severe in my judgment. But when he put the whole mill on [alkaline], and then left and was a thousand miles away, playing golf, and his troops were in chaos—that’s not excusable to me. I said, ‘You no longer work for us.’” Rule number one for Jim Wemyss: An officer never abandons his troops when they are under fire.

  “Gestetner could not use that paper. Every office all over the United States that had their machine—all of a sudden, it wouldn’t work,” Wemyss continued. “Normally, that’s an unforgivable sin, and the people throw you out. Because of my friendship with the chairman and president of the company, we were able to pull it out of the fire.”

  It would be
nearly a decade before the mill successfully converted to alkaline paper using a synthetic calcium carbonate. The ground calcium carbonate used in the early trials was so abrasive that it destroyed pumps and wires on papermakers. A $15,000 wire that should last a month or two was destroyed in a few days.

  Susan Breault concluded an upbeat report in Papermaker on two trial alkaline runs in early 1982 with this jarring exhortation: “Success in the [alkaline conversion] process can only be accomplished if everyone works as a team. This is a strong healthy town and with everyone’s help we can make it grow in wealth, health, and bring back the spirit and moral[e] which once lived here in these walls.”6

  Mill morale had taken a huge hit in the fall of 1981. Negotiations for a new union contract broke down. On September 12, 1981, Local 61 struck the mill over wages, the pension plan, and proposed changes in seniority rules. Years later, Jim Wemyss still angrily referred to the union president as an “idiot.”

  The Democrat editorialized: “The strike comes at a bad time. The paper workers can not stand getting along on $45 a week for very long, and if reports of the mill’s financial status are accurate, neither can the mill stand to lose those daily shipment revenues for very long.”7 “I can remember not eating that well,” back tender Dave Miles said, “or paying the bills.”

  The strike grew ugly. The mill reported it had found ten sticks of dynamite in the boiler room. When an injunction prevented the union from picketing the Campbell plant in North Stratford, someone slashed truck tires, and the radiators of three Mack trucks in a locked garage were smashed in by crowbars. Two men in North Stratford were arrested for trespass and criminal mischief. A salaried employee’s wife reportedly received a threat over the phone that her house would be torched.8

  Shirley MacDow, a vice president of Diamond, had a nightmarish time: “They came down and ruined our garden. Threw tomatoes all over my house. Our little girl was only a few years old then. So, Mr. Wemyss instructed, probably Joe Lacroix and a couple of others, to keep an eye on me. Maybe they’d set the house on fire. We didn’t know. The mind-set changed from, ‘Hi, how are you, Shirley?’ to ‘You’re our worst enemy.’”

  Roger Caron reluctantly joined the picket line: “I remember part of getting your strike benefit was walking a picket line. I really didn’t like that. People would drive by and look at you. Even Wemyss came along, and I’d known him all my life. He lived right behind my folks’ house. It just felt like an adversarial position to be in.”

  Pam Styles, a nonunion office worker, had to cross the picket line. “I didn’t have a problem with the people maybe because I was friendly with a lot of them,” she remembered. “One of my friends had a guy spit on her. It’s a small community, and people know everybody, and it’s just I’d never do that. I know I’m upset if somebody is doing my job, [but] we need the work too.”

  Styles was assigned to work in the fine-papers finishing room to run off reels of paper that had been produced prior to the shutdown. “I worked on the Wills machine,” she recalled with amusement. “That was the machine that cut the paper to eight-and-a-half by eleven, or eight-and-a-half by fourteen. It was fun because for a while we didn’t know what we were doing. It was something different, out of the ordinary. I’d get right up on the machine when we got a jam and pull the paper out. It kinda gave us firsthand knowledge of what they were doing.”

  During the monthlong strike, rumors swirled: Boise Cascade was going to buy the mill; a paper machine was going to be moved to Old Town. When the strike ended on October 11, the new agreement gave the seven hundred union workers a 9 percent pay increase in the first year and an 8.5 percent increase in year two.9 No paper machine was shipped to Old Town, but old Number 1 paper machine never restarted, and a couple of weeks after the strike ended, it was scrapped. Murray Rogers said: “It was kind of a retaliation move because of the strike.” As many as eighty jobs disappeared with Number 1.

  A month after the strike ended, the Democrat ran a short page-one article headlined: “Diamond Intl. Could Be Sold.”10 Readers of the paper learned that over the previous three and a half years, Sir James Goldsmith had bought up 40 percent of Diamond’s stock.

  Goldsmith and his merchant banker collaborator, Ronald Franklin, had made a stunning discovery: timberland-owning corporations, such as Diamond, listed the value of their forest holdings at a fraction of their potential market value. If the hostile takeover bid succeeded, Goldsmith could sell off Diamond’s pieces, including the Groveton and Old Town mills, Diamond’s playing-card business, Manchester Machine, and other non-timberland assets to pay off the huge, high-interest debt, while retaining the timberlands, valued by Goldsmith at $723 million, as profit. Franklin later explained the rationale: “Diamond interested us because of our philosophy which pervaded everything we did in America: that the sum of the parts of most conglomerates was worth a great deal more than the whole.”11 Diamond’s undervalued timberlands made the corporation irresistible to a corporate raider.

  “[Diamond] was a fantastic company until Jimmy Goldsmith came along,” Jim Wemyss told me. “You know what was wrong with Diamond? We were too rich. We had no debt. We had four million acres of land on our books for twenty-five dollars an acre. We were a very, very successful company. Any company like that was a target for these people. You couldn’t stop them.” Diamond owned eight hundred thousand acres in northern Maine, ninety thousand acres across northern New Hampshire and northeastern Vermont, and another ninety-six thousand acres in the Adirondacks. I asked Wemyss why Diamond had valued its timberland at one-fifth or one-tenth its market value. “The trees are growing every day, and so their value is increasing every day,” he explained. “You don’t have to report it as income on your company and pay taxes on it.” Wemyss acknowledged that the low valuation translated into a lower capital gains tax rate paid by the seller if and when the land was sold.

  Jim Wemyss led the fight against Goldsmith on the Diamond Board of Directors. “I kind of remember sitting in his office and listening to him vent—frustrated vent,” Greg Cloutier said. “Mr. Wemyss really saw this [takeover] as potentially the end to Groveton and the way Groveton worked and the way all of the different entities worked together to make the Groveton facilities profitable.”

  In the fall of 1981, two major Diamond shareholders, Conley Brooks and Old Jim Wemyss, sold their shares to Goldsmith for forty-two dollars a share, thirteen dollars above the price fetched on Wall Street. Jim Wemyss Jr. did not agree with his father’s decision, but he did not blame him either: “My father wasn’t happy with Diamond about that time. In any mergers like this, when your stock is selling for twenty-eight and somebody offers you forty dollars for it, and you’ve got many thousands of shares, it’s a lot of money. Father, in his inner thinking, said, ‘That damn son of mine, I know him, he’s going to screw this deal up. I’m getting up there, and I want to get my estate in order. This might be a good window for me to do this.’ Goldsmith called him up, and [Father] said, ‘I’ve got so many thousand shares; I want you to nail it for me right now: forty dollars, forty-two dollars.’ Maybe he asked a little bit more. Goldsmith saw the chance to grab that big hunk of shares, and they made a deal. The next thing I knew, [Diamond president Bill] Koslo said, ‘Your father just sunk us.’ I said, ‘I had nothing to do with it, Bill.’” Early in November 1981, as Koslo agreed to discuss terms of the takeover with Goldsmith, the New York Stock Exchange suspended trading in Diamond shares.

  Over the next year, as the final stages of this boardroom drama played out far from Groveton, most mill workers heard rumors but were in no position to take any action. “The guys on the machine knew there was something going on, and you’d hear rumors here and there, but no, we did our job, and waited to see what was going to happen, just do your job and that was it,” Ted Caouette recalled. Finally, on November 1, 1982, Bill Koslo recommended that Diamond shareholders accept Goldsmith’s offer, and 89.6 percent of Diamond’s shares voted in favor of the sale.

  To p
ay down his $660 million debt, Goldsmith moved quickly to sell off all Diamond’s assets except the timberlands. James River Corporation of Richmond, Virginia, had bought the Brown Company paper mills in Berlin and Gorham, New Hampshire, late in 1980. In May 1983, James River (JR) agreed to pay Goldsmith $171 million for Diamond’s paper division, which included the Groveton Papers mill, Campbell Stationery in North Stratford, and Old Town’s pulp and paper mills. JR paid $75 million in cash, common stock in JR worth $19.8 million, and preferred stock with a value of $76 million.12 Goldsmith paid Jim Wemyss $150,000 a year to remain on his Diamond board. However, when Sir James asked Wemyss to help dismantle Crown Zellerbach, following another successful hostile takeover of a paper company in 1985–1986, Wemyss refused.

  Jim Wemyss tried to persuade his fellow board members to consider the rights of other stakeholders, but to no avail: “I couldn’t get rid of Jimmy Goldsmith. I tried, but nobody would support me. I knew what he was trying to do. The board’s position was: Let the stockholders vote. If you don’t allow that to happen, you’re depriving the stockholders. They just, ‘I’ll take the money,’ and the people that are working there—‘The hell with them. They lose their job, but I’ve got my money.’ And I don’t like that.” Thirty years later, Wemyss was still enraged by mention of Goldsmith’s name. “Goldsmith didn’t even know where Groveton was. Never did know to the day he died.”

  The arrival of James River in Groveton in July 1983 ended forty-three years of Wemyss family ownership and management of the Groveton Papers mill. Jim Wemyss Jr. would remain a presence in the mill complex for another fifteen years as president and chairman of the board of Groveton Paper Board. Diamond had assumed the Wemyss family’s 50 percent ownership of Paper Board in 1968; James River declined to buy Diamond’s share, and for the next two decades, two independent corporations shared the Groveton mill complex. Almost immediately, the relationship between Young Jim and James River turned hostile.