Verso Corp. will eliminate 300 jobs – roughly a third of the workforce – at its Androscoggin Mill in Jay. The company said declining demand coupled with energy costs and high property taxes prompted its decision.

Verso will shut down the No. 1 pulp dryer and the No. 2 paper machine at its remaining paper mill in Maine, reducing the Memphis, Tennessee-based company’s annual production capacity by 150,000 tons of coated paper and 100,000 tons of dried market pulp.

The company made the announcement Thursday morning, saying the shutdowns are intended to reduce its output to match a sharp drop in demand for coated paper and dried pulp. The company also said it will idle a mill in Kentucky for an indefinite period, laying off 310 workers there.

“Decisions to reduce production capacity are never easy,” Verso CEO David Paterson said in a statement. “They are especially difficult for the employees and their families who are directly affected by these actions. Verso is committed to treating all of our impacted employees with fairness, dignity and respect and to communicating openly and honestly with each individual about how this decision will affect him or her.”

Rep. Paul Gilbert, a Democrat from Jay, was in a meeting of the Legislature’s Government Oversight Committee when he got a call with the news.

“It’s devastating,” Gilbert said after stepping out of the meeting. “The paper industry has been a major part of that town since the late 1800s. It still is, but jeez. In the last 30 years it’s gone from about 1,500 employees down to 830 now. After these layoffs it will be 530.”

Sen. Tom Saviello, a Republican from Franklin whose district includes Jay, said the news was a surprise because he had recently been in contact with company officials and there was no hint that this decision was coming.

“While this news is not surprising, it is disappointing and especially so because as recently as three weeks ago I was led to believe by mill management that nothing drastic was going to happen,” Saviello said in a statement. “I would certainly characterize this decision as drastic, and hope Verso will be supportive of their workers during this difficult time.”

The reductions in Jay will take place in the fourth quarter of the year, according to Verso spokesman Bill Cohen.

The Maine Department of Labor has contacted Verso officials and will prepare to send a team to Jay to assist affected workers.

“The cost of doing business in Maine continues to have a negative effect on our workers and their families,” Gov. Paul LePage said in a statement. “As we did last fall in Bucksport, we will use all available resources to assist these workers and the Jay community.”

The Androscoggin Mill opened in 1965 and operated five paper machines. The No. 1 machine has since been converted to a pulp dryer. The mill has the capacity to produce more than 1,900 tons per day of coated groundwood and coated free-sheet papers on three coated machines, and produces specialty grades of paper on the other machine.

After the planned shutdowns, three machines will remain in operation at the Androscoggin Mill — Nos. 3, 4 and 5, Cohen said.

Asked if the company will scrap the machines it’s shutting down, Cohen said the machines will remain in the mill.

“We are shutting them down and they are being mothballed,” he said. “They are not being scrapped. There’s a difference, but I also don’t want to give employees false hopes. But that’s really what we’re doing.”

REASONS FOR SCALING BACK

The company said demand for coated paper is off 4.7 percent in the first half of this year, on top of declines of 3.4 percent in 2014 and 4.3 percent in 2013. Besides the shrinking demand for paper because of shifts in reading habits, demand also has been stifled by the strength of the U.S. dollar, which makes it more attractive for papermakers to import paper and harder for U.S. companies like Verso to export to foreign markets.

“It’s these trade agreements,” Gilbert said. “They’re hurting American companies and American workers.”

If the company blames the layoffs on foreign competition and applies to the federal Department of Labor, employees losing their jobs could be eligible for Trade Adjustment Assistance that would provide them money for job retraining and other services.

Verso reported a net loss of $60 million during the second quarter of 2015, which ended June 30.

“Verso’s results for the second quarter showed our resilience in the face of industry headwinds,” Paterson said in a statement this month.

Earlier this year, Verso acquired rival NewPage, which operated a mill in Rumford. However, that mill was sold to Catalyst Paper Corp. because of antitrust concerns. Paterson said the company has saved $41 million to date because of the NewPage merger.

Verso’s mill in Jay is its sole remaining paper mill in Maine. It previously operated a paper mill in Bucksport, but closed that mill in December 2014. Roughly 500 people lost their jobs in that closure.

Cohen, Verso’s spokesman, said the company has been at odds with the town of Jay over the assessed value of its paper mill. While the town assesses the value of the mill and its power plant at roughly $720 million, Verso has argued that it should be closer to $450 million. The dispute began over the 2013 taxes, Verso appealed the town’s decision, which was denied. Verso is bringing its appeal to the state. Cohen expects the same thing will happen with the taxes for 2014.

Asked if Verso is worried that the decision to shut down a machine could be perceived as a negotiating tactic, Cohen said he hoped not and defended the company’s reasoning.

“It’s not a hard bargaining technique,” he said. “I hope they don’t see it that way. It has the potential to compound this because once you shut down facilities that will reduce the assessed value, but we’re not doing it as part of a hard bargaining technique.”

Cohen said what gets lost in the news of shutdowns and layoffs is the work that needs to be done to make the mill sustainable enough so that the remaining employees will keep their jobs.

“As hard as it is telling 300 people they’re losing their jobs, one of the things that gets lost at this point is we have to find out how to help 560 people keep their jobs. So that’s what we’re really working hard at. The mill could not survive in its current configuration, so what do we do to set it up for future success?”

He said the company is working on plans for scaling back the mill and making it run more efficiently. He said there are no current plans for investments in the mill, but that doesn’t preclude doing so in the future.

“We may have to spend some money to get where we really need to go,” he said. “The challenges of downsizing are different than the challenges of closing it, and the good news here is this mill isn’t being closed.”

 


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