Senior officials in Corner Brook — a city which was launched as a mill town — are guardedly optimistic that Kruger Inc. and its unionized workforce can reach a deal that will keep the newsprint mill running.

Montreal-based Kruger said Friday it was evaluating the viability of Corner Brook Pulp and Paper following the rejection by unionized workers of a pension restructuring plan. The union's blessing was necessary to push through a plan on pension relief that would give Kruger more breathing room as it weathers a slumping demand for newsprint.

While the announcement has touched off speculation about a shutdown, Greater Corner Brook Board of Trade president Keith Goulding said he is hopeful for a solution.

"Some people have it as a foregone conclusion that the mill is going to close. I don't believe that personally," he told CBC News.

Kruger had asked for 10 years, instead of five, to restructure the liabilities in its pension plans. Members of the Communications, Energy and Paperworkers union turned down the proposition, unlike non-unionized workers and two groups of retirees.

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Keith Goulding: 'Now that the situation has cooled down a bit that cooler heads need to prevail.' (CBC )

"I can understand the frustration that the union members are starting to feel and understand they feel it's time to take a stand," said Goulding.

"But I think now that the situation has cooled down a bit that cooler heads need to prevail."

Workers believe that provincial legislation involving the Kruger mill could translate into a cut in pension benefits for retirees.

Leo Bruce, a city councillor in Corner Brook, said the tough shape of the international newsprint industry is recognized within the city.

"It's never good when you hear Mr. Kruger or management say they're looking at the viability of Corner Brook operations," he said.

"As we know globally, the pulp and paper industry are in hard times … With the Canadian dollar, the way it is, it's hard to make a dollar at the end of the day."

Goulding said Corner Brook Pulp and Paper has several strong assets, including a reliable power source, a strong supply of wood and a generally supportive workforce.

The CEP has said it is hoping that it can negotiate a deal with Kruger that will give the company pension relief while also assuring workers that their pensions are protected.