Paper manufacturer UPM cutting 680 jobs worldwide

Small Canadian town hit hard

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Finnish forest products manufacturer UPM plans to permanently shut down a paper mill in Canada and to close one paper manufacturing line in Kajaani for ten months as cost-cutting measures.
      The closures are leading to the permanent losses of 540 jobs in Canada, while 110 people in Kajaani will be off work for ten months without pay.
      In addition to the pulp and paper industry, UPM is rationalising operations in its wood products and adhesive paper production.
      The measures are leading to the loss of 680 jobs - 540 in Canada, and a total of 140 in Finland and Australia.
      The company hopes to achieve savings of EUR 50-70 million a year through the cutbacks.
     
The cutbacks stem from prevailing global excess capacity in paper production.
      The closure of the Miramichi mill in Canada, which has been constantly making losses since UPM bought it in 2000, will permanently remove excess capacity of magazine paper, and the cutback in Kajaani will temporarily ease the glut of newsprint. UPM hopes that the moves will boost the price of the various grades of paper.
      "This will improve the balance of supply and demand somewhat, but not enough to have much of an effect on pricing", said analyst Harri Taittonen to Reuters News Agency.
      UPM's share price went down by three per cent on Monday. From the beginning of the year it has fallen by one third, suggesting that investors are shunning the company.
      UPM is currently negotiating on next year's terms for supplying newsprint. UPM's CFO Jyrki Salo says that the company's starting point is that the Kajaani newsprint production line will be restarted once negotiations and the shutdown are over.
     
"In Kajaani we have had two productivity improvement programmes. This is the thanks that we get for it - a nice Christmas present", said Pekka Kärkkäinen, head shop steward for employees at the mill.
      "Actually, [UPM CEO] Jussi Pesonen has been putting a noose around everyone's neck. Now he put some slack in one place, and tightened up somewhere else", Kärkkäinen says.
      The shop steward also expressed fear that a temporary cut in production would send customers away.
     
"This was a big disappointment, but no surprise. This is a forest industry area, and many forest companies are in trouble", says John McKay, Mayor of the City of Miramichi.
      McKay was part of a delegation which visited the management of UPM in Helsinki in 2005. At that time the city, with a population of 18,100, promised not to raise UPM's tax burden. Miramichi kept the promise, even though it is not a wealthy community.
      "UPM could have informed us more. But I understand that there are business reasons for this decision. It is not intended to punish our city", McKay says.


Previously in HS International Edition:
  UPM shutting down Canadian paper mill for up to a year (6.6.2007)
  UPM announces three-month shutdown of Canadian paper mill (8.12.2005)
  UPM to build new paper manufacturing line in France or Germany (15.8.2005)
  Paper manufacturer UPM cutting thousands of jobs in Finland (9.3.2006)
  Paper mill closure major blow to Kuusankoski (14.3.2006)
  UPM to seek delisting from NYSE (31.10.2007)

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