Reynolds American to cut 10 pct of jobs by 2014

AP News
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Posted: Mar 14, 2012 11:34 AM
Reynolds American to cut 10 pct of jobs by 2014

Cigarette and tobacco producer Reynolds American Inc. said Wednesday it will eliminate 10 percent of its U.S. jobs, affecting about 540 workers, by the end of 2014.

The move will reduce spending by $70 million a year for the Winston-Salem, N.C.-based maker of Camel, Salem and other brands.

Reynolds, the second-biggest U.S. tobacco company, said most departures will be voluntary. The company expects to take about $110 million in severance and other charges in the first quarter, and expects to save about $25 million from the cuts this year. That total will rise to $70 million annually by 2015.

The company had about 5,400 employees at the end of 2011. It plans to continue hiring new employees when necessary.

Reynolds said it is making the cuts so it will have the resources to maintain growth for its key brands. The announcement comes after a three-month review of its Reynolds American and RAI Services businesses, and the company said it also reviewed most of R.J. Reynolds Tobacco division.

The company announced the review in February, and confirmed it had laid off workers at a manufacturing plant in Tobaccoville, N.C.

Reynolds said the weak economy and high unemployment have created a difficult market and intense promotional activity. It said promotions by competitors hurt its sales in the fourth quarter, as sales of Camel cigarettes fell 4.5 percent in the fourth quarter and the Pall Mall brand posted weak growth.

Like other tobacco companies, Reynolds has been focusing on snuff and chewing tobacco as alternatives to smoking because of rising taxes, smoking bans, and health issues are making it harder to sell cigarettes.

According to the Centers for Disease Control and Prevention, 19.3 percent of adults age 18 and older were smokers as of 2010. That rate has fallen from more than 40 percent in 1965, when the health effects of smoking were first widely recognized.

Shares of Reynolds American Inc. lost 36 cents to $41.50 in morning trading.