BUCKSPORT — In an era of paper industry layoffs and shutdowns, one Maine mill envisions a capital improvement program and continued stability that others can only envy.
Not that Champion International Corp. hasn’t endured its share of upheaval. In October, the Connecticut-based firm announced a plan to divest five of its 11 mills worldwide and associated timberlands to refocus on its more profitable products, thereby boosting its stock value. It also plans to cut its companywide work force by 11 percent over three years.
In keeping with its announced strategy of buying softwood timberlands to feed its coated paper mills, Champion in October purchased 140,000 acres of central Maine forest lands from Fort James Corp., along with that company’s Diamond Lumber Mill in Passadumkeag.
If anything, these changes are expected to enhance the position of Champion’s Bucksport mill, which produces 1,300 tons daily of the lightweight coated magazine and catalog paper that is one of a handful of products the newly streamlined company will emphasize.
And while it has been scaled back significantly from the $121 million expenditure initially foreseen, the Bucksport mill’s capital improvement program is nonetheless under way, with $40 million already committed to upgrading the speed of its No. 5 paper machine.
Other planned investments in the Bucksport mill include $6.5 million in improvements to its thermomechanical pulping, or TMP, process, which separates fibers in the pulp used to make paper. Construction of a $3.5 million training facility is planned, while a wood yard upgrade is on hold.
Although these investments are planned, no new jobs are expected to come with this strategy.
At the mention of Champion’s relative good fortune, mill manager Fred Oettinger smiles and glances heavenward, as though to give thanks.
“The coated paper business has been a growth segment for the last 20 years, with 3 percent growth each year consistently. Our strategy right now is to grow in coated paper,” says Oettinger.
The local mill supplies paper to most of the nation’s largest circulation magazines, and to many major catalog publishers. Thumb through the glossy pages of Time, Newsweek, the L.L. Bean or Victoria’s Secret catalogs, and chances are you’re handling Champion paper.
Despite a trend toward more magazines and catalogs offering their wares online, the number of publications sold on newsstands and mailed to customers’ homes continues to grow, bolstering the market for lightweight coated paper, which is cheaper to mail and ship than its heavier counterparts.
Although lightweight coated prices are down now due to oversupply, the long-term outlook for the product is strong, say industry analysts, who give generally good reviews to Champion’s recent restructuring move. The company’s strategy parallels a trend toward specialization and consolidation seen nationwide as paper companies seek to capitalize on their strengths rather than to build new facilities.
“It was a wise move on their part and was highly anticipated on Wall Street,” said analyst Chip Dillon of Salamon Smith Barney in New York. The value of Champion stock rose in expectation of the restructuring announcement, and continued to rise until economic woes in Asia recently led to a decline in stock prices across the board, he said.
Because the pulp and paper industry increasingly relies on a global market, weakness in a major world economy such as Japan’s hurts everyone, Dillon said. Still, Champion’s strategy is seen as positive. “It makes sense, for now, for them to focus on a few product areas.”
The global market
Faced with intense overseas competition primarily from Finland, Sweden and Germany, where a variety of forces has fostered the construction of more productive, state-of-the-art facilities, U.S. paper companies are looking south to cut their costs and maximize profits.
In Champion’s case, looking to South America is not a recent development. The company built its Mogi Guacu mill, near Sao Paulo in southeastern Brazil, in the mid-1960s.
The mill produces 1,100 tons daily of uncoated freesheet paper for writing tablets, use in copiers and other purposes. Champion sells the Brazilian-made product within South America, and to Europe and Africa. None is sold to the United States.
The regulatory environment in Brazil is similar to that in the United States, said Keith Cunningham, community relations coordinator for the Bucksport mill. But because operating in Brazil offers a couple of distinct advantages, it is the only place Champion contemplates building additional paper machines.
“I think it’s unlikely we’ll see brand-new paper machines in America. There are none planned that I know of,” said Oettinger.
Mogi Guacu runs entirely on eucalyptus that Champion grows on nearby grassland plantations totaling 125,000 acres. As compared with spruce and fir, which take 30 years to grow even using intensive methods, eucalyptus can reach a height of 80 feet in just seven years, Cunningham said.
The wood is “dirt-cheap” to grow, and the proximity of the plantations to the mill saves greatly on transportation costs, added Oettinger.
The other factor favoring Brazil is labor costs. Wage rates for Mogi Guacu’s 2,000 employees are about 20 percent lower than those paid in Bucksport, which start at about $12.78 an hour.
Ask Champion officials what keeps Bucksport competitive, and a quality work force routinely tops their list. Even with that vote of confidence from management, you’d think the industry’s emphasis on Brazil, along with the recent restructuring, might make millworkers here a bit apprehensive regarding their own jobs.
Not so for 53-year-old Gerald French Sr., a No. 2 paper machine tender and 32-year employee of the Bucksport mill. “Overall, I think we’re extending our longevity and improving the security of our jobs,” the Searsport resident says of the restructuring.
French is chairman of the Bucksport chapter of the Pulp and Paper Resource Council, which he describes as a grass-roots organization concerned with industry issues such as fiber supply, environmental concerns and job security.
The product Champion makes in Brazil is entirely different from that made in Bucksport, so it poses no direct threat, French said. And while better technology has eliminated some local millworkers’ jobs, he said, most were vacated through attrition.
In light of the restructuring, Champion plans no layoffs, but instead will offer retirement, early retirement, and voluntary severance options to eligible workers, a process still in its early stages.
As president of United Papermakers International Union Local 261, Arthur Bissonnette says he senses some concern about jobs, but little that’s based directly on changes at Champion.
“I think in this day and age, every worker is concerned about job security. I think the people I work with feel fairly secure in their jobs. But with the economy the way it is, and the way companies are restructuring, nobody should take their jobs for granted,” said Bissonnette.
Most jobs and departments at Champion have undergone “redesign” to increase efficiency over the past few years, said the union head, leading workers to feel the mill is in better shape than those that have not re-evaluated.
“Even if we were sold, we would probably survive,” Bissonnette predicted, “unless we were given to a company that didn’t know what it was doing.”
With Champion shouldering about 68 percent of the local tax burden, about the same amount that goes to local education, the town of Bucksport depends on the mill, Hancock County’s largest employer, for its economic survival.
While the town is hard at work to broaden its economic base with myriad development projects such as a marina and business park, most acknowledge that the mill and its continued contribution are crucial.
In April, shortly after Champion’s proposed capital improvement program was announced, the mill and the town entered into a 20-year tax-increment financing pact that each side touted as mutually beneficial.
Under the agreement, Champion would pay property taxes on new capital investment and would be reimbursed about 75 percent of that payment. The remaining 25 percent in taxes would be used for Bucksport development projects. The TIF’s main benefit, said Town Manager Roger Raymond, is keeping the mill’s value relatively stable, which should help prevent the type of rancor that developed during a three-year dispute over the mill’s valuation, which led to Champion seeking a tax abatement.
That struggle, which moved from the local to the state level, finally ended in 1996, when the two sides settled out of court. Since then, the TIF pact is one sign observers point to, along with a mill-initiated middle school partnership project, in suggesting that relations have normalized.
“For the citizens of Bucksport, the nice thing is we’ve been able to stabilize the mill’s value, and look forward to committing resources to some economic development projects that were badly needed in the community,” said Raymond.
The town manager’s current goal is to see more Bucksport residents working at Champion. Whereas local residents once were in the majority at the mill, recent estimates suggest they make up more like 40 percent of the work force.
In Raymond’s view, mill positions remain some of the plum jobs in the state. But he realizes that rarely does anyone just walk out of high school and into the mill as was once the case.
According to Andrea Maker, Champion’s community relations director, applicants typically are tested to prove high school-level competency in areas such as reading and math, in addition to needing a high school diploma or GED. The mill prefers candidates with two years of college, or three to five years’ work experience.
Raymond said he hopes Champion and the town can find a way to ensure that more local workers can qualify for what continue to be some of the best jobs around.
While acknowledging Champion’s relative health as compared with many other Maine mills, Oettinger warns against making more of the multimillion-dollar capital improvement plan than it deserves.
Big money figures are always involved in any major upgrade, he said, and it takes about $12 million annually just to maintain current levels of production and efficiency at the Bucksport mill.
In addition, Champion is not the only mill in the state to see significant investment in recent years, said Oettinger, pointing to last year’s rebuilding of a machine at International Paper in Jay, and the building of three new machines at S.D. Warren’s Somerset plant in Hinckley.
“But when you look at other mills around the state, many have not had the upgrades we have,” Oettinger admitted. He said Champion corporation’s next opportunity to expand may may lie in buying a coated paper mill already on line.
In the meantime, said the mill manager, “For the facilities we have, it’s been a good business for us.”
Employees in Maine: 1,160 Salaried workers: 188 Hourly workers: 972 Employees nationwide: 24,000 Largest workforce: peak employment was 1,300 in 1988 Maine timberlands: 920,000 acres U.S. timberlands: 5.3 million acres Worldwide timberlands: 10 million acres 1996 Wages statewide: $84 million 1996 Corporate profits: $141 million Primary products: lightweight magazine and catalog papers