AbitibiBowater Inc. announced an action plan today which will include the closure of its Grand Falls, Newfoundland newsprint mill.
Approximately 830,000 metric tons of newsprint, 110,000 metric tons of specialty grades and 70,000 metric tons of coated grades will be removed from the marketplace. Capacity reductions include:
The permanent closure by the end of the first quarter of 2009 of the Grand Falls, Newfoundland and Labrador newsprint mill, representing 205,000 metric tons;
The permanent closure by the end of 2008 of the Covington, Tennessee paper converting facility, representing 70,000 metric tons of coated grades;
The immediate idling, until further notice, of the Alabama River newsprint mill, in Alabama, representing 265,000 metric tons;
The immediate idling, until further notice, of two paper machines (# 1 and # 2) in Calhoun, Tennessee, representing 230,000 metric tons of capacity, including 120,000 metric tons of newsprint and 110,000 metric tons of specialty grades; and
On a revolving basis, approximately 20,000 metric tons of monthly newsprint downtime at other facilities across the organization until market conditions improve.
"Today's announcement is consistent with previous actions and demonstrates our ongoing commitment to be a stronger, more competitive organization," stated President and Chief Executive Officer David J. Paterson. "The North American newsprint market continues to contract and our customers have told us they anticipate further decline. International customers have also indicated that export growth will not be as strong in the coming year. We have the resolve to adapt to these realities and to set the stage for continued quarter-over-quarter improvements."
Despite sustained efforts and discussions with government and unions, the permanent closure of the Grand Falls facility is a result of declining newsprint demand and high delivered cost. Idlings of machines at Calhoun and the Alabama River newsprint mill reflect softening markets for the products produced at these facilities and the non-competitive cost structure of southern U.S. electrical suppliers.
AbitibiBowater estimates it will incur cash closure costs of approximately $45 million related to severance and other closure charges as a result of these actions. The majority of these closure costs will be paid during the second quarter of 2009. A fourth quarter 2008 non-cash asset impairment charge of approximately $180 million will be taken to reflect the permanent closure of the Grand Falls mill and Covington paper converting facility.
A total of approximately 1,100 employees are affected by these capacity reductions.