- The Washington Times - Tuesday, September 30, 2003

Tobacco giant R.J. Reynolds announced recently that the company was cutting 40 percent of its workforce, or approximately 2,700 jobs. The maker of Camel and Winston brand cigarettes has gone from 16,000 employees in the 1980s to a little more than 3,000 after the newest round of layoffs. Since 1997, the company’s earnings have dropped 66 percent. The bad fortune at RJR headquarters mirrors the predicament at all of the big four American cigarette manufacturers. The situation will only get worse, as the federal government is poised to deal a death blow to tobacco firms.

Congress now is considering legislation to institute a $15 billion program to buyout tobacco farmers. If passed, the new law would terminate the 1939-era federal tobacco price supports and stick the big tobacco firms with the bill for the buyout. With profits already going up in smoke, this new cost of doing business could very easily put major cigarette producers out of business. For example, R.J. Reynolds, which owns 27 percent of the market, simply does not have the revenue to underwrite its one-quarter share of the new assessment — unless it raises prices significantly, something it already has done to pay off the 1998 settlement over state medical costs.

One side effect of the tobacco buyout will be to ship thousands of jobs to Mexico and Asia. Foreign importers already have increased their market share from 2.5 percent in 1998 to 15 percent last year — and not because of the quality of their product. Like small boutique outfits, importers have a competitive pricing edge because they do not have to pay into the settlement fund. This means foreign packs of smokes easily can undercut the price of a pack of Camels by half. Many smokers’ loyalties follow their pocketbooks.

No matter what one thinks of smoking, it is sad to see the government destroy historic U.S. corporations. No doubt, a significant impetus behind bleeding tobacco firms for cash is that the massive bureaucracy is addicted to the kick of tobacco revenue. Already, 40 percent of the revenue for a pack of RJR cigarettes goes to federal and state governments. There will always be smokers. The new assessment looks as if Washington is angling to force the big firms into bankruptcy and take over the market itself. That’s not our idea of free enterprise.



Sign up for Daily Newsletters

Manage Newsletters

Copyright © 2020 The Washington Times, LLC. Click here for reprint permission.

Please read our comment policy before commenting.

 

Click to Read More and View Comments

Click to Hide