Posted on 11/03/2003 2:57:56 PM PST by Willie Green
For education and discussion only. Not for commercial use.
Although Brown & Williamson's pending Macon plant closure will cost 2,100 jobs, nearly seven times that many could be forced out of work because of what economists call the multiplier effect.
"We've estimated that the loss of those 2,100 jobs and the closure of the plant would ultimately produce a total job loss of about 14,000 in the state of Georgia," said Bill Riall, an economist with the Economic Development Institute at Georgia Tech. "The multiplier effect is spread out all over the state."
The loss of net state taxes alone would be close to $171 million during a 10-year span.
Though Riall cautions that a lot more work needs to be done to give exact figures, the estimated loss to Georgia is "still very large," he said.
The merger, announced Oct. 27, between Brown & Williamson Tobacco Corp. and R.J. Reynolds Tobacco Co., will create a new company, Reynolds American Inc., based in Winston-Salem, N.C.
The news caught local and state officials off guard, and they began scrambling to try to save the Macon plant from closure.
Representatives from both companies say the Macon factory and B&W's headquarters in Louisville, Ky., will close if the merger receives regulatory approval, expected to take about six months. If approved, the Macon plant will shut its doors in 18 to 20 months, said Fred McConnell, manager of communications and public affairs at B&W in Macon.
By combining operations, it is expected the new company would generate savings of more than $500 million in costs per year and help it compete against Philip Morris' current dominance of the market.
Macon and Bibb County are not the only areas that will experience ramifications of the closure because B&W employees come from every contiguous county to Bibb County and from as far north as Atlanta and as far south as Cordele, McConnell said.
Jeff Humphreys, director of economic forecasting for the University of Georgia, said the economic impact of a factory closing includes basically three considerations:
"So, when you close that plant, you also eliminate a ton of business in a lot of other companies," Humphreys said.
Other companies will take hit
Aviance International Corp. will lose 25 percent of its business if B&W shuts down, an official there said.
Aviance has provided Lear Jet charter service to B&W since 1989, said Edwena Higginbotham, sales manager.
"If they totally close it, it will have the impact of $1.5 million to $1.75 million a year (on revenue), because in addition to our contractual hours, they fly extra hours sometimes," Higginbotham said.
The aviation company used to provide two round-trip flights a week to Louisville, but at the end of September, B&W cut back its trips to once a week, McConnell said.
Losing that one trip cost Aviance about $1 million in revenues, Higginbotham said.
"We hope we can recoup the loss, but it's hard to recoup the loss of a contract unless you get another contract," she said. "It does free up the use of that airplane."
Higginbotham doesn't anticipate the 18 jobs at Aviance are in jeopardy because she hopes to be able to fill the gap with other flights, she said.
Carter Mechanical Inc. also has worked with B&W since 1989, performing all kinds of mechanical contracting work, including steel piping and conveyer work, said president and owner Mike Carter.
"They are my largest single customer," Carter said. "Over a whole year, I have more people (at B&W) than anywhere else. I'm personally in this plant almost every day, sometimes a couple times a day."
Depending on the workload, about 20 to 50 of Carter's employees perform work at B&W, he said.
If B&W closes, he would have to lay off some workers, he said, but he hopes to pick up other work to make up for it.
B&W is one of Georgia Power's largest customers in Georgia, said Lynn Wallace, Georgia Power media relations representative.
"So, obviously, a plant closing of this size will have an impact on Georgia Power's revenue," Wallace said. She declined to provide numbers.
Not only does S&S Food Administration have 35 employees in two cafeterias at B&W, it purchases goods and services from 10 vendors for its food service operation at B&W, according to a written statement from S&S. A division of Macon-based Smith & Sons Foods Inc., it has provided services to the plant 11 years.
The vendors "will definitely feel the economic ramifications through their loss of our purchases," said Grant Bennett, director of operations for S&S Food. "The impact will also filter down in less noticeable ways like fewer delivery trucks buying gas and less candy and snacks being purchased from vending machines. The depth of the dollar loss to the area economy is really not measurable at this time."
S&S Food will relocate its workers throughout the company, according to the statement.
The opportunity for B&W workers or others to find jobs is better now than it would have been a few years ago, even though those new jobs probably won't be in manufacturing, UGA's Humphreys said.
"Quite frankly, the Georgia economy is starting to grow again," he said. "It's a lot easier to recover when the economy is growing. If this had happened back in 2001, then this would be a lot harder."
To contact Linda S. Morris, call 744-4223 or e-mail lmorris@macontel.com.
Not mentioned in the article is that B&W is moving its HQ to N.C. where there will be a jobs gain.
Merger and consolidation always eliminates redundancies for a net job loss. The market also becomes less competitive with such mergers.
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