International Paper plans job reductions, mostly in salaried positions

gomemphis.com ^ | July 10, 2003 | By Richard Thompson

[WKB]

International Paper Co. is cutting jobs and Memphis could bear the brunt of it.

The world's largest paper company, based in Stamford, Conn., is reducing management and staff positions across the company as part of an ongoing effort to reduce costs and improve customer service to improve profitability, IP confirmed Thursday.

Stacy Wygant, company spokesman, said employees were notified at the end of June.

It's unclear if the layoffs will happen worldwide or just in the United States. IP employs about 100,000 people worldwide.

In a statement, IP said it's too soon to tell how individual facilities, businesses and staff groups will be affected. Wygant did not say when the layoffs would begin.

Still, layoffs here appear unavoidable.

Memphis is the operational center for IP, which employs about 3,000 workers here in various businesses and departments ranging from its printing and commercial papers business to corporate finance to information technology to its consumer packing business to health services.

"These (job reductions) are difficult decisions to make, and the company will treat all impacted employees with dignity and respect throughout the process," the company said in a statement.

IP said the cuts are not likely to have a significant impact on hourly employees in manufacturing facilities.

To reduce costs in recent years, IP has closed 42 facilities, including 11 paper mills; downsized another 15 facilities; shut down 2.6 million tons of capacity; and reduced staffing by more than over 15,000 positions.

As of March 31, IP had terminated 1,436 employees, according to its Securities & Exchange Commission filing for the first quarter.

The manufacturing restructuring initiative, plus dumping $3 billion in none-core assets, helped IP record net earnings of $44 million, or 9 cents a share, in the first quarter compared with a net loss of $1.11 billion, or $2.31 a share, in the first quarter of 2002.

Both periods reflect a cumulative effect of an accounting change.

IP reports second-quarter 2003 earnings on July 24.

Wall Street expects IP to post earnings of 17 cents a share for the quarter ended June 30. IP earned 35 cents a share in the same quarter a year ago.

Analysts have given IP credit for reducing its costs, but also have wondered how much more fat the company can lose. Steven P. Chercover,cq a research analyst with D.A. Davidson & Co.cq who doesn't own any IP shares, said he isn't surprised that IP is cutting positions.

"It's a sad, tough reality," said Chercover, who has a "buy" rating for IP.

"These companies don't control the selling price of their products because they are commodities. You've got to control what you can - that includes headcount."

[WKB]

Calling Wille Green

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[lelio]

IP employs about 100,000 people worldwide.
What on earth is a company doing with that many employees?

[doosee]

To reduce costs in recent years, IP has closed 42 facilities, including 11 paper mills; downsized another 15 facilities; shut down 2.6 million tons of capacity; and reduced staffing by more than over 15,000 positions.

There still remains a huge overcapacity in paper. Who buys a newspaper anymore? Seriously, these are all union mills where most workers are pulling over $20 per hour.

[kylaka]

Newsprint isn't the only paper made by IP. It's one of about 100 different paper products, the largest being printing papers or white papers and linerboard for corrugated boxes. IP's single most profitable product (highest margin) is telephone poles.

[freekitty]

More equality. No upward mobility in the job market. Just layoffs that provide bonuses for those who lay them off.

[oceanview]

and on and on it goes, the corporate executives who can't get huge bonuses from stock options anymore, have to get it some other way now, and this is how they do it.

[WKB]

I was thinking about pinging you on this. I remembered the other day you were talking about IP. My son works for IP at the Vicksburg Ms mill. You are too fast for me though.

BTW The V'burg mill made several million last yaer. I guess they will be next.

[WKB]

Where's Willie?

[kylaka]

RE: Vicksburg... probably not up for closure. It is part of the once proud Southern Kraft division of IP, now part of the Industrial Packaging Group. Those boys always managed to make money.

[WKB]

My son will be glad to know that.
They were laid off for a week for the 4th but he only lost 2 days.

[kylaka]

The paper mills are a pretty straight forward business, and anybody can determine their health by looking at operating rates, or percent of capacity of an individual mill or the company as a whole. 92% is considered flat out full capacity, since mills schedule 6-8% of their time as downtime for scheduled maintinence. In the mid 80% range most make money comfortably. When operating rates dip into the high 70% range or lower, it depends on the age and efficiency of the individual mill, as well as its proximity to resources (rivers for chemicals in bulk, and trees for pulp).

My recollection is that Vicksburg is an older mill but has a substantial advantage due to proximity. I haven't looked at the "yellow sheets" that detail mill operating rates in more than a decade, but would "guess" that most are operating in the low 80% range at the moment.