AbitibiBowater Inc. announced Thursday the permanent or indefinite closure of eight money-losing mills across Canada as part of a massive reduction in newsprint production capacity.

The company also announced it wants to reopen its Canadian union contracts to "explore ways to reduce overall labour costs and provide enhanced flexibility in the workplace." Salaried employees will also be asked to take cuts.

The list of closures and idlings includes:

• The permanent closure of the Belgo (Shawinigan, Que.) and Dalhousie (New Brunswick) mills.
• The indefinite idling of the Donnacona (Quebec) and Mackenzie (British Columbia) paper mills.
• The idling of two Mackenzie sawmills that support the Mackenzie paper operation.

The company will also permanently close the already idled Fort William paper mill in Thunder Bay, Ont., and the Lufkin paper mill in Texas. The No. 3 paper machine at the Gatineau, Que., facility, which had also been previously idled, will be shuttered for good.

There was no immediate word from the company about the number of jobs lost through this restructuring. But the Communication, Energy and Paperworkers Union estimated at least 1,000 workers would be affected.

In a release, the CEP called for an an emergency summit of union and industry leaders in the forestry sector. 

"Today's 1,000 or more victims in the mills in Dalhousie, N.B., Shawinigan and Donnacona, Quebec and Mackenzie, B.C., bring the job losses in the sector to over 20,000 in the past two to three years," said CEP president Dave Coles.

Closures 'difficult decisions': company

AbitibiBowater said the closures are painful but necessary. 

"These were difficult decisions that were made after careful deliberation and represent the best course of action given the current economic conditions and significant challenge that lies before us," said CEO David Paterson in a statement.

"We are mindful of the impact these decisions will have on the employees and communities affected, and will be working with them to help mitigate the effects," he said.

The firm said the measures will reduce capacity by about one million tonnes annually.

Montreal-based Abitibi Consolidated and the paper division of Bowater Inc. merged last January in a deal that both companies hoped would return them to profitability.

But the economics of the beleaguered Canadian forest products industry continued to deteriorate throughout this year as the Canadian dollar surged, the U.S. economy slowed and fuel prices soared. That made it increasingly difficult to sell newsprint in American markets.

At the time of the merger, the companies hoped to realize $250 million in savings over the next two years. On Thursday, that target was raised to $375 million.

The company also said it would suspend its stock dividend and hoped to raise $500 million through the sale of assets. It will undertake a further review of its business over the next four months in a bid to cut costs further. It warned that further closures could be announced in 2008.

The Conference Board of Canada issued a report Thursday that estimated Canada's paper products industry will lose about $400 million this year — the third straight year of losses.