Facing declining demand for its products, International Paper last week announced plans to close three plants, including the one located in Albany.
The closure affects 270 positions, said spokeswoman Jessica Savage. That includes 40 positions that were on indefinite layoff starting in October 2008 after IP shut down one of its paper machines there. The closure is planned to take effect in December.
The planned closures include a paper mill and associated operations in Franklin, Va., and containerboard mills in Pineville, La., and Albany. The plans also will reduce production at IP’s Valliant, Okla., containerboard mill.
These permanent shutdowns will reduce the company’s North American paper and board capacity by 2.1 million tons.
“We recognize these are very difficult decisions affecting our employees, their families and the communities surrounding these mills,” said Chairman and CEO John Faraci. “We have concluded that we have excess capacity in our North American paper and packaging businesses, and these decisions will better match our supply with our expected customer demand.”
Since the onset of the global recession, the decline in demand for International Paper’s uncoated freesheet in North America has accelerated, and consequently the company has decided to further reduce its uncoated freesheet capacity.
In its containerboard and coated paperboard businesses, International Paper expects demand to resume growth as the economy rebounds. However, the company’s demand is not expected to return to 2008 levels in the near future. Therefore, permanent IP capacity closures are necessary.
The closures will impact about 1,600 employees.
Following these permanent shutdowns, IP will have approximately 10 million tons of North American containerboard capacity, 2.6 million tons of North American uncoated freesheet production capacity and 1.7 million tons of North American coated paperboard capacity.
The company will work closely with union officials concerning severance benefits for hourly employees. Salaried employees impacted by these shutdowns will be offered severance packages and outplacement assistance consistent with company policy. Employee assistance providers will be available to support employee and family needs.
The company estimates that these closures will result in noncash asset write-off and accelerated depreciation charges of approximately $1.1 billion and cash severance charges of approximately $60 million to be recorded in the fourth quarter of 2009 and first quarter of 2010, plus additional closure costs to be determined and recorded as the facilities are closed.
International Paper (NYSE: IP) is a global paper and packaging company with manufacturing operations in North America, Europe, Latin America, Russia, Asia and North Africa. Its businesses include uncoated papers and industrial and consumer packaging, complemented by xpedx, the company’s North American distribution company.
Headquartered in Memphis, Tenn., the company employs more than 58,000 people in more than 20 countries and serves customers worldwide. 2008 net sales were approximately $25 billion. For more information about International Paper, its products and stewardship efforts, visit http://www.internationalpaper.com.