A paper mill runs through it – Smurfit-Stone in Missoula

In the wake of a corporate challenge to improve, and with manufacturing moving overseas, can the Smurfit-Stone mill survive? And what does the answer mean to Missoula?

“In October of 2003, we announced that we would consolidate our operations, probably to the effect of about 1,400 jobs being eliminated,” says Tom Lange, public relations director for Smurfit-Stone Container Corporation. “That’s a process that’s going to take about a year.”

by Mike Keefe-Feldman

http://www.missoulanews.com/News/News.asp?no=3897

Smurfit-Stone Container owns 21 mills in the U.S. and Canada, including the one in Missoula County. Each mill has been challenged to improve as the overall corporation looks at strengthening its bottom line, a situation which could represent the biggest challenge to the local mill since its construction in 1957. The mill was then under the ownership of Hoerner Waldorf, then Champion and Stone Container, and eventually Smurfit-Stone Container. All told, the mill on the Frenchtown/Missoula border is approaching its 50th year of turning wood chips to slurry to paper. At least one employee, Malcolm Dayshaw, has worked at the mill throughout its history, since the days when the mill’s 78 employees made $2.25 an hour. These days, those paying attention to the pulp and paper industry have reason to wonder: Will the mill be here 50 years from now?

The mill’s current workforce certainly hopes so. One member of that work force is Troy Savage, a Smurfit-Stone Container process engineer. Savage hands out a hard hat, glasses and a pair of ear plugs before leading a tour of the mill’s operations. He passes a large pile of wood chips waiting to be made into pulp slurry, and eventually paper, as well as several large stacks emitting steam. The air smells of sulfur. Because the mill’s vast array of machinery is so intricate—each unit with its own specific task—it’s difficult, even while walking around the actual plant, to make the connection between these machines and the end product: the DVD player cartons and Kirkland pizza boxes you might load into the back of your car in a Costco parking lot.

Savage thinks that many Missoulians don’t actually know what work goes on at the mill. Lori Jacobsen, the mill’s personnel supervisor says, “I always explain making linerboard like a sandwich. We make the bread on the outside, and the meat in the middle is made at another place and then both go to a box plant.”

When he reaches the building with the mill’s main paper machines, where the “bread” is made, Savage notes that one of these three machines was shut down in November of 2002. Thirty-six people lost their jobs in that shutdown.

“That was kind of sad,” Savage says.

The longevity of the mill’s remaining two paper machines, and the 508 full-time employees who operate them, is a subject of discussion that no one at Smurfit-Stone seems entirely comfortable with. The Smurfit-Stone Container Corporation has closed or scaled-back five mills in the past several months, and the Chicago-based company announced in October that more cutbacks are on the slate this year—without specifying where. Missoula’s mill has been challenged to prove its worth to the overall corporation, as have all of the other 20 mills that the company owns. Can Smurfit-Stone survive the corporate scrutiny? And if Smurfit-Stone fails, can Missoula survive its absence?

“I’m an American worker,” says Don Serba, who began working at the local paper mill 30 years ago. “I want as many jobs in this country as we can get. It’s good for the economy and for families. But those things are basically out of our control. Businesses are going to make business decisions.”

Beyond jobs

“I thought when you said you wanted to talk to me about Smurfit-Stone that you were going to tell me that they are leaving,” says Judy Wing, the chief professional officer of the Missoula County United Way, the oldest United Way in the state, and the one which raises the most money.

“And I was going to tell you, ‘Don’t tell me that,’” Wing says.

It’s not hard to understand why Wing is so anxious to see Smurfit-Stone stay put. Between the mill’s corporate contributions and donations from its workers, the Missoula County United Way received $110,000, or about 10 percent of its total budget, last year. In 2002, that figure was $120,000. Smurfit-Stone’s giving to the Missoula County United Way represents the most money given to a United Way by a single entity in Montana.

“Because of Smurfit-Stone, we’re able to do a lot of things,” Wing says, sitting at a desk in her office at the far northern end of Higgins Ave.

“Children are able to be cared for at Watson’s Children’s Shelter, the emergency shelter for abused and neglected children. Beyond the money that they give us, they have a huge food drive. People eat because of Smurfit-Stone.”

Those programs barely scratch the surface of Smurfit-Stone’s role within Missoula County. In fact, close examination shows that the mill has its lifeblood, either through financial or direct personnel support, running through just about any local activity you can think of. When the Salvation Army needed a disaster vehicle to provide a mobile kitchen for fire crews, Smurfit-Stone was there with $25,000. When Missoula Children’s Theatre performed Harvey last year, it was in large part due to Smurfit-Stone’s support. When kids with disabilities ride horses as a form of therapeutic healing, that’s Smurfit-Stone. The list goes on and on: the Ronald McDonald House; the annual Street Jam basketball tournament; the 4H livestock sale at the Western Montana Fair; a trip to D.C. for kids to learn about the legislature; a math bee; fishing conservation programs; Play Ball Missoula’s new baseball park; Big Brothers, Big Sisters; the Special Olympics; Missoula Symphony; an observation deck at Frenchtown High School where kids study microbes and aquatic life; Literacy Volunteers of America; Leadership Missoula High School; the Boy Scouts; Camp Make-a-Dream; the Missoula Strikers soccer team and various other sports teams…even the Missoula Long Ears Association’s mule competition relies on support from Smurfit-Stone. Wherever you look in Missoula, you can see the impact of the mill, which is why Judy Wing may be a little nervous when it comes to talking about its future.

“If you figure that they contribute 10 percent of our campaign, I don’t think it’s hard to imagine that there would be a 10 percent reduction in the kind of services that we as a community have,” Wing says. “We’d have 10 percent fewer kids finding foster homes. Ten percent fewer people able to get food at the Food Bank. And the unfortunate, interesting twist about this is that after all these years of being supportive of the United Way and the community as a whole, if the mill shut down and the employees needed help and services, that would add a demand at a time when we’d be cutting services that should be there for them.”

Local non-profits aren’t alone in their reliance on Smurfit-Stone, according to Dick King, president of the Missoula Area Economic Development Corporation. King points out that in 2002 (the last year for which data is currently available), Smurfit-Stone payed $2,500,000 in property taxes. Without that tax-base, King says, public schools, already under the knife, would feel a significant pinch.

King says that, fortunately for Missoula, its economy is more diversified than many other mill towns, where a plant closure can pretty much turn a boom town into a ghost town.

“In 1980, the wood products industry accounted for a third of our economy’s base,” King says. “That’s shrunk now to about 14 percent, so that’s what drives the discussion about wood products no longer being as important as it used to be. That’s true, but it also disguises the fact that we have three of the largest manufacturing companies in the state of Montana: Smurfit-Stone, Stimson Lumber and Roseburg [Forest Products]. Those are manufacturers with quality jobs and health insurance. When you look at it that way, then Smurfit-Stone is very prominent.”

Smurfit-Stone currently employs 508 full-time workers. With Missoula’s job market as tight as it is, if the mill were to close, those workers—and their families—would likely have to move elsewhere, an exodus which would surely take its toll beyond mere numbers.

While not everyone is as thrilled about Smurfit-Stone as Wing and King, even the mill’s critics recognize its value to Missoula’s economy. Darrell Geist is the former executive director of Cold Mountain Cold Rivers, an environmental non-profit which filed suit against the mill in 1996 over Clean Air Act, Clean Water Act and community right-to-know concerns before eventually settling the case in 1998.

“They are the largest source of air toxins in Montana, and that’s one hell of a statement to make,” says Geist.

Debbie Skibicki, an environmental engineer and air permitter with Montana’s Department of Environmental Quality (DEQ) confirms that Smufit-Stone had the highest hazardous air pollutant levels in the state in 2001, and though she is aware that the mill has made environmental improvements since then, she suspects that the overall rank hasn’t changed. Skibicki also points out that if one measures in terms of OSHA carcinogens, Plum Creek in Columbia Falls ranks higher than Smurfit-Stone.

Despite his concerns, Geist believes that even if a mill shut-down would lead to cleaner air, it wouldn’t be a cut-and-dried victory for Missoula.

“It’s a tough call,” he says. “How do you balance out a huge employer like Smurfit-Stone Container with the environmental impact they’re having?”

From her United Way office, Judy Wing ponders the same question.

“I don’t know,” she says.

“There’s been a large loss of manufacturing in the United States,” says Smurfit-Stone General Manager Bob Boschee. “And linerboard orders that this mill processes are used for packaging to ship those manufacturing products. So our challenge—well, in industry today, you need to continually get better.”

Pulp friction

In October of 2003, a letter from Smurfit-Stone mill Frenchtown General Manager Bob Boschee to employees was leaked to the Missoulian. In the letter, Boschee wrote that the corporate office would be evaluating all of its components, and that the mill had six to 12 months to improve its efficiency, safety record and teamwork in order to demonstrate its value to the overall corporation, the daily reported.

Boschee discusses the letter in his office at the mill. Behind glasses, Boschee’s eyes appear alert yet tired. One gets the impression that the GM could use a vacation.

“I wouldn’t refer to it as a mandate,” Boschee says of his directive from the corporate office. “I think it’s more of a challenge. What brought it on is the company’s looking at how it wants to configure its entire operational base for the future, and if you’ve been following the basic change in our economy, it’s moving from manufacturing to service. There’s been a large loss of manufacturing in the United States. And linerboard orders that this mill processes are used for packaging to ship those manufacturing products. So our challenge…well, in industry today, you need to continually get better.”

Last year, the mill recorded 14 injuries requiring treatment beyond Band-Aids and ice packs, which was one of the higher rates among Smurfit-Stone mills, according to Boschee. This year, he says, the mill is committed to improving that number, and therefore costing the company less money. Walking around the mill, one finds signs at every turn which read, “Safety begins here.” Even the paper coffee cup Boschee’s secretary offers has the word “Safety” printed on its side.

As for efficiency, Boschee says the mill will be analyzing what its full potential is and then figuring out how to close gaps between that ideal and current production figures. And when it comes to the challenge to display greater teamwork, Boschee says, “I don’t know that you can ever prove an intangible. Teamwork isn’t something you can measure in statistical terms.” Nonethless, he feels that his workers have it, even if he doesn’t have a monthly tally list of collegial high-fives to back his claim.

The Missoula mill is Smurfit-Stone’s western-most operation. That gives it both strategic advantages and disadvantages compared to other Smurfit-Stone mills, Boschee says. The advantage is that the local mill is closer to the West Coast (where about 50 percent of its product winds up) than any other. The disadvantage is that being in Montana means being a long way from major metropolitan areas, so shipping costs are typically more expensive.

An $18 million lawsuit filed against Smurfit-Stone by Enron when the Missoula mill switched its power supply in the wake of Enron’s collapse hasn’t made matters any easier for Smurfit-Stone; nor has a $92.5 million antitrust settlement the company made in November in response to allegations of collusion among containerboard manufacturers from 1993 to 1995. Boschee says that the people involved in the alleged ’90s scandal are no longer with the company, and would not comment on the Enron lawsuit.

From an investor’s standpoint, Smurfit-Stone Container Corporation has seen better days, reporting a net loss of $208 million in 2003 and making Zack’s List of “Stocks to Sell Now” last month.

Yet these problems pale in comparison to the fact that the manufacturers who place orders with Smurfit-Stone are increasingly moving their businesses out of the U.S.

“The number one issue is overseas manufacturing,” says Tom Lange, public relations director for Smurfit-Stone Container Corporation, from the company’s corporate headquarters in Chicago, Ill. “That has by far been the most dramatic impact on our industry and our company specifically. We have 21 mills in the Stone system. They’re all under the same pressures in terms of cost issues and belt-tightening, and the bottom line is the market for packaging is smaller today than it was even five years ago because there’s more and more offshore manufacturing. In the mid-’80s, 20 percent of packaged goods were manufactured and packaged offshore. Today, that number is about 50 percent.”

Lange says he wouldn’t jump to the conclusion that Smurfit-Stone will be closing more mills, though he also doesn’t say that the company won’t.

What he will say for sure is that approximately 1,400 Smurfit-Stone employees will be laid-off this year. This creates a situation wherein each mill is hoping to prove itself invaluable to the company, a game of wait-and-see that has drawn the attention of both of Montana’s senators.

“I’m committed to protecting those…good-paying jobs in Missoula County,” says Sen. Max Baucus (D-Mont.). “That’s why I’ve been working to help small timber mills provide the products that Smurfit-Stone needs to stay in business, as well as help them ship those products affordably.”

Sen. Conrad Burns (R-Mont.) also took note, saying, “Any time a company is considering cutbacks, you have to be concerned about the impact on the community. Smurfit-Stone is facing numerous challenges, and as a profit-making enterprise they are considering all options and doing what they can to remain competitive. In a community like Frenchtown, and the Missoula Valley, job losses can have a dramatic impact, and I will continue to do what I can to support Smurfit-Stone and its employees.”

For his part, Boschee says that he is confident in the long-term future of his mill.

“And if I wasn’t, I shouldn’t be here in a position of leadership,” he says. “I believe we’ll be here for a long, long time, and I believe that sincerely. It’s not something I’m just hoping. But, sometimes things come up in business that we don’t necessarily have the ability to predict. If there is a time when there has to be a decision regarding this mill, I’m going to do everything I can [to ensure] that we’re going to be viewed as a long-term component of the Smurfit-Stone organization.”

Dick King, president of the Missoula Area Economic Development Corporation, on what the future holds for the local mill: “There could be a very bright future for Smurfit-Stone in Missoula, but we also have to be realistic and realize that they are one plant out of many owned by an out-of-state corporation.”

How did we get here?

The U.S. pulp and paper industry has been in trouble for some time now. Since the inception of the North American Free Trade Agreement (NAFTA) in 1993, 3,325 paper-products jobs have been lost in this country, according to Robert Scott, an international economist with the Economic Policy Institute, a non-profit, non-partisan think-tank that “seeks to broaden the public debate about strategies to achieve a prosperous and fair economy.” Scott says that since 1994, trade deficits have eliminated about 3 million U.S. jobs overall, mostly in manufacturing. This number may be more telling for Smurfit-Stone than even the pulp and paper job loss figure, because without in-country manufactured products in need of paper for boxes, Smurfit-Stone cannot exist in its current form.

Few are more familiar with this dilemma than Don Serba, communications director for the Rocky Mountain region of the Pulp and Paperworkers’ Resource Council (PPRC), a national grassroots labor coalition of unionized and non-union lumber mills and associated businesses. Serba was born and raised in Missoula and began working on the local paper mill’s boilers 30 years ago. Serba, a plain-spoken man who compares union/management negotiations to living with a wife and two kids (“Everybody’s got their own opinion”), moved onto the wood chip dock in 1979 and began his work with PPRC in 1995. That work includes frequent trips to Washington, D.C., where he often meets with legislators to discuss his industry’s concerns.

Serba points to a number of factors which he says have contributed to the decline of the U.S. pulp and paper industries. One is environmental lawsuits, which he says have made it more difficult for mills to obtain cheap lumber. Another is NAFTA and similar “free trade” agreements.

“The only thing you have left when you basically dissolve the borders is tariffs,” Serba says. “The only way you can level the playing field for American labor and business is through tariffs. Now with GATT and NAFTA and the WTO, it’s awful tough to level that playing field, as we just saw with the steel tariff, which the WTO found was illegal.”

Serba says that a trade agreement such as the current preliminary settlement to allow 32 percent of Canada’s softwood lumber market into the U.S. duty-free will hurt U.S.-based workers.

Still, Serba has been relatively pleased with the attention his industry has received from Montana’s legislative delegation in D.C., though he takes issue with Baucus’ continued pro-NAFTA stance.

“We, as a union, lobbied Max Baucus twice to vote against NAFTA. Didn’t work. I think he’s still a firm believer that NAFTA would create more jobs than it would do away with. We know better.” Serba hopes Baucus will learn from NAFTA when considering the Free Trade Agreement of the Americas (FTAA), a proposal he thinks will be bad for U.S. workers unless heavily amended.

Baucus spokesman Barrett Kaiser says the senator still supports NAFTA and sees no connection between it and the situation in which mills such as Smurfit-Stone find themselves. Sen. Burns, on the other hand, says that NAFTA may well factor into the company’s declining profit levels.

“NAFTA was well intentioned, and has worked for some sectors of our industry, but I think it’s had a negative impact on Montana overall,” Burns says. “I certainly see how the argument could be made that NAFTA has impacted the pulp and paper industry and [can] be a contributing factor toward the position Smurfit-Stone is in.”

But Burns maintains that environmental lawsuits are a larger part of the problem. So, too, does Gov. Judy Martz, who recently visited Smurfit-Stone to discuss her pleasure with the Healthy Forests Initiative and her displeasure with “those who want to obstruct everything that we do.”

The argument that environmental lawsuits are killing the industry doesn’t add up on the local scene these days; even Serba says the mill receives an ample amount of fiber from Plum Creek, albeit at a more expensive price than it would pay for Forest Service “salvage” wood.

Serba’s PPRC has focused more attention on dealing with what it considers overzealous environmental regulation than it has on the trade agreements that the Economic Policy Institute finds are rapidly sending jobs out of the U.S. This may be a result of the fact that the PPRC can have more of a say in environmental law than it can in the business decisions of large corporations.

Asked what he might say to a U.S. manufacturer planning to move offshore, Serba takes a minute, adjusts his baseball cap, and responds: “Well, I’m an American worker. I want as many jobs in this country as we can get. It’s good for the economy and for families. But those things are basically out of our control. Businesses are going to make business decisions. What we have to do is figure out how we react.”

Out of control

An overwhelming feeling that the issues affecting the Smurfit-Stone mill are out of locals’ control engulfs Frenchtown’s pulp mill. It is, in a sense, a feeling of helplessness that manifests itself in Boschee’s hesitancy to talk about the future. Asked about trade agreements sending manufacturing jobs overseas, Smurfit GM Bob Boschee says, “Our focus is to address the things that we have the ability to control or change. Those things that we can’t control, there’s no value in us trying to deal with those.” The same is true, he says, for the corporate office’s ultimate decision on where cuts should be made. Serba agrees. “The paper industry is going through some changes. Hopefully it all shakes out and stabilizes. Myself, am I worried about this mill shutting down as opposed to one in Louisiana? No, because it’s out of our control. What corporate decides to do and the reasons they have for doing it, we have no control over that. We just come here and make paper as efficiently as possible and go on with life.” Even Cold Mountain, Cold Rivers’ Geist takes issue with the lack of control mill workers and the larger community can exert on the ultimate direction of the mill. “It would be a huge economic impact to lose those jobs at the Smurfit-Stone Container pulp mill. A huge impact. Unfortunately, we as a community don’t have much, if any, say in the future of that pulp mill. Its decisions are made from elsewhere. So [if the mill were to close], it’d be bad in the sense that the value the workers bring to the community would be gone. It’d be good in the sense that the environment may improve, but bad again in the sense that we as a community don’t have any influence over the decision that’s going to be made by the Stone-Container Corporation. It puts the community in a real bind. We can’t plan for any sustainable transition for the pulp mill because we don’t have any influence over the decision that’s going to be made over there. It’s very hard to plan for something that you don’t have control over.” “There could be a very bright future for Smurfit-Stone in Missoula,” says Missoula Area Economic Development Corporation President Dick King, “but we also have to be realistic and realize that they are one plant out of many owned by an out-of-state corporation,” King says. “We’ve taken for granted that they’re here, but I don’t think we can do that anymore.” Contact the reporter: [email protected]