Price war prompts 1,000 BAT job cuts

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The Independent Online

British American Tobacco announced plans yesterday to cull more than 1,000 jobs in Britain and Canada in an attempt to slash production costs to reduce the impact of a US price war.

The move, which follows 430 job losses last month at rival Gallaher, will see BAT shut its plant in Darlington, in the North-east, axing 490 jobs. Another 840 jobs will go at its Imperial Tobacco Canada unit in North America.

BAT, which makes the Dunhill, Kent, Lucky Strike and Pall Mall brands, said it intended to shift the bulk of its cigarette production overseas to avoid high UK manufacturing costs. The Darlington site, which BAT acquired when it bought rival Rothmans in 1999, would close by the end of 2004, leaving just its plant in Southampton operating in the UK, it said. The company shut a nearby site in Spennymoor, also acquired at the time of the Rothmans deal, in 2000.

Analysts welcomed the move, which will affect 2 per cent of BAT's global workforce. Michael Smith, at JP Morgan, said the group could close as many as 18 of its 90 factories over the next five years. "Low-cost production bases in [European Union] accession countries such as Poland should enable BAT to close less efficient West European plants," he said.

BAT said it would take a hit of some £320m in its first-half results to cover redundancies and asset write-downs. It is closing its factory in Montreal and its leaf-threshing operations in Aylmer, Ontario. It expects to achieve annualised cost savings of about £65m from 2005.

BAT said it transferred production of 10 billion sticks from Britain to South Korea earlier this year and plans to shift production of a further 8 billion sticks to Nigeria soon.