MONTREAL - Sacrifices are required to make AbitibiBowater more competitive if the province is to consider investing in the insolvent paper producer, Quebec's economic development minister said Monday.

Montreal-based AbitibiBowater has been operating under court protection from creditors since April.

Clement Gignac said he wouldn't rule out Quebec becoming a shareholder.

But first, interested parties need to make sacrifices that would reduce production costs by $50 to $75 per tonne to protect jobs because of a North American newsprint overcapacity, he said.

"Before the government invests or becomes a shareholder in AbitibiBowater all the partners need to make sacrifices to see if we can reduce production costs in the Quebec plants for fibre and labour costs," Gignac told reporters.

He said former Bowater Canada president Pierre Monahan is part of a working group that is "turning all stones" on how to reduce production costs to offset the high Canadian dollar.

Gignac, a former chief economist at the National Bank of Canada (TSX:NA), said "nothing is excluded" about Quebec investing in the company.

However, he insisted the government won't run afoul of the softwood lumber agreement with the United States or repeat the error when the former Parti Quebecois government invested heavily but failed to protect jobs at Abitibi-Consolidated's former Gaspesia mill in Chandler, northeast of Quebec City.

Like other paper producers, AbitibiBowater faces a complex situation with tonnes of newsprint overcapacity and dwindling demand.

"We also need to be fair to all the players. It's not up to the Quebec government to decide the winners, losers and survivors in this area," Gignac added.

The province's $100-million loan guarantee to Abitibi's Canadian subsidiary has been extended because the sale to Hydro-Quebec of Abitibi's stake in a power generating station has been delayed until the end of November or early December.

The $615-million sale is expected to net Abitibi $137.6 million.

The complexity of AbitibiBowater's restructuring will likely delay its exit from court protection from creditors until perhaps the end of next summer, its monitor wrote in a report.

Contract talks were suspended last week between AbitibiBowater and the Communications, Energy and Paperworkers Union until governments help with pension and restructuring issues.

Union president Dave Coles said lowering labour and fibre costs are "almost irrelevant" if the company can't resolve its $1.3-billion unfunded pension liability.

"We've got bigger fish to fry right now than what our labour costs and fibre costs are," he said in an interview after meeting Ontario Forest Minister Mike Gravelle.

The encounter followed a similar discussion last week with Quebec Labour Minister Sam Hamad. The union is hoping to pitch its case next week to federal Finance Minister Jim Flaherty.

Pension reforms introduced by Ottawa last week failed to include any relief for companies under creditor protection.

Coles said a joint union-company proposal, including the creation of a trust to oversee AbitibiBowater's pensions, is the paramount focus to preserve AbitibiBowater's future and provide employees "with a guarantee of retirement income, and peace of mind during difficult economic times."

"This is a solution that allows governments to solve part of a growing social and economic problem without any cash infusion."

Coles noted that AbitibiBowater employees have already helped to reduce labour costs in Quebec and may "under the right circumstances, be prepared to sacrifice more."

Abitibi spokesman Seth Kursman declined to discuss potential cost reductions, but said the company is working "collaboratively with unions to address pensions issues."

Meanwhile, AbitibiBowater announced Monday that former AbitibiBowater chairman John Weaver has resigned from the board of directors for personal reasons.

Weaver had agreed to stay on the board following the merger of Bowater Inc. and Abitibi-Consolidated to ensure a smooth transition.