Potlatch announced plans to close the company's paper mill in Brainerd, Minn., Monday. More than 600 people will be out of a job when the plant closes in two months. The shutdown is part of a deal to sell the company's Cloquet plant to a South African paper manufacturer. Potlatch officials say they want out of the coated paper business. They say it's not a profitable endeavor in light of a flood of foreign imports. Brainerd city leaders hope something can be done to save the hundreds of high-paying jobs so important to their community.
Sappi Limited, a South African paper manufacturer, has signed a deal that gives Potlatch $480 million in cash for the company's paper mill in Cloquet. The deal does not include Potlatch's mill in Brainerd.
Potlatch says it will try to find a buyer for the facility. But the company has already made plans to shut down the mill in 60 days. Potlatch spokesman Mike Sullivan says the deal will allow his company to focus on more profitable ventures.
Sullivan says Potlatch wants out of the coated paper business. Coated paper is the shiny paper used for magazines and newspaper advertisements. Sullivan says a flood of foreign imports has made it a hard to make a profit.
"Since 1998, there's been an increase in imports from other countries, that has been driven essentially by the strength of the U.S. dollar. That's given our foreign competitors a cost advantage, which has put us at a disadvantage in both domestic and international markets," says Sullivan.
More coated paper from southeast Asian countries is being used by printers because of its lower cost.
Shari Ramaswamy, an associate professor in paper science and engineering at the University of Minnesota, says the Potlatch plant is just another victim in the changing paper business.
"The paper industry has been going through some major changes over the last five to 10 years. The magnitude of changes is something that's never been seen," says Ramaswamy. "Potlatch is just one example of what's been happening in the industry."
Ramaswamy says the paper industry in Minnesota and the U.S. needs to work to stay competitive in international markets.
He says Minnesota paper mills put out some of the highest quality paper in the world. He says as long as they work on developing new technology and remain efficient, they should be able to compete globally.
Talk of international competition is not what people in Brainerd are thinking about. They're worried about the lost jobs, and the impact on their community.
Brainerd city officials say they hope a buyer will emerge for the plant. City Administrator Dan Vogt says he thinks the paper plant would make a great home for another company.
"It is adaptable for reuse. We have an excellent group of employees that work there now that would be happy to work for another employer at that facility," says Vogt.
Vogt say if the plant does closes and its 660 workers lose their jobs, the city will offer what assistance it can.
The loss of hundreds of jobs would have a devastating ripple effect on Brainerd's economy. Retailers, restaurants and other business owners would all feel the pinch.
Jay Mousa, director of research at the Minnesota Department of Economic Security, says the effect could reach further. Mousa says 660 jobs is 2.5 percent of Crow Wing County's work force. But it also could affect the state, especially during these hard economic times.
"You add this to the significant number of jobs we lost during 2001 and it adds up. These job losses have an impact on the economy" says Mousa.
Company officials at Sappi have hinted at expansion plans at the Potlatch plant they are buying in Cloquet. About 1,000 people work in the Cloquet plant.
The deal between Potlatch and South Africa's Sappi still needs to be approved by federal regulators, which could take several weeks.More from MPR