Potlatch officials announced they expect to lay off up to 60 hourly employees in January between the Brainerd and Cloquet mills.
About 30 hourly workers are expected to be laid off in Brainerd.
The announcement came late Monday afternoon from Potlatch Corp.'s Minnesota Pulp and Paper Division, which makes coated printing papers for high-quality advertising and corporate publications such as catalogs, brochures and annual reports.
In addition, Potlatch announced it will not replace nearly 80 additional hourly employees who "have elected to retire in 2000."
An announcement about layoff numbers has been expected. In May, Potlatch's board of directors approved a plan to cut the company's work force. Throughout the company 300 salaried jobs were eliminated in May with 16 of those jobs at the Potlatch plant in northeast Brainerd. The cuts were part of the Spokane, Wash.-based company's previously announced plan to reduce costs and improve efficiency.
"The reality is that we must minimize costs, which includes reducing the size of our work force where possible, to remain competitive," said Phil Baker, Potlatch's Pulp and Paper Division vice president, in a news release.
Potlatch points to increased competition from coated paper import sales that increased 25 percent in each of the last two years. Potlatch's annual company report shows net earnings from 1989 were $136 million. Net earnings in 1999 were $40 million, which was an increase from earnings reported in 1998 and 1997. The last time the company reported a loss was 1993.
Potlatch spokesman Mike Birkeland said that the 1999 net earning figures come despite a $450 million increase in net sales since 1989. Birkeland said while earnings went up, prices for product were stagnant in the 1990s and costs increased.
"Combine all those factors and you come up with a scenario that you have to reduce costs to be competitive," Birkeland said.
Potlatch's contract with union locals representing the Paper Allied Chemical and Energy Workers International Union and the Energy Workers International Union and the National Council of Fireman and Oilers, Service Employees International Union allows for employees Union membership for Local 79 and Local 164 voted against an agreement negotiated between management and labor representatives. Union officials stated the vote was on a retirement package offered by Potlatch and not on the number of hourly jobs to be eliminated and was overwhelmingly rejected by membership in Brainerd and Cloquet because of contractual strings.
Union officials at the Brainerd plant could not be reached for comment late Monday or early today.
"We were unable to reach an agreement on an early retirement package," Birkeland said. "If we could have achieved an early retirement package it could have potentially reduced or eliminated any layoffs. ... And without reaching an agreement this is the result."
Job layoffs are expected across the board with the most recent hires going first.
"We've seen the wave of consolidation," Birkeland said of diversified forest product industry trends. "We are not alone in the efforts to reduce cost in the industry. We are analyzing every facet of our business. The work force reduction is part of that process."
Birkeland said cost reduction efforts between the Brainerd and Cloquet mills achieved a bottom line savings of $12 million in major fixed cost areas from raw material to travel expenses. Birkeland said the job cuts, both hourly and salary, are expected to put Potlatch in a better competitive position. Further changes, if any, in the work force in Brainerd are expected to be on a much smaller scale and preferably handled through attrition, Birkeland said.
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