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UPM to Close Mill, PM, and Reduce Work Force in Finland

May 12, 2006 (Press Release) - UPM's profitability programme has advanced from planning to implementation phase. Local employee consultation negotiations at Finnish paper mills have been concluded. Negotiations were carried out locally, in a serious but constructive atmosphere. During the negotiations both the rationale and impact of the plans was discussed and alternative solutions to improve cost efficiency were identified. Continuing the operations of Voikkaa mill and the production lines planed to be closed is not economically viable in the current overcapacity situation and changing business environment.

UPM will close Voikkaa paper mill and Kymi PM 7 during the third quarter of 2006. Tervasaari PM 6 and the oldest pulp line will be closed during the second quarter of 2007. In addition, the company will cease production of coated magazine paper at Jämsänkoski PM 4 and to convert it to produce label face paper at the beginning of 2007. In order to increase the profitability it has been decided to reorganize the production and functions at mills and the group head office during 2006-2008.

The implementation of profitability programme will decrease UPM's personal by 2557 in Finland within next three years which is moderately less than earlier estimated. Notice will be given to 672 persons out of which 575 persons are at Voikkaa mill to be closed.

UPM will finance pension schemes by € 40 million. The negotiations on positions and outsourcing will continue according to the collective labour agreement.

The overall target of the profitability programme will remain as before and the employee consultation negotiations will continue also outside of Finland. UPM estimates that the financial targets set for the programme are realistic.

"From Job to Job" Programme for the 672 Dismissed

In order to minimise the impact of redundancy UPM will start a "From Job to Job" programme. The programme supports retraining and relocation. UPM will provide special support to Voikkaa which is going through a serious change.

In all Finnish units people will be encouraged to apply for UPM's internal vacancies and to move to new locations. Redundant employees are to be prioritised when filling vacancies considering reasonable retraining to meet the job's requirements. The company will cover costs for internal retraining and a settling-in allowance equal to one month's remuneration if the new job requires relocation.

UPM will support re-employment training of the persons given a notice. € 600,000 is reserved to support participation and material costs for retraining up to € 2,000 per person.

Furthermore, UPM has agreed on retraining cooperation with Aker Yards in Finland. UPM will support retraining by paying remuneration for the notice period even if a person started retraining at Aker Yards before the closure of the notice period. In addition, UPM will pay removal expenses and a settling-in allowance equal to one month's remuneration. The retraining in Aker Yard's ship building institute will take from 1 to 6 months in Turku.

In order to relieve the difficult situation at Voikkaa, UPM will extend the re-employment obligation for local employees to 24 months. In other units the 9 months rule obligated by law will be followed. It has been found important that the employees given a notice will continue to have the right to use occupational health services. Unemployed redundant employees can use UPM's occupational health services during the re-employment obligation period, that is, for 24 months at Voikkaa.

UPM has signed a letter of intent according to which Empower Oy will employ 50 - 100 redundant Voikkaa employees. UPM is committed to use the services of the new company for a minimum of three years. Empower is one of the largest service providers in energy and telecom sectors in Finland specialized in forest industries' maintenance. The aim is to sign the contract by the end of June.

In addition, UPM encourages its personnel to create new businesses by offering start-up support. The company has booked: € 400,000 for this purpose. UPM's start-up support can be applied for till end 2008. Maximum support per business is € 10,000.

The company has received several contacts concerning Voikkaa premises and real estate. The proposals are being investigated.

The closures and streamlining of operations will have an impact to following units in Finland:


Unit Redundancies Early retirement or other arrangements
Voikkaa575 103
Kymi 37 310
Tervasaari 2213
Jämsänkoski 14140
Kaukas 0339
Kaipola 13140
Kajaani 17195
Pietarsaari 0215
Rauma 0173
Corporate head office1457
 
In total672 1885

Additional Information

UPM’s Voikkaa paper mill manufactures coated magazine papers. Its two machine lines have a combined annual capacity of 410,000 tonnes. Located in southeastern Finland, the mill employs approximately 670 people. The mill was founded in 1897.

UPM’s Kymi paper and pulp mill manufactures coated and uncoated fine papers as well as chemical pulp. The mill’s three machine lines have a combined annual capacity of 950,000 tonnes. All pulp produced at the mill is used in Kymi’s own paper production. Located in southeastern Finland, the mill employs approximately 1,200 people. The mill was founded in 1872.

UPM’s Tervasaari paper mill manufactures label papers, envelope papers and sack papers. The mill’s four machine lines have a combined annual capacity of 460,000 tonnes. The mill is located in central Finland and employs approximately 800 people. The mill was founded in 1872.

UPM’s Jämsänkoski paper mill manufactures coated and uncoated magazine papers and speciality papers for self-adhesives. The mill’s four machine lines have a combined annual capacity of 870,000 tonnes. The mill is located in central Finland and employs approximately 870 people. The mill was founded in 1888.

SOURCE: UPM




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