Some workers at Weyerhaeuser headquarters in Federal Way are already gone as the timber giant struggles through a housing downturn.
For the past few years, Weyerhaeuser has been downsizing itself from a manufacturing powerhouse with global ambitions to a smaller company more closely tied to its vast landholdings. Along the way, it’s shed thousands of jobs — most of them in places geographically and psychologically far from its home base in the Puget Sound area.
On Tuesday, the human cost of that transformation came home, as Weyerhaeuser said it would cut 1,000 of the 2,500 jobs at its Federal Way headquarters and 500 more corporate-support jobs across the country.
Some of the targeted workers already have left the struggling wood-products giant, spokesman Bruce Amundson said. The company expects about 900 people to be gone by year end, and the rest by the end of 2009.
The cuts should save Weyerhaeuser, which reported its third-straight quarterly loss Tuesday, $375 million a year, Chief Executive Dan Fulton told Wall Street analysts in a conference call.
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Tuesday’s announcements made Weyerhaeuser the latest iconic Northwest company to retrench in the face of the nationwide housing collapse and a sagging U.S. economy.
Seattle-based Washington Mutual, once one of the nation’s biggest mortgage lenders, has announced 4,700 layoffs since the beginning of the year.
Starbucks has cut 1,700 jobs this year and is closing 616 U.S. stores, as people staggering under higher mortgage payments and fuel prices forgo their $4 lattes.
But in many ways, Weyerhaeuser’s woes go deeper than the weak economy.
The company spent billions bulking itself up into a huge integrated wood-products manufacturer, only to see that business model fall out of favor with investors.
Not too long ago, Weyerhaeuser sawmills cut Weyerhaeuser trees into lumber that, frequently, was used to build Weyerhaeuser housing developments on old Weyerhaeuser timberland.
All things Weyerhaeuser
Weyerhaeuser ships transported Weyerhaeuser logs overseas. Weyerhaeuser pulp mills processed other Weyerhaeuser trees and sent the pulp to Weyerhaeuser plants to be turned into boxes, white paper or newsprint — at least some of which was then shipped to customers on one of Weyerhaeuser’s own railroads.
But that soup-to-nuts model has all but disappeared in the forest-products industry, said analyst Steve Chercover, with D.A. Davidson in suburban Portland. Instead, most companies now specialize in one sliver or another of the industry.
“The Street is telling [Weyerhaeuser] that the trees are where our value is, and we’d better focus on what we’re really, really good at,” Chercover said. “They’re becoming a land-based company — more than ever, they’re about exploiting what grows above the land and also what exists below the land.”
That last was a reference to mineral rights — specifically oil and natural gas.
Mineral leases profitable
Weyerhaeuser disclosed Tuesday it had earned $22 million in the first half of the year from mineral leases and royalties, largely due to oil and natural-gas exploration on a tract of land it owns in Louisiana’s Haynesville Shale.
Just last week, International Paper sold subsurface mineral rights on 13,000 acres in the same area for $263 million.
As of Monday, International Paper also owns Weyerhaeuser’s former containerboard, packaging and recycling business, which made $105 million in pretax profit in the second quarter and employs 14,000 people.
The International Paper deal, along with other asset sales and those yet to come (the company sold off its Australian operations last month, and has put its shipping and rail lines on the block), means fewer people are needed to manage the new, leaner Weyerhaeuser.
“Let’s face it, you’re not running a vast conglomerate anymore,” Chercover said.
Weyerhaeuser began planning the cuts and notifying affected workers about a month and a half ago, Amundson said. They will be spread across nearly all corporate-support functions: human resources, finance, information technology, external relations and the like.
Depending on how specific departments are reorganized, some people may get the chance to apply for new jobs within the company.
The standard severance package is 60 days’ pay plus a week of pay for every year of employment.
Weyerhaeuser also has ratcheted back its retiree health benefits, a move that saved it $32 million in the second quarter. For current retirees and employees now eligible to retire, Amundson said, the company has frozen its health-care subsidy at this year’s level. Future retirees will get no subsidy.
In the conference call, Fulton also hinted that the eventual conversion of Weyerhaeuser into a real estate investment trust (REIT), while not imminent, was still on the table.
He told analysts that, with the company smaller and more focused on its land-based businesses, it could choose “the right structure, for the right reasons, at the right time.”
REITs are entitled to several tax advantages, so long as they derive most of their revenue from real estate rather than from, say, manufacturing.
The job cuts announced Tuesday, traumatic as they are for the workers involved, aren’t enough on their own to affect the broader Seattle-area economy, said Andrew Gledhill, an economist at Moody’s Economy.com in Pennsylvania.
Nearly 1.5 million people are on metro Seattle payrolls, and the local economy regularly gains or loses more jobs each month than Weyerhaeuser plans to eliminate over the next 18 months.
In addition, Gledhill said, the 2-year-old housing slump has hit “anything that’s been related to housing, either directly like construction or indirectly through the wealth effect, like retail.”
Still, the Puget Sound region continues to add payroll jobs — 1,000 in June, the most recent month available.
And, Gledhill said, the region’s tentpole industries — aerospace and software — are still hiring, though at a slower pace.
“Everything is slowing,” he said, “but if you put that in the context of the catastrophe that a lot of the country is in, Seattle is not looking too bad.”
Drew DeSilver: 206-464-3145 or email@example.com