Retrench, reinvent, renew.

I'm afraid to pick up the newspaper these days--or more realistically, turn on my computer. Every day brings news of a new mill closure. Here's a sampling of recent headlines: Smurfit-Stone announces plan to make permanent closures at three North American mills (08/04), 700,000 tons, 565 jobs lost; Sappi Muskegon Mill to close one paper machine and mothball pulp mill (07/28), 365 jobs; International Paper to realign business units (07/18), up to four mill closures or reductions; Kimberly-Clark to cut jobs, close plants (07/22), 6000 jobs, 17% of plants closed or sold; Wausau Paper announces pulp mill closure (07/06), 60 jobs, 80,000 tons of sulphite pulp; Closure of Norske Skog Union mill recommended (07/27/05), 380 jobs, 260,000 metric tons of paper.

That's a lot of tons, and a lot of jobs. The announced closures were almost all in North America, and they passed here almost without notice--except for the IP and K-C announcements, which were analyzed for their financial impact. The greatest outcry seems to be in Norway, where Norske Skog wants to close its Union book paper mill. There has been much public discussion about the closure, including an offer to buy the mill. Norske Skog says that would be fine--as long as it isn't used to make paper. Seems that Europe is unaccustomed to mill closings. In North America, they are about as regular as the leaves turning and are scarcely noted--except by those who lose their jobs.

But my point is not to belabor these mill closings. As we are told, they must happen to keep the remaining parts of our business healthy--it's called thinning the herd, shooting the stragglers, whatever. The closures are part of the "creative destruction" of capitalism. So far we've had plenty of destruction--when do we get to the creative part?

To renew the paper industry, we must first reinvent it by challenging all of our assumptions about how paper is made and why. Producing more tons at lower costs has clearly been a huge bust. As Roger Stone once noted, being the low cost producer just makes you the healthiest leper in the leper colony.

Here's one thought--make products that are different. It's not exactly a new idea, but it hasn't been used much in the paper industry. Along this line, International Paper recently announced it will use a new technology to improve the appearance of 3.5 million tons of its North American uncoated freesheet production. This is one of the core businesses IP plans to keep, after jettisoning others. The new technology will allow IP to improve to a new standard of whiteness and brightness in uncoated freesheet, a business today that is about as commodity oriented as you can get. They want to differentiate their products by using new, proprietary technologies to create "consumer preferred" products. They have developed a new technology to achieve higher levels of whiteness, which reportedly makes much more efficient use of traditional chemicals and additives. The technology increases the brightness of IP's standard papers from 84 to 92 on the GE scale, and whiteness to CEI levels of 135 and 145 with a uniformity of color "unprecedented in commodity papers," said IP. This is the first of a series of promised breakthroughs, which IP calls VIP Technologies[TM], which stands for "Vision Innovation Papers."

This is a promising approach and one that should be a good model for the industry as a whole. Value-added, proprietary products are the only ones that typically makes serious money for companies. Just take a look at H-P's and Canon's ink cartridge sales. In some ways, this will mark a leap back for the paper industry. Remember when companies like Consolidated Papers used to patent and jealously guard their own manufacturing processes and coating formulations? Remember how much money they used to make? One of the fundamental mistakes paper companies have made is turning over all their technology development to suppliers. While this has lowered their costs in the short term, it also means that the same technology is available to anyone, making it nearly impossible to make products that are different than any other. IP clearly wants to buck this trend, and more power to them. I hope it spurs other paper companies to seek similar market advantages.

In next month's column, I will continue on this theme by looking at changing the way we structure our paper manufacturing processes. In the meantime, send me your thoughts on how we can reinvent paper products and produce proprietary products that actually make money. I'd love to hear about any examples you have: Send them to me by email at [e-mail], or by that horse and buggy technology, the fax machine, at [phone].

ALAN ROOKS

Editorial Director

Contact Alan at [phone], or by e-mail at: [e-mail]

[ILLUSTRATION OMITTED]