October 1990 - VOLUME 11 - NUMBER 10
Another Tree, Another Dollar
Rampant Expansion at Georgia-Pacificby Jim Donahue
The ever-expanding Georgia-Pacific Corp. (GP), founded in 1927, has become the largest lumber company in the United States and the largest landowner in the forest products industry. GP began as a small lumber company in Augusta, Georgia, and moved to the Pacific Northwest in the early 1950s. GP operated primarily in that region until it revolutionized the plywood industry in 1963. When it developed technology to manufacture plywood exclusively from Southern pine trees, as opposed to Douglas firs, GP expanded its operations in the South. In 1964, it built the first Southern pine plywood plant in Fordyce, Arkansas, and in 1982 it moved its headquarters back to Atlanta.
To finance its voracious appetite for expansion, GP borrowed heavily in the 1950s and 1960s. It used the money to buy up timberlands and manufacturing facilities. Between 1955 and 1965, the company increased its size by seven times, becoming one of the forestry industry's goliaths. In 1972, the Federal Trade Commission forced the company to sell 20 percent of its operation, thus spawning another pulp and paper giant, Louisiana-Pacific.
Today, with its operations located primarily in the South and Northeast, GP is a leading manufacturer and distributor of a wide variety of building products and pulp and paper products. It manufactures common household items such as tissue paper, paper towels and napkins as well as printing paper; GP also ranks first in U.S. production of softwood plywood and other wood panels. In addition to its wood and paper products business, GP also has a small interest in gypsum mining with 10 gypsum board plants and associated mines, quarries and deposits located in Iowa, Kansas, Michigan, Nevada, Texas, Utah, Wyoming and Nova Scotia, Canada.
Ten percent of GP's revenues come from its operations in foreign countries. Its foreign subsidiaries operate in Panama, Brazil, Netherlands Antilles, Germany, Switzerland, Mexico, Canada and the Virgin Islands. Finished wood products, primarily from Indonesia, Malaysia and the Philippines � areas undergoing intense deforestation � account for 50 percent of GP's imports.
GP has seen its greatest expansion in the last decade. Between 1982 and 1990, the company's sales doubled to $10.2 billion, while earnings increased from $20 million to a record $661 million in 1989. GP's growth, however, is largely the result of gobbling up existing companies rather than creating new operations. Among its recent acquisitions are a $216 million purchase of US. Plywood Corp. in 1987, a $228 million purchase of timberland and two lumber mills from American Forest Products Co. in 1988 and a $665 million purchase of Brunswick Pulp & Paper Co., also in 1988.
GP made its most notorious acquisition in March 1990, when it completed a $3.8 billion hostile takeover of its rival, Great Northern Nekoosa. The takeover added six paper and pulp mills, four containerboard mills, 26 box plants and 3.4 million acres of timberland to GP's already growing empire. Before the takeover, the corporation owned 42 paper and paper board converting plants and 31 corrugated container plants throughout the United States.
Currently, GP manages 10 million acres of land in the United States, more than any of its competitors, and commands one-third of the U.S. paper market. After the Great Northern takeover, it became the largest landowner in Maine and the largest private landowner in Wisconsin.
Like other forest products companies, GP refers to itself as a "tree growing" company. Sheila Weidman of the GP corporate communications office says that in 1988 GP harvested 87,000 acres of timber in the United States and regenerated 50,000 acres by planting 30 million seedlings. Approximately 37,000 acres were left for "natural regeneration," a process whereby spared trees naturally re-seed the immediate vicinity of the harvested area.
Jonathan Pont of the Oregon Natural Resources Council, a Portland-based environmental group that deals with forest issues, says that GP's claim of regenerating trees after a harvest obscures the more important issue of destroying whole forests. "We're running out of ancient forests," says Pont, "and you can't cut part of the ancient forest and expect it to sort of come back. ... What you'regetting is a monoculture, you're getting a tree farm, a plantation. It is not the same as the ancient forest." Pont also points out that massive tree-cutting operations of companies like GP contribute to greater pollution of streams and rivers as a consequence of soil erosion.
Georgia Pacific's 1980s acquisition binge is taking its toll in 1990. A $5.5 billion debt and a 30 percent decline in earnings since the Great Northern takeover have forced the corporation to sell off assets. GP is currently selling a containerboard mill in Valdosta, Georgia and one in Tomahawk, Wisconsin (these were acquired through the Great Northern acquisition), 19 corrugated box plants (about half of these plants were acquired from Great Northern), 540,000 acres of timberland and an undisclosed amount of timber cutting rights for $740 million. In addition, the company is seeking a buyer for its pulp and paper mill in Toledo, Oregon.
Attacks on workers
Georgia Pacific has financed its expansion and increased profits to record levels on the backs of its workers. GP forced its employees to accept cuts in premium pay and healthcare and has either cut wages or provided annual wage increases running far below the cost of living index. After acquiring mills from American Forest Products, for example, GP reduced the workforce by 25 percent and cut wages by up to $2.25 an hour. Within a year of acquiring its plant in Brunswick, Georgia, GP cut what it called "redundant" jobs while reducing overtime pay.
According to Dick Blin, director of publications at United Paperworkers International Union (UPIU), GP successfully forced concessions at all facilities where UPIU has members. "We frankly think that a lot of their record profits have to do with the fact that we granted them concessions," Blin said.
But workers did not grant these concessions voluntarily. Over the last few years, thousands of striking paper-workers have been replaced by non-union workers at lower wages, making it more difficult for unions to reject company proposals during contract negotiations. About 3,300 UPIU members have lost their jobs to replacement workers in recent years. "Basically, we do not have the power to strike," says Blin.
In September 1990, about 500 members of UPIU demonstrated in front of the White House to protest the growing practice of replacing striking workers. The demonstrators, including UPIU president Wayne Glenn, called on Congress and President Bush to support pending legislation sponsored by Sen. Howard Metzenbaum, D-Ohio, and Rep. William Clay, D-Mo., that would allow striking workers to return to their jobs.
Georgia-Pacific has repeatedly abused the power which comes with its dominant position in the market. The company is notorious for price fixing. In 1975, it was convicted of fixing prices of $4.8 billion worth of gypsum board with U.S. Gypsum Co., National Gypsum Co. and Celotex Corp. After the conviction, the case was appealed and subsequently settled out of court in 1980 for $6 million.
In December 1982, GP settled a $2 billion price-fixing suit for $165 million. The class-action suit, representing 20,000 lumber yards nationwide, charged GP, Willamette Industries and Weyerhaeuser with fixing the prices of plywood from February 1968 through December 1973. The case began in 1972, when 39 plaintiffs charged that they had been required to pay higher prices than were appropriate because of "phantom" freight rates. The suit contended that the manufacturers agreed to charge freight on softwood plywood produced in the South as if it had been produced in the West, thus instituting a "phantom freight charge." The plaintiffs said the freight charges cost them billions of dollars. The case was settled after the paper giants appealed a 1981 ruling by the New Orleans Circuit Court of Appeals which upheld a 1978 jury verdict that found the three companies guilty of price-fixing in violation of the Sherman Antitrust Act. GP paid 60 percent of the settlement.
A dismal environmental record
As Georgia Pacific tightens its budget to deal with its debt problems, its already dismal environmental and workplace health and safety record may worsen. In March 1990, GP was fined a record $637,000 for water and air pollution violations at its Woodland, Maine mill dating back to 1986.It was the largest environmental fine ever assessed in Maine. The fine includes $250,000 for dumping six million gallons of waste water into the St. Croix River and $387,000 for 6,000 violations of state air pollution discharge limits between 1986 and 1989. The fines also involved monitoring and reporting violations.
In January 1990, the Occupational Safety and Health Administration fined GP's Fort Bragg, California facility after art explosion caused a release of PCBs; OSHA ruled that GP failed to provide adequate equipment to protect workers from the leak and cited GP for a "serious" violation of the Occupational Safety and Health Act.
In June 1989, the Environmental Protection Agency (EPA) charged GP with dumping dioxin into the Mississippi River near Baton Rouge in violation of the Clean Water Act.
In 1985, GP's Plaquemine, Louisiana plant paid $625,000 to the federal and state governments for releasing vinyl chloride, a known carcinogen, into the air between 1977 and 1985. At the time, it was the largest air pollution settlement on record. The Plaquemine facility was also fined a record $308,000 in 1981 for illegally dumping 42,000 pounds of phenol into the Mississippi River.
The federal EPA fined Georgia Pacific seven times for a total of $1.16 million between January 1,1977 and May 1,1990, even though the agency was eviscerated for much of that time under the Reagan and Bush administrations. Of the largest 50 corporations in the United States, only USX and Dupont were fined more often by the EPA.
For the sprawling forestry giant, the 1990s are an uncertain period. A recession will pose serious problems for highly indebted companies like Georgia Pacific. This raises disturbing questions about how a company with a history of exploiting and endangering its workers, cheating consumers and damaging the environment will respond to the pressure of an economic downturn.