Document Gmk8K8K1awObrb0JLJJVo3a7r

A SHORT HISTORY OF INTERNATIONAL PAPER GENERATIONS OF PRIDE INTRODUCTION was a merger comprised of 17 pulp and paper mills. Production facilities ranged On the threshold of the 21st cen from a small mill in Turners Falls. Mas tury, International Paper is a diver sachusetts--which produced 11 tons of sified. global company with manufactpuarper per day--to the Hudson River mill ing operations in the Western Hemi in Corinth, New York, one of the most sphere, Europe, Asia and South Africa. advanced in the industry with a daily Its international presence is the result of output of 1 50 tons. Holdings also in long-term changes that evolved since the cluded 1.7 million acres of timberland in company's founding in 1898. Starting as the Northeastern states and Canada. a pulp and paper company based in the During its early years, IP was the Northeastern part of the United States, nation's largest producer of newsprint, IP expanded into Canada and the Ameri supplying 60 percent of all newsprint can South during the 1920s. Three de sold in the United States and exporting cades later the company began expand to Argentina, England and Australia. ing beyond North America. This was fol The company became an industry lowed during the 1980s by the acquisi pioneer under the leadership of Hugh tion of subsidiaries operating in Europe, Chisholm, who served as president from South Africa and Asia. 1898 to 1907. Milestones included the construction of the first laboratory in ORIGINS AND GROWTH. 1898-1940 the American pulp and paper industry in Glens Fall, New York, the industry's first Incorporated in Albany, New York, on collective bargaining agreement and an January 31, 1898, International Paper innovative timber harvesting system that protected young trees. Operating in the Northeastern United States, the heart land of the turn-of-the-century pulp and paper industry, IP employed some of the nation's most experienced papermakers, many of whom had honed their skills during decades of shop floor labor. These workers knew their pulpwood grinders and paper machines inside and out and rarely needed the advice of managers, who usually concentrated on administrative and financial matters. The company's newsprint business declined after 1913, when the United States Congress eliminated tariffs on low-cost Canadian imports, which flooded U.S. markets, eroding IP's mar- Above International Paper played a major role in the development of the "second" and "third" forests in the south. This photo is part of the second forest near Natchez, Mississippi. FOREST HISTORY TODAY | 1998 29 ket share. Moreover, the company be came embroiled in a labor conflict in 1921 that disrupted its system of collec tive bargaining. IP was subsequently led by Archibald Graustein. president from 1924 to 1936. Graustein reinvigorated the company's newsprint operations by forming Canadian International Paper, an IP subsidiary that acquired vast tracts of timberland in Canada and con structed some of the world's largest newsprint mills in the Province of Que bec. Within the United States, the com pany diversified into Southern kralt pa per production by acquiring two mills in Bastrop, Louisiana, and one in Moss Point. Mississippi, and by building new mills in Camden. Arkansas, and Mobile. Alabama. Consolidating its operations in the Northeastern part of the United States. IP sold or closed several older mills and converted the remaining ones from newsprint to book and bond grades. The company also built up an extensive hydroelectric power business in the Northeast and Canada. This ven ture had to be dissolved when Congres sional legislation prohibited the combi nation of manufacturing operations and electrical power production. The Great Depression of the 1930s marked a difficult period. Like most manufacturing companies. International Paper suffered severe financial losses due to the unprecedented economic down turn. forcing the company to reduce out put and lay off workers. In addition to selling off poorly performing subsidiar ies, the organization weathered these hard times by introducing a range of new products and. later, by branching out into the packaging business. In 1931, IP became one of the first paper compa nies to manufacture linerboard on the Fourdrinier machine, which produced inexpensive, high-quality grades for use in corrugated containers. Major custom ers for this product included a leader in the corrugated container industry, the Agar Manufacturing Corporation, which was acquired by IP in 1940. This transaction made the company one of the first integrated linerboard manufac turers in the American pulp and paper industry. Other efforts to develop new business followed the same pattern. In 1939, IP pioneered bleached kraft grades for fold ing cartons, tags and file folders and sup plied the first bleached kraft paper grades that were suitable for milk carton production. The company sold the bulk of its milk canon board output to Single Service Containers. Determined to ex pand its presence in the converting sec tor, IP acquired Single Service in 1946 and later turned it into an integrated liq uid packaging operation. The company also laid the foundation for its specialtyproducts business during the Great De pression. During the early 1930s, it formed Arizona Chemical as a joint ven ture with the American Cyanamid Com pany. Arizona Chemical refined crude li quor turpentine, a by-product of the sul fate pulping process, and later became a specialty chemicals producer with op erations in the United States and over seas. In 1939, Canadian International Paper teamed up with the Masonite Cor poration to build a hardboard products plant in Gatineau, Quebec. Almost five decades later, IP acquired Masonite w-ith operations in the United States. Europe and South Africa. The quest for new technologies, products and markets dur ing the Great Depression of the 1930s was initiated by Richard Cullen, who served as president from 1936 to 1943, and as chairman of the corporation from 1943 to 1948. VIEW FROM THE TOP, 1940-1960 The early 1940s marked a w atershed in the history of the company. In 1941, In ternational Paper completed a largescale reorganization that recapitalized the company and simplified its corpo rate structure. During World War II, In tcrnational Paper converted some of its manufacturing operations to the pro duction of military items. These in cluded the V-l Box, an ultra-strength container developed by IP that replaced wooden crates for the shipment of mili tary supplies. Featuring five layers of moisture-proof kraft board laminated with insoluble adhesive, the V-l Box un derwent rigorous testing, in which it was left to soak in the ocean surf lor 24 hours and then dropped repeatedly on a con- Wet-strenglh linerboard produced at the Georgetown and Camden mills was used to produce these "V boxes "for American servicemen and women overseas. IV fcO 'lW i0 I OREST HISTORY TODAY 1908 Established by IP in 1957, the Southlands Experiment Forest became the company's centralforest research facility that developed management techniques and the SuperTrceTM. Fred C. Cragg (left), vice president and general m<t nager-woodlands, Southern Kraft Division and LawrenceJ. Fugle man, sice present and general manager-wood lands, inspect a test plantation ofslash pine trees grown from genetically improved seed at the SF.F in Hainbridge, Georgia, 1966. INTERNATIONA! PAPIR COMPANY cretc floor. Using large amounts of re cycled paper. IP also manufactured kraft cases for the transportation of gun shells and hundreds of other military items. Nitro cellulose for explosives was made from dissolving pulps produced by Ca nadian International Paper's mills. The postwar era witnessed unprec edented growth and prosperity. John Hinman, who led the company as presi dent from 1943 to 1954 and as chairman from 1954 to 1961. reduced its debt to zero and increased dividend payments. During his tenure. International Paper established a research laboratory at Mo bile, Alabama, and the Southlands Ex periment Forest at Bainbridgc. Georgia, which developed IP's Super Tree through selective breeding of genetically superior pine trees. In 1950, the company started a dissolving pulp mill in Natchez. Missis sippi. that was the first to use 100 per cent hardwood, and started a paper mill in Pine Bluff, Arkansas, producing news print, milk carton grades and light weight white papers. In 1956. IP acquired the Long-Bell Lumber Corporation in an attempt to diversify' into markets outside paper pro duction and conversion. Although the Federal Trade Commission initially ar gued that this transaction violated anti trust legislation, the merger was eventu ally approved. The struggle with federal authorities over the Long-Bell acquisi tion, however, convinced IP to proceed cautiously with further efforts to expand beyond pulp and paper. As a result. IP became less diversified than major com petitors during the 1950s and early 1960s, leaving it more exposed to the highly cyclical market for newsprint and kraft paper products. The company' tried to address the diversification problem during subsequent years, but a viable so lution was not implemented until the 1980s. The late 1950s marked the beginning of International Paper's expansion over seas. The company had been a major exporter for decades and maintained sales offices in London, Paris, Zurich and Johannesburg. In 1959, it added the first overseas manufacturing operations through joint ventures with container companies in Israel, Germany, Greece and Italy. The same year it organized a new subsidiary and built a liquid packag ing plant in Caracas, Venezuela. It also acquired major shares in a bagasse paper mill in Cali, Colombia; converting op erations in Arecibo, Puerto Rico; and a folding carton plant in Mexico City. Also in 1959, International Paper first achieved S1 billion in sales. Under the leadership of Richard Doanc--elected president in 1954 and chairman in 1961 -- International Paper further developed its pulp and paper business. Responding to growing com petition that resulted in a decrease of domestic market share, Doane estab lished a creative marketing center and launched an innovative sales training program. On the manufacturing side, IP added new mills in Vicksburg, Missis sippi; Gardiner, Oregon; and Jay, Maine. In 1962, the Georgetown, South Caro lina. mill became one of the first in the pulp and paper industry to install com puterized information and process con trol systems. Improving its converting operations. IP built and acquired liquid packaging, corrugated container and folding carton plants in the United States. THE CHALLENGES OF CHANGE, 1960-1980 International expansion continued throughout the 1960s. Overseas manu facturing operations acquired during the 1960s included corrugated container plants in Catania, Italy; Bilbao, Spain; and Arles and Mortagnc, France. These facilities improved International Paper's presence in the European market. The company also built new corrugated con tainer plants in Pomezia, Italy; Guade loupe. French West Indies; and Las Palmas. Canary Islands. FOREST HISTORY TODAY 1998 31 IP's Thomas Busch developed machinery that influenced later developments in logging operations. The most famous is the Busch combine or "Buschmaster" shown here circa I960. It cut individual trees, delimbed them, cut them in lengths and stacked them. N il* * .* ' JNAi *A P |* CCMPANr International Paper entered a critical Veratcc. a specialty business launched in period in the late 1960s. Controlling 1987. Another major initiative of the late valuable and debt-free assets that had 1960s and early 1970s w as the construc been built up over decades. IP witnessed tion of the Corporate Research Center an era of an unprecedented number of at Sterling Forest, New York. This facility mergers and acquisitions. To awn a hos has pioneered important manufacturing tile takeover and tackle IP's diversifica and environmental technologies as well tion problem. Edward Hinman--elected as innovative products during subse president and CEO in 1966--increased quent decades. IP also built state-of-the- the company's indebtedness and ac art pulp and paper mills in Ticonderoga. quired specialty businesses, including a New York, and Texarkana. Texas. major real estate developer and a manu Edward Hinman w as succeeded by facturer of medical products. However, Frederick Kappel who served as chair like many leading corporations of the man of International Paper's board of late 1960s that diversified into markets directors from 1969 to 1971. Formerly that were unrelated to their core busi chairman of American Telephone & nesses. IP found it difficult to integrate Telegraph. Kappel was the first leader of its recent acquisitions and most were International Paper since Philip Dodge sold a few years later. A recession in the (1912-1924) who had spent most of his pulp and paper market meanwhile led to | career with another company. a 30 percent drop in the company's earn Streamlining its operations during ings in 1970. producing additional finan the 1970s. International Paper phased cial hardships. out several facilities and improved its Despite these difficulties. Interna marketing organization. These tasks fell tional Paper scored a number of impor to Paul Gorman--w ho served as chair tant successes during this era. Its non- man from 1971 to 1974--and his succes woven fabrics division, which built a sor J. Stanford Smith, who led the com plant in Lewisburg. Pennsylvania, made pany until 1980. During their respective IP an important nonwoven fabrics pro tenures. IP closed or sold older mills in ducer and laid the groundwork for Livermore Falls, Maine; Panama City. Florida: and Springhill. Louisiana. A large-scale corporate reorganization in 1976 replaced the Southern Kraft Divi sion and the Northern Division with functional business units: white papers, consumer packaging, industrial packag ing. wood products and specialty pack aging. In each business unit, production managers were encouraged to think as marketing and financial managers, and vice versa. As a result, strategic changes in a unit's manufacturing operations were made with a keen eye on earnings and sales. MEETING THE CHALLENGES OF CHANGE. 1980-PRESENT This restructuring led to a major new initiative in the 1980s. when IP launched a large-scale overhaul of its mills. Led by Dr. Edwin Gee--who served as chair man from 1980-1985--IP conducted in depth studies of mills and plants. The Bastrop. Louisiana, mill had to be closed in 1982. Other mills received extensive upgrades in a S6 billion capital improve ment program that included a complete reconfiguration of the Georgetown. South Carolina, mill. The program Si FOREST HISTORY TODAY | I08 phased out inefficient linerboard opera tions and switched to more profitable bleached paper products. The program also included the reconfiguration of the Mobile, Alabama, mill from newsprint and kraft grades to white papers. These mill reconfigurations enhanced produc tion efficiency and contributed to a 5 percent cost decrease in per-ton produc tion of white papers from 1982-1988. Fi nancial resources for the corporate capi tal program were raised through the sale of Canadian International Paper, Gen eral Crude Oil Company and other sub sidiaries, stock offerings and loans. In addition to reconfiguring existing facili ties through the corporate capital pro gram, International Paper built a highly efficient containerboard mill in Mansfield, Louisiana, which helped the company reduce containerboard pro duction costs by 18 percent in a six-year period. The decade from the mid-1980s to the mid-1990s marked a period of un precedented expansion when sales more than quadrupled, reaching $20 billion in 1996. This trend reflected the growth of high-value product lines, enhanced by the acquisition of the Hammermill Pa per Company in 1986. This $1.1 billion transaction was engineered by John Georges, chairman from 1985 to 1996. In addition to a rich tradition in fine paper production and nine mills, Hammermill brought invaluable marketing experi ence into the partnership. Recognized as the "best-known name in paper," Hammermill had developed a distribu tion network and a reputation for quality that were unrivaled in the American pulp and paper industry. As a result of the merger, IP learned valuable market ing lessons and Hammermill improved the profitably of its manufacturing op erations. Hammermill's extensive distri bution network later became the foun dation for ResourceNet International, a large-scale marketing organization that sold a wide variety of products made by IP and other leading companies. Operat ing in 250 locations at the time, the dis tribution operation sold graphic arts supplies and equipment, printing paper, industrial packaging, janitorial and maintenance supplies, retail packaging and related products. ResourceNet Inter national was renamed xpedx in 1998. One year after the Hammermill ac quisition, a labor conflict emerged at In ternational Paper. In an effort to control production costs, the company had ne gotiated a number of agreements with the United Paperworkers International Union and others to eliminate premium pay for work performed on Sundays and holidays. However, strikes took place at Hugh Chisholm (1847-1912), one of International Paper's founders, served as the company's president from 1898 to 1907. Born in Canada, Chisholm began his career as a newsboy on trains running between Toronto and Detroit. Possessing considerable business acumen, he soon controlled news paper distribution on major U.S. and Canadian railroads and steamboats. In 1865, he sold the business to his brothers, emigrated to the United States and became an American citizen. As a newspaper dealer and owner of a publishing house in Portland, Maine, Chisholm became interested in the paper business. After an ex haustive study of industry condi tions, he acquired a small mill in Livermore. Maine, and organized the Umbagog Pulp Company in 1881. By 1885, Umbagog operated two paper machines. Two years later, Chisholm organized the Otis Falls Paper Com pany, which was followed by another venture that led to the formation of an extensive paper mill and power complex at Rumford, Maine in 1891. Believing that a large-scale merg er of American paper companies would stabilize the industry, Chis holm joined William Russel, A.N. Burbank and other industry leaders to form International Paper. At the company's first board meeting, William Russel was elected presi dent but he died in less than six months. Hugh Chisholm, who had been elected first vice-president, then became president of the new enterprise, which was the world's largest paper company. three mills and there was a lockout at a fourth. The strikes and lockout ended in the fall of 1988. In 1993, the company and the union signed a "peace accord" and agreed to return a positive relation ship. In the late 1980s, International Paper devised a viable solution to its diversifica tion problem. In the pulp and paper in- Widely considered the most powerful man of the time in the American pulp and paper industry, Chisholm helped IP gain control of 60 percent of the American news print market. His skillful financial management enabled the company to post significant profits through out the early years. Chisholm's success raised the ire of newspaper owners who argued that the "paper trust" charged exorbitant prices for newsprint. Chisholm denied these accusations at several highly pub licized Congressional hearings. During his tenure at the helm of the company, Chisholm initiated IP's first forest management programs. In 1901, he issued instructions forbidding the harvest of immature trees. He also forged a close re lationship with Yale University's forestry program, whose faculty and students helped IP select trees for cutting. In 1907, Chisholm resigned as IP president so that he could devote his efforts to developing the Oxford Paper Company at Rumford Falls, Maine. He was succeeded by A N. Burbank. FOREST HISTORY TODAY | 1998 33 dustry, whose core business was highly During the early 1990s, IP also gained cyclical, a secure foothold in less-volatile a major presence in the Pacific Rim. markets was necessary to maintain a where it established over time a majority healthy balance sheet when earnings shareholder status in Carter Holt Harvey from paper products declined. IP had of New Zealand. Founded in the 19th learned painful lessons during the late century. Carter Holt Harvey became a 1960s. when it made acquisitions that did leading manufacturer of pulp, paper, tis not fit into the overall organization. De sue. containerboard and wood products termined to avoid this mistake. IP operating primarily in New Zealand and strengthened its position in markets for Australia. It also acquired a presence in a specialty products that were related to its Chilean energy and forestry company, core business but less cyclical in earnings COPEC. Carter Holt Harvey's diversi that the pulp and paper market. fied holdings centered around a core In 1988, for example, the company business in wood products fit well with acquired the Masonite Corporation, IP s overall organization and corporate modernized its manufacturing facility in philosophy. IP acquired majority share Laurel. Mississippi, and later built an ad holder status in Carter Holt Harvey in ditional plant in Ireland. These invest 1995. ments fulfilled their purpose. In 1996. The most recent chapter in the his when the printing papers business stag tory of International Paper, which began nated, earnings in IP's specialty panels with John Dillon s election as chairman business grew at double-digit rates. IP and CEO in 1996, was still unfolding derived similar benefits from other spe- | when the company approached its cen cialty businesses, including chemicals tennial. One of the leaders of IP's corpo and petroleum, nonwoven fabrics and rate strategy development during the silicone-coated products. 1980s and early 1990s, Dillon's philoso The late 1980s and early 1990s phy emphasizes customer focus, low- marked a period of international expan cost production, technological innova sion. Prior to this era. the company had tion, workforce diversity, and employee exported a significant share of its prod involvement in running the business. ucts to overseas markets but most of its At the beginning of Dillon's tenure as manufacturing operations were located chairman, IP extended its long tradition in the United States, the world s largest of community involvement by provid paper market. During the 1980s, how ing building materials for the reconstruc ever. overseas demand for paper rose tion of churches that had been destroyed sharply with the introduction of office by a series of arson attacks. Moreover, IP copiers, computer printers and fax ma was a major sponsor of the 1996 Olym chines. In Europe, paper consumption pic Games in Atlanta, Georgia. per person rose at an annual rate of 3 One of Dillon's first business objec percent, compared to 1 percent in the tives was the successful integration of United States. In 1989, International Pa Federal Paper Board into the Interna per acquired two European companies: tional Paper family. Federal merged with Zanders Feinpapiere AG, Germany's IP in March 1996 in a S3.5 billion transac leading producer of coated papers that tion that included mills in: Augusta. had been founded in 1829; and Aussedat Georgia; Riegelwood, North Carolina; Rey, a diversified French manufacturer Versailles, Connecticut; the Tait mill in of office copying paper, specialty panels Inverurie, Scotland, as well as extensive and related products whose origins date packaging and wood products opera back to the 18th century. In 1992. IP ex tions. The merger has exceeded its finan panded its European presence with the cial expectations. acquisition of Kwidzyn, Poland's most Also in 1996, International Paper modern paper mill, which subsequently opened the new Cincinnati Technology was expanded and upgraded. Center, a major facility that includes. among many operations, pilot project plants for development work in printing, packaging and extrusion coating. The Cincinnati Technology Center continues some of the function of the Erling Ris Research Laboratory which was phased out. Under Dillon's direction, the com pany undertook a thorough evaluation of its business leading to decisions that would guide the allocation of capital and set new requirements for acceptable lev els of profitability. As a result of this analysis, the company announced, in mid-1997, a performance improvement plan that would include the sale of SI billion in assets. THE IP WAY As in the past. International Paper is committed to continuous improvement in everything it does and the key is the people who make up the company. In 1898, a typical paper mill was run by skilled workers who knew more about pulp production, paper machines and product quality than anyone else in the organization. One hundred years later. International Paper is committed to be coming a I ligh Performance Organiza lion, a company with a greater degree of teamwork and greater decision-making power delegated throughout the organi zation in order to better satisfy custom ers and beat the competition. Employees sharing their ideas and experiences to improve the business is part of what has come to be called "the IP Way." More formally, "the IP Way" includes a commitment to be a global leader and earn an excellent return. It includes being the company of choice not only for customers but employees, shareholders and suppliers. In 1998, as International Paper enters the new millennium, its success in fulfill ing its vision will depend on the ability to continue its legacy as a company of employees who think and act with cre ativity. energy and, most of all, the drive to succeed. Printed with permission from Generations of Pride A Centennial History of International Paper. Copyright 1998. International Paper Compary M FOREST HISTORY TODAY 199S