Few R.J. Reynolds Tobacco Co. Workers Will Volunteer for Severance, says Professor Lord

1.14.2011 Article, Careers, Faculty News

R.J. Reynolds Tobacco Co. Prepares to Cut More Jobs

Reposted from Winston-Salem Journal/McClatchy-Tribune Information Services | by Richard Craver

To leave or not to leave?

That's the question once again facing the manufacturing work force of R.J. Reynolds Tobacco Co.

The company confirmed Thursday that as part of a business analysis, it is asking for volunteers among its 1,400 manufacturing employees to take a severance package.

The last time Reynolds made such an analysis, in December 2009, it had about 400 manufacturing employees accept the offer within a six-day period.

The primary reasons for the downsizing is the continuing decline in demand for cigarettes nationwide and higher efficiency gains from consolidating production at its Whitaker Park plant into its Tobaccoville plant.

Since 1983, Reynolds American Inc. and its subsidiaries have eliminated at least 83 percent of its local work force through at least 17 job-cut announcements, going from 15,500 full-time workers to about 2,600.

The company has not set a job-cut goal, spokesman David Howard said. The offer will not affect plant employees "who do not express interest in leaving, nor any other Reynolds Tobacco, Reynolds American employees and their affiliates," Howard said.

Reynolds told targeted employees of the offer Wednesday. It is giving them until Jan. 31 to decide. It expects to determine the number of eliminated jobs by mid-March.

Howard said the job cuts would not be as deep as the ones in December 2009.

The severance package is the same as in December 2009 — two weeks of pay for every year of service, with a minimum of 13 weeks of pay regardless of years of service, and a maximum of 78 weeks, along with benefits and outplacement help.

However, as of Jan. 1, 2010, the severance package is paid in a lump sum as soon as employment ends rather than a "salary continuation" period.

"Based on experience with previous business analyses, and given the number of manufacturing workers who are eligible for retirement, we believe we will be able to match up the to-be-determined job reduction with volunteers," Howard said.

He said there is no guarantee that every employee who volunteers for the severance package will be accepted because "we need to have the staffing levels and skill sets to operate effectively after this consolidation is done."

Howard said about half of Reynolds' manufacturing employees have at least 30 years with the company.

Eligibility for retirement differs for some employees because their years of service include time spent with companies that Reynolds bought. Although the main criterion is being at least age 55 with 20 years of service, some employees are able to retire at 50.

Howard said the closing of Whitaker Park, which was announced in May 2010, remains on pace for June 30.

"Business needs are driving this decision," Howard said. "Declining cigarette volumes industrywide are a fact, and gained efficiencies in manufacturing mean that we can operate with fewer employees."

Analysts question how many volunteers Reynolds will get given the uncertain economic times, particularly in manufacturing. Many of its production employees make between $50,000 and $67,000 a year.

By contrast, the average manufacturing employee in North Carolina makes $31,574 a year, according to the N.C. Employment Security Commission.

Michael Lord, an associate professor of management at Wake Forest University, said that because the positions at Reynolds "are pretty decent jobs, unless someone already has something else lined up at another company, it's taking quite a leap to go for the severance package."

"Tobacco won't go away anytime soon, and Reynolds' emphasis on smokeless products gives them other options. But the business no longer is anywhere near as labor-intensive as it once was."