Massive job cuts due to restructuring in paper sector

In response to substantial cost increases and in order to safeguard long-term profitability, the Finnish pulp and paper company Stora Enso has announced a severe restructuring programme. Trade unions at national and international level have condemned the closure of profit-making mills. Meanwhile, the paper company M-real has also announced closures in southern Finland. These measures will lead to a combined total of 1,300 job losses on a national scale.

Stora Enso closes several mills

As a result of high cost increases and in order to safeguard long-term profitability, the Finnish pulp and paper company Stora Enso announced on 25 October 2007 its intention to permanently close the Summa paper mill on the south coast of Finland near the Port of Hamina and one magazine paper machine at the Anjala mill in the southern town of Anjalankoski. The company also plans to shut down its pulp mills in the northern-most city of Kemijärvi in Finland and in the eastcentral region of Norrsundet in Sweden. In Finland, about 1,100 jobs will be lost due to the planned mill closures.

The Finnish Paper Workers’ Union (Paperiliitto), which is affiliated to the Central Organisation of Finnish Trade Unions (Suomen Ammattiliittojen Keskusjärjestö, SAK), and the Union of Salaried Employees (Toimihenkilöunioni, TU) declared that Stora Enso’s decision to close mills in Finland amounted to making the taxpayer cover the costs of the company’s failed North American ‘adventure’. The trade unions have criticised the company for closing profit-making mills.

Stora Enso recently pulled out of the North American market after sustaining considerable losses. The company sold off its factory holdings in North America to NewPage, the paper industry subsidiary of the American investment company Cerebrus Capital. Stora Enso received just under €2 billion for its North American factories, which were acquired seven years ago with the purchase of Consolidated Papers. That deal was valued at €4.9 billion.

According to the Chief Executive Officer (CEO) of Stora Enso, Jouko Karvinen, the proposed restructuring actions in Finland and Sweden are based on ‘specific analyses of marginal costs in wood supply and asset quality’. Mr Karvinen emphasised: ‘I also want to be clear that these plans are based on present conditions and the outlook before implementation of the announced 80% duties on Russian wood exports from 1 January 2009.’ He concluded: ‘If the issue of the impending higher duties cannot be resolved soon and the dramatically increasing wood cost trends reversed, we will have to take further steps to rationalise our pulp, paper, board and sawn wood production in Finland.’ 

Trade unions condemn the cuts

The International Federation of Chemical, Energy, Mine and General Workers’ Unions (ICEM) highlighted in a statement to Paperiliitto that Stora Enso’s latest cost-cutting programme was ‘shameful’. ICEM, representing about 20 million workers, added that Stora Enso had rewarded its employees with a unilateral and insulting restructuring programme after extensive efforts by the workers to cut costs.

The Chair of Paperiliitto, Jouko Ahonen, has attended employee information meetings at Stora Enso. Mr Ahonen expressed the trade union’s shock and that of the workers over the scale of the restructuring measures, despite the fact that significant changes had been expected in the sector. In March 2006, the pulp and paper manufacturer UPM announced a large-scale restructuring programme, which is to lead to the reduction of over 10% of its workforce and the closure of the entire coated magazine paper plant at the Voikkaa mill in the southeastern town of Kuusankoski (FI0603029I).

Further restructuring at M-real

Meanwhile, the paper company M-real, a subsidiary of the Metsäliitto Group, has announced that it is launching the fourth step of its strategic review process to improve profitability and reduce complexity by integrating two of the company’s current business areas. The new restructuring programme includes the planned closures of M-real’s BCTMP (bleached chemithermomechanical pulp) mill in Lielahti, near the southern city of Tampere, and one of its two coated magazine paper machines at the Kangas mill, in the southcentral city of Jyväskylä. Apart from reorganising the company’s business area structure, the plan is to simplify the coated magazine paper business, and to streamline its sales and marketing organisations. The number of personnel affected in Finland by the planned measures will amount to 200 workers.

The Chair of M-real’s Board of Directors and the President and CEO of the Metsäliitto Group, Kari Jordan, explained that ‘the new programme combined with the earlier profit improvement steps are expected to improve the company’s position relating to the various phases of consolidation in the European paper industry’. He noted: ‘We have considerably reduced our capacity, which will contribute to restoring the paper market to a sound basis.’

When asked for his reaction to the news, the Chief Shop Steward at M-real’s Lielahti mill, Kimmo Koukkari, admitted that it was ‘like a bombshell’. The shutdown of the Lielahti mill is scheduled to take place by the end of June 2008, while the statutory negotiations with the workers were due to open within a few days.

Reaction to restructuring plans

Employees of Stora Enso and M-real have organised walk-outs and protests against the restructuring plans.

Overall, the Finnish Forest Industries Federation (Metsäteollisuus) considers that the production of forest industries will increase in Finland, but the manufacturing is focusing on the most effective and profitable units in the future.

Pertti Jokivuori, Statistics Finland

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