ATLANTA – Georgia-Pacific Corp. (GP), maker of Brawny paper towels and a variety of other paper and lumber products, said Tuesday it is cutting more than 1,000 jobs in a broad restructuring that aims to save $100 million a year.
The company said it will idle up to four tissue paper machines and about 70 lines that convert a large tissue roll into smaller sizes that consumers can use as it eliminates 850 jobs in North America. Its tissue paper products also include Angel Soft (search) and Quilted Northern (search) toilet papers and Mardi Gras napkins.
Internationally, Georgia-Pacific said it will cut 250 jobs as it reorganizes operations in France and changes its operating procedures in Britain and the Nordic region.
The announcement comes amid challenging times for the paper industry. Another major paper maker, Weyerhaeuser Co. (WY), announced plans Tuesday to close a pulp and paper mill in Prince Albert, Saskatchewan, Canada, early next year, eliminating 690 jobs. Federal Way, Wash.-based Weyerhaeuser blamed "poor market conditions" and said its uncoated free-sheet paper and pulp markets "face fundamental challenges, including excess capacity, declining demand, mounting inventories and weak prices."
The Georgia-Pacific restructuring will cost $106 million over the next two years, Georgia-Pacific said, including a third-quarter charge of $42 million. About $53 million of the expense will come from asset devaluation, about $21 million from paying severance and other employee termination benefits and another $32 million for costs related to exiting certain plants, the company said.
The company said it expects the changes to reduce operating costs by $100 million annually during the next two years, with about 75 percent of the savings in North America.
The company said most of the North American job cuts will be at its Green Bay, Wis., mill. Georgia-Pacific plans to move most of the mill's warehouse operations to a new center in the Green Bay area and close certain operations there. Mills in Muskogee, Okla., and Savannah, Ga., will also be affected, the company said.
Some of the affected employees may be able to work at the new center, said spokeswoman Robin Keegan.
"We think the skilled employees from Georgia-Pacific's warehouse operations would make great candidates at the (new) mix center," she said.
The moves are part of a larger reconfiguring that Georgia-Pacific is undertaking in an attempt to attain a yearly operating profit of $1.2 billion in North America. The company has already reduced its work force at tissue plants in Plattsburgh, N.Y., Camas, Wash., and Wauna and Halsey, Ore., along with its Dixie factory in Parchment, Mich., where the popular paper-cup brand is manufactured. Georgia-Pacific said it also plans to shut a tissue converting operation in Maine.
Georgia-Pacific has previously eliminated more than 2,250 positions while integrating plants from its acquisition of Fort James in 2000. Since 2001, the company has shut down nine tissue-paper machines and idled 47 converting lines in the tissue and Dixie businesses.
"Much of the capacity of these machines and lines was moved to newer, faster assets," Georgia-Pacific said in a statement.
The company said the international changes include closing one facility in Greece and two operations in Britain, along with substantial reductions in overhead costs. Georgia-Pacific said it is shutting down a paper machine at its Kunheim facility in the Alsace region of France. The company did not specify in a news release where the majority of the European job cuts would occur.
In July, the company cited higher raw materials and energy costs as it reported a more than 11 percent drop in second-quarter profit on a decline in revenue.
Georgia-Pacific said it earned $194 million, or 73 cents a share, for the three months ending June 30, compared to a profit of $220 million, or 84 cents a share, for the same period a year ago. Excluding unusual items, the company said it earned $217 million, or 82 cents a share. On that basis, analysts surveyed by Thomson Financial were expecting earnings of 83 cents a share.
Company officials then said raw materials and energy inflation increased operating costs by $105 million compared with the second quarter in 2004.
Georgia-Pacific shares fell 22 cents to $33.37 in afternoon trading on the New York Stock Exchange. They have traded in a 52-week range of $30.69 to $38.45.