Feedback on The Perfect Storm
It would be shocking (and welcomed) if Cerberus ending up as a long-term player in the paper business because papermaking is a highly capitalized business that requires constant reinvestment of hundreds of millions of dollars – they have very deep pockets. However history has shown that these types of companies tend to buy low and sell high meaning that as soon as they can make a profit they will take the company public, profit handsomely if they can, and leave this industry without having made any substantial capital investment. As NewPage has continued a strategy of buying assets of U.S. competitors it has shown the tendency to reduce supply to prop up prices. Their attempt to stop Asian mills from sending unprinted paper to the U.S. is one more step in reducing supply to prop up sagging demand and pricing.
In our opinion, this country, the unionized papermakers, and U.S. printers would be better served by NewPage investing in new plant and equipment and out performing their Asian competitors with higher quality and lower pricing. Right now the facts are that these Asian sheets are of higher quality because they are made using brand new paper machines while the U.S. makers have antiquated machines that cannot compete on either price or quality.
We hope the petition is denied and Cerberus sees the light, becomes a long-term player, puts money into their old mills to update their equipment to 21st Century levels and uses competition, not restriction of supply, to make money. That a win-win instead of a win-lose.
Los Angeles, CA
Printing Industries Association – Southern California