Industry voices.

One of the interesting parts of my job is that I get a fair number of letters and e-mails about my columns and the paper industry in general. Many of my correspondents prefer to remain anonymous, for obvious reasons. Still, I find these messages compelling, and many speak to the heart of issues confronting the paper industry. That's why I'd like to use this month's column to present some anonymous "viewpoints" on how consolidation is reshaping the industry--mostly in North America.

Most analysts and observers agree that consolidation is a good thing for the pulp and paper industry, and it probably is. However, consolidation has a very hard edge not often discussed in articles and presentations--the personal upheaval and other "side effects" that always accompany consolidation. My first correspondent zeroes in on this issue:

"As one of those unemployed that got caught in the reduction of investment by paper companies, I fully agree that the U.S. paper industry has lagged way behind other countries in new technology and investment in same. I have worked for suppliers, and a paper company, and have watched U.S. capital equipment suppliers disappear left and right through the lack of orders and--we have to be honest--some bad decisions. I have heard many times, during presentations of new designs at U.S. paper mills, 'When you have 3 or 4 of these new designs working, let us know.' Meanwhile, paper mills in other countries have invested almost immediately in new designs to make better quality paper at lower costs."

In another message, the same correspondent noted how suppliers are being hit with a "double whammy" through mill closures:

"Every time I open up paperloop.com or tappi.org there, is another mill or another machine going down. This produces another problem for suppliers. Mills take existing equipment from these mills and move them in other sites instead of purchasing new equipment. Smurfit-Stone has been doing this for years and IP, recently, is doing this with the equipment from Mobile (Alabama). I would expect that Mead/Westvaco will be doing that with the Tyrone, Pennsylvania facility. I am worried that it won't be long before we no longer have any capital equipment suppliers left in the United Stales. I have very little confidence that I will find employment again in the paper industry, to the point that I am taking classes to pursue a different career after being in the industry for over 35 years and a member of TAPPI since 1978."

Another correspondent noted that U.S. companies have a built-in investment handicap--the U.S. tax code:

"Read your editorial and Jim Kenny's article ('Viewpoint' and 'The Investment Gap,' Solutions!, April 2002). Great stuff I was particularly impressed with the perspective Jim was able to give on how the Europeans see things. I wish there was a way to get our friends in government to see this. It really lays out our problems for the future. The solutions will need some kind of recognition and government support to correct--not just in the paper industrial, but all manufacturing. For example, if we could get some kind of tax break for replacing old tonnage with new, would it shift the balance toward more investment but not more tons? For example we--at least the 'we' for now--have two old board machines that we could easily replace with one new machine if the capital incentives were there. I'm looking forward to next month's editorial and am interested to hear what the folks that have a better view of these things see as our way out."

Unfortunately, this correspondent--a friend of mine with a sharp mind and lots of experience--was one of those recently "dislocated" by yet another consolidation. So it goes.