Kruger expands in U.S. instead of Quebec, drawing criticism from Parti Quebecois

Kruger Products LP, Canada’s biggest tissue maker with brands such as Scotties and SpongeTowels, will spend $316 million US to expand a mill in Tennessee – a move that the Parti Quebecois says will hurt Quebec’s economy.

The opposition party also says Quebec’s pension fund manager, Caisse de depot et placement du Quebec, has no business lending Kruger $211 million to help the privately held Montreal-based company with the Tennessee mill expansion.

“The mandate of the Caisse de depot is to favour Quebec’s economic development and not to send investments elsewhere from our own businesses to other markets using Quebecers’ savings,” said Nicholas Marceau, the PQ economic development critic.

“The Caisse de depot shouldn’t be using Quebecers’ money to hurt Quebec’s economy,” Marceau said in a statement.

Kruger also has a plant about 50 minutes north of Montreal in the municipality of Crabtree that local officials, the PQ and a provincial investment agency were hoping would get the expansion.

But the company said earlier this month that it will install new manufacturing equipment to expand its plant in Memphis, Tenn.

“The proximity of our Memphis mill to growing U.S. markets will further strengthen our competitive position in North America, which will benefit all our establishments in both Canada and the U.S.,” Mario Gosselin, the company’s chief operating officer, said in a statement.

Kruger said the expansion and new tissue equipment will increase production capacity by 18 percent, or 60,000 tonnes a year, at the Memphis plant.

The Daily News, a Memphis newspaper, reported that the project will create 100 new jobs and preserve 294 jobs. It will also create nearly 500 direct and indirect jobs during construction.

Caisse de depot chief executive Michael Sabia said that the pension fund’s role is to help Quebec’s businesses expand outside of the province.

“An element of our Quebec strategy is to work with Quebec companies that have the potential to develop outside Quebec,” Sabia said on a conference call after the Caisse released its results for the first half of this year.

“Why? To increase their level of growth,” Sabia said, citing Quebec companies such as convenience store operator Couche-Tard, aviation and transportation giant Bombardier Inc. and engineering firm SNC-Lavalin that have grown globally.

Since Kruger bought its tissue mills in 1997, the company said it has invested more than $450 million at its four Canadian mills.

Kruger Products, with 2,500 employees, is the tissue-making subsidiary of forestry company Kruger Inc., and is Canada’s largest tissue company.

In Canada, it produces tissue for household, industrial and commercial use, selling such well-known brands as Cashmere, Purex and White Swan.

In the U.S., Kruger manufactures the White Cloud brand, as well as many private label products.

The tissue maker has five mills – in New Westminster, B.C., and Crabtree, Sherbrooke and Gatineau, in Quebec, as well as the Memphis operation.

Founded in 1904, parent company Kruger operates sawmills, tissue, cardboard and packing operations in Quebec, Ontario, British Columbia, Newfoundland and Labrador, and the United States.