Steve Quayle News Alerts

July 11, 2003
By Richard Thompson

Stamford, Conn.-based International Paper Co. is cutting jobs, and Memphis, where IP employs 3,000, could bear the brunt of it.

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

The cuts could affect 20,000, or 36 percent, of IP's U.S. workforce; there are approximately 35,000 hourly IP employees domestically, according to the company's annual 2002 report.

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

Employees were told of the pending cutbacks at the end of June, Wygant said.

As of Dec. 31, 2002, IP employed about 91,000 people globally - 55,000, or 60 percent, are located in the United States.

Layoffs in Memphis appear unavoidable.

Memphis is the operational center for IP. Employees here work 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 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 noncore 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 the 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, a research analyst with D.A. Davidson & Co. 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."

http://www.gomemphis.com/mca/business/article/0,1426,MCA_440_2101618,00.html