Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, April 16, 1995 TAG: 9504140010
SECTION: BUSINESS PAGE: BUSINESS EDITION: METRO
SOURCE: GREG EDWARDS STAFF WRITER
DATELINE: BIG ISLAND LENGTH: Long
PHISSSTT. BOING. ... PHISSSTT. BOING. ... PHISSSTT. BOING.
That's the sound - something like a soup ladle striking the side of a pressure cooker - that the pile driver made as it pounded a steel girder 25 feet into bedrock.
With each drop of the big hammer, the beam inched into the ground, and several feet away the Earth's surface shook like the upstairs floor of an old house during a loud party.
Aside from the small crew on the pile driver, most of the 160 construction workers on the building site last week were busy doing other work on the foundation - fashioning concrete forms and placing steel reinforcing rods to help bind concrete and give it strength.
The building site is on the same relatively narrow river bottom as the company's existing mill but 1,000 feet downstream. The work will give the mill a new paper machine and a recycling plant for turning used paper into fiber for making new paper.
The mill's expansion represents the second large investment by the paper industry in the region in the past half-dozen years. Westvaco Corp. embarked on a $530 million expansion of its paperboard mill in Covington in 1989, which represented the largest single business investment ever in the state.
The difference in the two expansions is the timing. Westvaco undertook the construction of a new paper machine and boiler at Covington just before the paper industry followed the rest of the economy into a recession. Georgia-Pacific's expansion was announced last fall in the midst of an economic boom and growing demand for paper products.
"Basically, from 1989 to early 1994, the paper industry was unprofitable, as bad as it's been in 20 to 50 years, depending on who you talk to," said George Shipp, a securities analyst with Scott & Stringfellow in Norfolk. But last year, led by the type of box-making paper made at Big Island, the industry made the quickest and most substantial turnaround in its history, Shipp said.
Last Thursday, Georgia-Pacific announced record new income of $232 million, or $2.59 cents per share, in the first quarter on sales of $3.48 billion. Compared with the first quarter of 1994, sales rose by 18 percent and profits soared 480 percent. The company's pulp and paper business reported record operating profits of $363 million for the quarter, compared with a year-earlier loss of $53 million.
The price of linerboard, a type of paper used to make boxes and the product of the Big Island mill's new machine, increased by $50 a ton on April 1. It was the sixth increase in 17 months, a period during which the price of the commodity has increased from $300 to $520 a ton, Shipp said.
The demand for paper to make boxes is really high, said Joseph Kertis, manager of the Big Island mill. "It's a very good business right now," he said. "We can't make enough."
When its finished - around the first quarter of next year - the expansion will increase paper production at the mill by nearly 75 percent and more than double Georgia-Pacific's tax payments to Bedford County, to more than $1.5 million annually.
Perhaps more important than those contributions, however, is the stability that G-P's investment will create for the mill's workers and the Big Island community.
Before the expansion was announced last fall, there were occasional rumors that the mill might close, said Thomas Scruggs, owner of the Big Island Food Mart, which sits a few hundred yards from the mill. The expansion announcement "squelched all the rumors," he said.
When Atlanta-based Georgia-Pacific bought the mill's former owner, Great Northern Nekoosa Corp. of Stamford, Conn., in 1990, it shut down some Nekoosa operations. The fact that G-P kept the Big Island Mill open meant the company believed it was a good operation with a good future, mill manager Kertis said.
G-P's confidence in the Big Island work force and the mill's location near some of the company's existing customers went into the decision to expand the mill, Kertis said. "This expansion also reflects a commitment by Georgia-Pacific's senior management to this local community and to continued support for the Big Island facility," he said last October when the expansion was announced.
The town lies near Virginia 122 and U.S. 501 in northeastern Bedford County, about 20 miles from both Lynchburg and Bedford.
|n n| The mill, the oldest continuously operating pulp and paper mill in Virginia, first opened in 1891 as the Lynchburg Pulp and Paper Co. and has had many owners. Nekoosa, the owner before G-P, bought the mill in 1987 from Owens-Illinois Corp. The mill's two existing paper machines, Nos. 1 and 3, were built in 1915 and 1959.
When the Big Island mill celebrated its 100th anniversary in 1991, then Georgia-Pacific Chairman T. Marshall Hahn called it "an integral part of our corporate strategy."
Of four mills in G-P's containerboard and packaging division, Big Island is the smallest in terms of output and will remain the smallest even after the expansion. Others are located in Toledo, Ohio; Cedar Springs, Ga.; and Monticello, Miss.
The Big Island mill employs 340 production workers and managers. The vast majority of the work force lives within a 30-minute drive of the mill, Kertis said. The annual payroll is $9.5 million.
The mill produces 820 tons a day of corrugating medium, the fluted paper that makes up the curvy inside of corrugated container board, which is used to make boxes.
The new paper machine will increase production by 73 percent, making an additional 600 tons each day of linerboard, the paper used for a box board's outside surfaces or walls. The 400-foot-long machine is made by Valmet, a Finnish company. Two-thirds of the machine will be produced by Valmet's Charlotte, N.C., subsidiary.
The recycled fiber plant, which will be built under the same roof as the new paper machine, will produce 900 tons a day of recycled paper fiber from used corrugated containers and other paper waste. The recycling plant will come on line in November ahead of the new paper machine.
Two-thirds of the recycled fiber will be used to fill 100 percent of the needs of the new linerboard machine. The remaining 300 tons of fiber to be produced daily by the recycling plant will help feed the two existing paper machines. The machines currently get about one-fourth of their fiber from preconsumer scrap produced at corrugated box plants and the remainder from virgin hardwood pulp made at the mill.
The percentage of recycled fiber in the corrugating medium made at the mill will not change.
Part of the expansion will involve an upgrading of the mill's wastewater treatment plant at a cost of up to $8 million. The mill uses 5.2 million gallons of water a day but that usage is down 15 percent from last year because of water conservation measures, Kertis said.
The mill burns coal, shredded tires, paper pellets and wood waste in its boiler but has had no major environmental problems, said Rich Judy, manager of technical services. A check with state environmental officials confirmed the plant has a good record of complying with environmental regulations governing solid waste and discharges into the air and river.
Because the existing mill was damaged by the November 1985 flood, the expansion is being built on fill dirt to raise it above the worst possible flood that's expected to occur in the next 100 years.
Also, since the flood nearly a decade ago, the mill has developed a flood-monitoring and reaction program, Judy explained.
The expansion will take part of the mill's wood yard, which will be closed. In the future the mill will no longer use pulp logs but, instead, will buy wood chips from outside contractors to make its virgin pulp, Kertis said. Workers who lose their jobs at the wood yard will be reassigned to other jobs in the mill, possibly in the expansion.
About 35 employees will be needed to run the new paper machine and recycling plant, Kertis said, adding about 10 percent to the mill's work force. Employees at the mill make between $14 and $18 an hour, he said.
|n n| Georgia-Pacific gives its individual plants and mills a good deal of autonomy in the way they operate and efforts are under way at Big Island to involve employees in operating decisions, Kertis said.
Because management wanted employees' ideas on how the new machinery should be started up, staffed and run, a committee of seven production workers and four managers was formed to examine those issues, Kertis said. The United Paperworkers local union was involved in that effort.
As committee members looked for a better way to operate the paper machine and recycling equipment, they visited other manufacturing plants where new ideas are being tried out, including the Saturn automobile plant in Tennessee and a Union Camp Corp. paper mill at Savannah, Ga. The committee is preparing to make recommendations on staffing, training, shifts and pay systems for the new facility, Kertis said.
"I believe they're going to recommend some very unique operating systems," he said.
Storeowner Scruggs has lived in Big Island since 1975. For 35 years he sold advertising for the Lynchburg News & Daily Advance and has operated his convenience store for three years. He said he anticipates some additional business from the construction workers but also expects the 1,000 tractor-trailers a week that travel two-lane U.S. 501 in front of his store to double as construction picks up. The road was widened recently to help accommodate that traffic, he said.
The number of construction workers employed on the expansion at Big Island is expected to climb to 650 when activity hits its peak in June. The out-of-town workers have been staying at motels, campsites and other locations around the area, Kertis said. About half the construction work force so far has come from the local area.
Bedford County officials say they don't expect any problems from the temporary influx of workers. County Administrator Bill Rolfe said county officials sat down with representatives of Georgia-Pacific before the construction began to discuss potential problems and "have kept the lines of communication open" since.
The school system has enrolled "a couple" of children of construction workers and expects a few more, said School Superintendent John Kent. "We welcome the opportunity," he said, adding that G-P is a "real fine company" and the expansion will be good for the community.
G-P and Brown and Root, the Houston general contractor for the mill expansion, held a community meeting before construction began to explain the plans for the project and what to expect, Scruggs said.
The company has been a pretty good neighbor and has contributed to the local rescue squad and Fire Department, said Scruggs, himself a rescue squad member.
From the standpoint of county tax revenue, the expansion will mean an additional $1 million yearly, Rolfe said. That's an increase of more than 100 percent of the plant's current tax bill of $692,765 in personal property taxes and $38,045 in real estate taxes.
The tax contributions would have been even greater but for a 30 percent tax break the county gives to companies who buy recycling equipment.
Georgia-Pacific said the mill's current economic impact based on total mill expenditures, including payroll, freight, raw materials and utilities, is about $67 million annually. The expansion will add roughly $45 million a year to the mill's spending, a 67 percent increase, the company said.
The mill's sales this year will be roughly $140 million, Kertis said. They should increase substantially after the new paper machine comes on line early next year.
The mill's largest customer is a Georgia-Pacific box plant in Martinsville, which gets 20 percent of the mill's output, Kertis said.
The mill also sells to other box makers, including those owned by the company's competitors, Kertis said. "We sell to almost all the major players in the boxboard industry," he said. The mill's major competitors include Union Camp, Weyerhaeuser, International Paper, Stone Container and Chesapeake Corp.
While the demand and price for paper has increased dramatically over the past year, the cost of waste paper for recycling has also increased markedly.
In reporting the corporation's earnings last week, Georgia-Pacific chairman A.D. Correll said its pulp and paper business "continued to strengthen at an unprecedented rate.
"The momentum that began to build last year for Georgia-Pacific's pulp and paper business continues into 1995" with "fast-recovering worldwide demand.
A year and a half ago, the costs of virgin pulp and recycled pulp were about the same, Kertis said. Today, recycled pulp is twice as expensive as virgin pulp, he said.
by CNB