Reynolds American and tobacco unit, RJ Reynolds, said Tuesday that they would cut about 570 jobs, or 10 percent of their U.S. workforce.
The company expects the job cuts to save $ 100 million by the end of 2010 and $ 55 million per year thereafter. Employees will begin losing their jobs in the third quarter, but some reductions will take place before the end of 2009.
A day earlier, a great rival of Reynolds, Altria Group, which owns Philip Morris USA, said it would buy UST, the creator of Skoal and Copenhagen smokeless tobacco products, for $ 10.4 billion.
Goldman Sachs analyst Judy Hong said the restructuring was a natural move for Reynolds, as the tobacco industry finds ways to cope with falling sales of cigarettes. Americans are buying 3 to 4 percent less cigarettes a year, and the industry turned to alternatives like chewing tobacco, snuff, cigars and snus (a tobacco pouch meant to be held under the upper lip) for future growth. Sales of smokeless tobacco are growing about 5 to 6 percent per year.
Reynolds' plans are designed to focus on core businesses and redirect resources to areas of economic growth. Among the changes: The company scaling back marketing and promotional support for its Kool menthol cigarettes, despite the increase in spending on Camel menthol products. Pall Mall will remain one of the growth of companies and brands.
The company said jobs will be eliminated from both Reynolds American and RJ Reynolds in the company's headquarters in Winston-Salem, North Carolina, but some jobs lost at the parent company will be filled by employees of the branch.
All positions are under review except for those in the field of sales and marketing outside of headquarters and production in Winston-Salem.
The company said on Tuesday it hoped to record a $ 90 million before deducting the cost of restructuring in the third quarter of 2008.
Reynolds American shares fell 50 cents to $ 51.07.
