400 RJR employees accept severance package

400 RJR employees accept severance package

Winston-Salem - R.J. Reynolds Tobacco Co. officials thought that their voluntary severance offer of Dec. 4 might draw a favorable response from veteran manufacturing employees despite turbulent economic times.

However, having 400 of its 1,800 production employees accept a severance package within a six-day window took officials by surprise.

Although the departures will be spaced out over more than a year, employees will begin leaving Jan. 10 and 75 percent will be gone by Sept. 30, spokeswoman Maura Payne said.

“We didn’t know how many people would accept, but we went into it with an open mind considering the last time manufacturing workers received a similar offer was 2003,“ Payne said.

“We were able to accommodate everyone who requested the offer, and 99 percent of them were retirement-eligible.“

Payne said that while Reynolds has no current plans for involuntary cuts in production jobs, it will continue to evaluate the size of the work force with regard to consumer demand for cigarettes.

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

Each employee will be told of his release date by Tuesday, Payne said.

“Actual release dates for each individual will be determined based on both the needs of the business and any milestones the employee needs to reach in order to be eligible for retirement or other benefits,“ said Tommy Hickman, a senior vice president of operations for Reynolds.

Reynolds said last year that it would reduce the value of its overall severance package on Jan. 1, 2010. The current severance package contains 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 assistance.

For employees whose jobs are eliminated after Jan. 1, their severance packages still include two weeks of pay for every year of service. But it will be paid in a lump sum as soon as employment ends rather than through a “salary continuation” period.

Jan Smith, a senior director of communications for Reynolds, said on Dec. 4 that there are other changes “which are better aligned with what most companies our size offer, and better than what some of them offer.“

Payne said that the company is confident that it will be able to cross-train employees over the next year to lessen the loss of experienced workers. “This also opens up channels for promotion for younger employees,“ she said.

That Reynolds is reducing its manufacturing work force is not surprising given lower demand for cigarettes nationwide, analysts said. Contributing are higher excise taxes, more smoking bans, increasing social stigma regarding tobacco products, and reduction in Reynolds marketing.

With this restructuring, Reynolds has conducted at least 17 job-cut announcements since 1983, going from 15,500 full-time local workers to 2,630 by early 2011.

Reynolds is not alone in cutting jobs. Philip Morris USA completed the closing of a cigarette-manufacturing plant in Concord in July, affecting 2,500 jobs. Several hundred jobs were transferred to its plant in Richmond.

Analysts and economic officials had questioned how many volunteers Reynolds would 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.

“Older workers changing careers face a challenge in today’s economy,“ said Michael Walden, an economics professor at N.C. State University. “Especially if they come from a manufacturing background, their re-employment options are often limited to lower-paying service jobs.

“Re-training and skill upgrading are almost musts to qualify for better-paying jobs,“ he said.

“Then the question becomes whether the worker considers the time and effort to make those talent improvements worthwhile,“ Walden said.

Reynolds said it will take a charge of $47 million in the fourth quarter related to the severance offer. It also said it expects to reduce costs by $17 million in 2010 and $30 million in 2011. Hickman said that the company plans to “phase in new productivity programs” as part of the production restructuring.

Gayle Anderson, the president and chief executive of the Greater Winston-Salem Chamber of Commerce, said that the effect of the voluntary job cuts could be small, given that many production workers will elect for retirement rather than pursue another job.

However, volunteering for the severance package was likely a bittersweet experience for many production workers given the chilly hiring projections for well into 2010, said Archie Hicks, the manager of the Winston-Salem office of the state’s employment-security commission.

“On one hand, I am sure these people have very good skills on the latest high-speed machinery,“ Hicks said.

“But on the other hand, if we do not see the type of economic recovery that results in job growth over the next two years, they will face difficulty in finding suitable work regardless of their age.“

Hicks said that because the production workers make “far above the average wage for manufacturing workers in this area, they will face reluctance on the part of some employers to take a chance on them despite their work history and demonstrated work ethic and skills.“

Richard Craver is a reporter for the Winston-Salem Journal.