When Employees Become Owners... A Happy Ending
- Published: June 01, 2000, By Teresa Koltzenburg, Senior Editor
The "closing" of a former Champion-owned paper mill and several converting facilities proved to be a blessing for the employees—now owners—of one-year-old Blue Ridge Paper Products Inc.
It was just two years before the new millennium that the employees of Champion's paper mill in Canton, NC, and the employees of several of its converting operations across the country faced a prospect much worse than Y2K: They were hit with the possibility of losing their jobs, ultimately their livelihoods.
In October of 1997, Champion announced the sale of its Canton, NC, paper mill, its neighboring Waynesville, NC, extrusion coating operation, and five of its DairyPak converting plants located in Athens, GA; Clinton, IA; Fort Worth, TX; Morristown, NJ; and Olmsted Falls, OH. It was especially scary for the people in Canton and Waynesville: The loss of the mill and the extrusion plant, together a major employer in the region, threatened the very stability of the Canton-Waynesville area's economy.
Like the sigh of relief the world breathed as we woke to status quo on New Year's Day 2000, the people employed by the formerly Champion-owned operations experienced similar relief just over a year ago. In May 1999, the employees took ownership of their place of employment--and their futures.
The seven-plant system (including the mill) is now Blue Ridge Paper Products Inc. Headquartered in Asheville, NC, it is said to be the first employee-stock-ownership program (ESOP) company in the US paper products industry.
Grassroots Grow to Success
According to Blue Ridge president and CEO Gordon Jones, the employee purchase of the mill and six converting plants began as a grassroots effort. "At first, [various companies] came forward and showed interest in buying the mill and the plants. But Champion wasn't satisfied with the offers, so it remained for sale. Eventually, an employee group decided to try and take control of the mill and plants, so supported by the union, the group formed an ESOP committee." Gordon explains that while the union did support the group, the purchase of the mill and the six plants was not a union buyout.
He reports that after the committee was formed, the members began looking at employee buy-out options. "They were introduced to a group called the 'KPS Special Situations Fund' located in New York. It's the same group that did the United Airlines ESOP, so the committee was assured the group understood the complexities of an ESOP. Then the thing really got going: When the ESOP committee met with the KPS people, together they determined what the ownership plan would look like: The investment fund owns 55 percent of the company, 5 percent of the company is reserved for senior management ownership, and 40 percent of the company is owned by the employees in an aggregate."
The employee buyout of the Champion facilities didn't come as easily as the turning of the millennium, though. In order to buy the 40%, the employees had to give up 15% of their total compensation. Jones explains: "If you were making ten dollars an hour before, you're making 15 percent less now. And it wasn't just 15 percent of the hourly benefits; it was 15 percent of the total compensation, so if you had six weeks of vacation, you might only have five now. It's not quite as straightforward as that, because we allowed each individual location to figure out what the mix of that reduction was going to be. For example, the employees in Clinton, Iowa, took their entire reduction in salary and kept their full benefit packages. Other locations reduced their benefits significantly, so the employees didn't have to take as much of a hit in their take-home paychecks. But in each location, it added up to a 15 percent total compensation reduction."
There Is a Payoff
Though the 15% reduction is structured within a fixed seven-year agreement, says Jones, the employees do get monetary compensation other than their paychecks. "In addition to having a voice in their futures, they benefit financially from profit sharing every year. Each employee will receive 10 percent of the pretax profitability of the company, which they get in one check every year. Every employee will get exactly the same amount."
Jones adds the ESOP compensates employees in the form of shares as well. "Every year of the seven-year agreement, each employee will receive one-seventh of the shares of the 40 percent of the company they agreed to buy." He explains that those will get distributed to employees differently. "For instance, if an employee was making $50,000 a year and contributed 15 percent of his or her pay (or $7,500 dollars), he or she would get twice as many shares as the person who was making $25,000 a year, a person who is contributing half as much." He adds, "Ultimately, there are two types of payback for Blue Ridge's employees: One is the profit-sharing check, which is the same for everybody; the second is the shares, and those shares are proportionate according to each individual's contribution."
Culture by Committee
The ESOP isn't the only thing unique about employee involvement at Blue Ridge Paper Products, says Jones. Along with the special ownership program, employees are members of the board--4 of the 11 board positions are held by employees, 3 of which are hourly--and employees also participate in what the company calls "workplace-culture committees."
Jones believes these committees have helped the company in its successful start. "We have a committee in each plant site, and each has equal hourly position and salaried position representation. For instance, at the Canton mill, there are 6 salaried members and 6 hourly members, and those 12 people meet on a very frequent basis and discuss the operation's problems, issues, and important decisions. They are open, sharing committee discussions, and they are at every site. It's not always 6 and 6; some of the smaller locations might have 3 and 3, or 4 and 4. But these workplace-culture committees are trying to change the general way business has been done."
Equipment Upgrades Push Production
Blue Ridge continues to produce paper at the mill in Canton, and, according to Gordon, a big part of its production is in envelope paper. "We manufacture 20 percent of all the envelope paper used in the United States," he notes.
The Dairy-Pak plants convert gable-top containers in which consumers buy milk, orange juice, and products such as creamers for coffee. Gordon notes the company is the second largest producer of these types of containers in the US.
The Waynesville plant is another converting operation Blue Ridge now owns and operates. Nestled in the Appalachian Mountain range (which provided colorful views of autumn foliage during PFFC's visit last fall), this facility is about a ten-mile ride from the Canton mill.
The 270,000-sq-ft Waynesville plant is primarily an extrusion coating and laminating facility, but it also includes a cut-size sheeting operation and does some specialty coating and one-color printing with a Black Clawson flexographic printer/coater. Blue Ridge also has two sheeters at Waynesville.
The plant houses three extrusion/laminating lines, which extrusion coating operations manager Alan Denney says furnish 310,000 tons of coating capacity per year. Two of the extrusion lines were manufactured by Black Clawson, both installed several years ago. The first Black Clawson line was upgraded in the mid-90s with two Cloeren internally deckled multilayer dies and feedblocks. Other upgrades to the line include an A&F machine winder in 1994; Eurotherm heater controls in 1995; and a Eurotherm digital drive in 1997. Denney says this line can run widths up to 86 in. at speeds to 1,000 fpm.
Waynesville's other Black Clawson line underwent major upgrades through the 90s as well. This line also is outfitted with two Cloeren internally deckled multilayer dies and feedblocks. In addition, it features such add-ons as Eurotherm heater controls installed in 1996; three Eurotherm digital drives installed in 1994, 1995, and 1997; Eurotherm digital line drives installed in 1995; and a Eurotherm digital winder drive installed in 1996. This line also runs 1,000 fpm and can handle widths up to 116 in.
The third extrusion line housed at Waynesville was installed just over a decade ago and was manufactured by Er-We-Pa, a German company that is now owned by Davis-Standard Egan. It can run widths up to 1183/4 in. at speeds to 1,500 fpm. Upgrades to this line include Eurotherm digital drives (installed in 1994) for the primary unwind and a Measurex web inspection system.
Denney says the Waynesville location supplies Blue Ridge's Diary-Pak converting operations with the coated board for the gable-top containers. He notes the plant runs low-density polyethylene primarily and consumes in the neighborhood of 55 million lb of LDPE resin per year. But, he adds, the plant extrudes other resins and has substantial laminating capacity. "We also extrude a range of barrier resins, including nylon, and we utilize it for our barrier boards."
Blue Ridge's own mill supplies paper to the Waynesville facility, and the extrusion operation purchases resin materials from various suppliers, including Chevron, Equistar, Shell, and MSI Technology.
Denney says that while the extrusion line equipment was installed years ago, the Waynesville plant remains a leader in extrusion coating.
"We consider ourselves a pioneer in film extrusion coating; we started in the milk carton business in the early 60s. We were one of the first to melt polyethylene and adhere it to board to make milk cartons. We have three of the most competitive extrusion coating lines in the industry, and we have made it a priority to upgrade our equipment. This plant meets 100 percent of the requirements for all of our DairyPak plants. In addition, we have our own on-site research and development facility."
Waynesville's R&D facility includes such equipment as an X-Rite color scanner, a Technidyne opacity and brightness meter, and a Mocon Oxtran and Permatran.
Starting Off Right
According to Gordon Jones, Blue Ridge Paper Products has been running in the black since it first incorporated in May 1999.
He explains, "We've been the beneficiary of two things: One is that everybody's salary and wage compensation went down 15 percent, so right away you help yourself a heck of a lot in terms of cost base. In addition, the paper markets have improved, so our prices went up at the same time that our costs went down. That sort of double effect has increased the spread, and so we've been profitable from the first day."
Just over a year after its official opening, Blue Ridge Paper Products still seems to be going strong. In fact, the company recently purchased Westvaco Corp.'s liquid packaging business (based in Richmond, VA).
According to Jones, the purchase increases Blue Ridge's market share and enhances its position as one of the liquid packaging industry's dominant players. "This acquisition reinforces our commitment to expand the capabilities and capacity of our DairyPak division, strengthen our long-term position in the industry, and create additional short- and long-term financial growth."
The purchase adds approximately 100 employees, one plant, and two state-of-the-art offset web presses to the company's DairyPak div.
It looks as if Y2K has settled in nicely for Blue Ridge Paper Products and its approximately 2,200 employee-owners. With its workplace-culture committees and its progressive attitude toward growth and benefit for its employees, Blue Ridge Paper Products obviously has started the new millennium off on the right foot, and it looks as if it has many more steps planned for the future.
Supplier Information
Black Clawson, Fulton, NY; 315/598-7121; blkclawson.com
The Cloeren Co., Orange, TX; 409/886-5820; cloeren.com
A&F Equipment, Philadelphia, PA; 215/289-8300
Eurotherm Drives Inc., Charlotte, NC; 704/588-3246; eurotherm.com
Davis-Standard Egan (Er-We-Pa), Somerville, NJ; 908/722-6000; davis-standard.com
Honeywell-Measurex, Cupertino, CA; 408/255-1500; honeywell.com
Chevron Corp., Houston, TX; 800/231-3826
Equistar Chemicals, Houston, TX; 713/652-7300; equistar.com
Shell Chemical/Polyester Business Akron, OH; 330/798-6400
MSI Technology, Arlington Hts., IL; 847/255-4888
X-Rite Inc., Grandville, MI; 616/534-7663; xrite.com
Technidyne Corp., New Albany, IN; 812/948-2884
Mocon/Modern Controls, Minneapolis, MN; 612/493-6370; mocon.com
Paper Mill Breaks Records and Keeps Improving
"Oh, my gosh!" This was the response I had (most likely not an unusual one for someone seeing Blue Ridge's paper mill for the first time) when Alan Denney pointed to the gargantuan structure as we drove toward it one morning last fall.
Situated among the mountains in the Appalachian range, the 200-acre mill is easy to identify, both because of its size and its placement. According to George Henson, VP, mill div., the mill operates three uncoated paper machines, producing 254,000 tons of envelope and specialty paper per year. A fourth machine, referred to as "No. 19," produces 281,000 tons of paperboard per year. The paperboard is shipped to the Waynesville extrusion facility for coating; then, most of it is utilized at the company's DairyPak plants.
Built in 1908, Blue Ridge's paper mill originally was constructed to produce pulp for the Hamilton, NC, mill. Henson says while the structure is close to 100 years old, Champion invested $526 million over the past ten years to improve mill operations and to make it environmentally compliant. A new pulp-bleaching system was installed, and all the machines have been converted to alkaline. Suppliers for the mill's equipment include Valmet and Jagenberg.
As for the change in ownership since it became part of Blue Ridge Paper Products Inc., the employees, for the most part, seem to be doing fine. In fact, they broke several production records last summer.
Henson acknowledges, "I'd say it was a little difficult to remove ourselves, if you will, from Champion. Before, we had this "Mother Champion looking-out-for-us" sort of thing. But the people are operating it very well. It's an ongoing learning process for all of the employees. They are starting to understand that we now own the mill, and we make decisions on spending money, and the decisions we make do impact the bottom line."
Supplier Information
Valmet Converting Group, Kempson, U.K.; +44(0)123-4852553; valmetconverting.com
Jagenberg Inc./Kampf Machinery Div., Enfield, CT; 860/253-9660; jagenberginc.com
