Longview Fibre Company

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Longview Fibre Company

P.O. Box 639
Longview, Washington 98632
U.S.A.
(206) 425-1550
Fax:(206) 425-3116

Public Company
Incorporated: 1927
Employees: 3,450
Sales: $6.9 billion
Stock Exchanges: New York
SICs: 0811 Timber Tracts; 2411 Logging; 2421 Lumber Mills; 2611 Pulp Mills; 2621 Paper Mills; 2631 Paperboard Mills; 2653 Corrugated & Solid Fiber Boxes; 2674 Merchandise and Grocery Bags

An owner and operator of tree farms in Oregon and Washington, Longview Fibre Company produces logs for sale as well as for a range of paper and containerboard products. Because of its size and versatility, Longview has accessed many niche markets. The company’s Longview, Washington, pulp and paper mill encompasses a 350-acre site producing 2,600 tons of paper products daily, making Longview one of the largest manufacturers of packaging. The company also operates one sawmill and holds 14 converting plants throughout the United States that produce corrugated and solid fiber containers, merchandise and grocery bags.

Longview Fibre Company was first conceived in the mind of Monroe Wertheimer of Thilmany Pulp and Paper Company, based in Wisconsin. Wertheimer had noted the waste wood being produced by a new sawmill overseen by the now defunct Long-Bell Lumber Company. The idea was to utilize that waste wood at a paper mill in Longview, Washington. The first concern was whether or not the wood produced by the Northwestern sawmill—which came from Douglas fir trees—would make suitable paper. After experimenting in Wisconsin with wood shipped from Longview, Wertheimer collected a group of investors and launched the new paper mill. Elected as president was H. L. Wollenberg, formerly an oil company executive. Wertheimer’s son, R. S. Wertheimer, became Longview Fibre’s vice-president and resident manager. Wertheimers and Wollenbergs remain among the company’s directors and corporate officers.

Longview’s beginning sparked the company’s tradition for utilizing waste wood fiber. Wood from the douglas fir tree, a dominant species in the Northwest, was formerly wasted; it had been burned before Longview decided to utilize its wood chips in the production of kraft paper. The method was a cornerstone on which Longview Fibre was built, and it continued into the 1990s. Longview was also the first to utilize sawdust in the manufacture of paper.

Once arrangements were made with Long-Bell to provide a plant site, waste wood, steam, and electricity, all the newly formed Longview Fibre Company needed was a pulp mill and a containerboard machine, which were constructed within a year. When Longview Fibre first opened its doors in 1927, there was one containerboard machine and 300 committed employees. The company’s goal was to produce high-quality paper products. The total output at that time was 100 tons per day.

A second paper machine was up and running by 1928. The following year, Longview acquired General Fibre Box Company, which had a large container plant in Springfield, Massachusetts. Despite the financial difficulties of the Great Depression, earnings throughout the 1930s were good enough for Longview to expand considerably. In 1933 a third paper machine was installed at the Longview mill. Also during the 1930s, the first electrostatic precipitators were installed in Longview’s recovery furnaces to enhance air emission control. Longview’s box plants were enlarged in 1934. Then a fourth paper machine was purchased, followed by the fifth machine in 1941. By 1948 a newly constructed container plant in Los Angeles began operations. Another newly built plant was opened in Oakland in 1950 and has been in operation since.

At the same time that the company was expanding its production capacities, it was acquiring timberlands. Its first purchase was in 1941, and through the years a number of acquisitions of small parcels of timberlands in Oregon and Washington grew into the 525,000 acres Longview owned by the early 1990s. The lands were purchased because the company recognized the importance of having its own timber supply. Timberlands provide the company with a wood supply for its own use in making paper should there ever be an extreme wood fiber shortage, a condition that began to appear alongside of environmental pressures that surfaced in the late 1980s. The majority of Longview’s timberlands are in Oregon. They are managed for timber harvest and the logs are sold to independent solid-wood products manufacturers. Since 1951 the company has engaged in a full-scale, sustained-yield forest management program. They grow the trees, practice forestry, harvest the trees, and market the logs. Longview has a professional forest management staff that manages tree farms and hires contractors to do harvesting, road construction and other forestry work.

A sixth paper machine was installed at the Longview mill in 1951. Business was profitable enough for the Los Angeles and Oakland, California, plants to double their capacity in 1955, in an effort to keep pace with growth on the Pacific coast. Longview took a leading role around that time of converting wooden boxes—used for such things as transporting fruits and vegetables—to fiber or paperboard boxes. This conversion brought so much business to Longview that they built a new container plant in Seattle, Washington, in 1955. The following year a seventh paper machine was helping the Longview mill meet demands. Whenever a paper machine was added to the equipment fold, it required other additions as well, such as pulp machines and recovery equipment. These were all signs of growth.

Longview Fibre acquired Downing Box Company in 1960. Downing produced both corrugated and solid-fiber boxes and added four plants to the Longview fold. The plants were in Milwaukee, Wisconsin; Minneapolis, Minnesota; and Cedar Rapids, Iowa. That same year, the company started running its eighth paper machine. In 1961, the ninth was added. A new container plant near Minneapolis was constructed from scratch in 1963, in order to serve the Twin Cities area. In 1966 Longview Fiber acquired Waltham Bag Company, a producer of grocery bags out of a Massachusetts-based factory and owner of warehouses in other locations in the East. A tenth paper machine was put into operation that year, and another newly constructed container plant was completed in Amsterdam, New York, in 1967.

The industry was in flux during the 1970s. Whiles sales dipped and energy costs soared, many companies concentrated on investing in updating existent equipment. Longview pursued the development of its profitable converted products business and continued its capital investment programs. During this time, two more container operations were built, one in Yakima, Washington, and another in Twin Falls, Idaho. And another paper machine was added to the Longview mill in 1974. The economic slump of the late 1970s impacted Longview in much the same way that the economic downturn of the late 1980s would: depressed purchases—such as fewer appliance sales—meant fewer boxes sold. In addition, the housing slump hurt lumber sales.

In 1980 Longview suffered its worst earnings drop—a staggering 97 percent plunge after 53 years in business. Not only was the company suffering from the housing slump that was pummeling the entire lumber industry, but Longview was hit doubly hard because it was then buying wood chips from independent lumber mills in order to make paper. The independent mills were down because of the collapsed housing market; the price of wood chips more than doubled in a few months time, from $60 per ton to $130. Fluctuations in the lumber business had always been balanced for Longview by its paper business, especially since most of its paper business was in grocery bags and containers, a fairly recession-proof market. With the severe crunch in the late 1970s and early 1980s, Longview was in a bind: it had to meet its paper commitments despite the pounding it would take on wood chip prices.

Another contributor to that year’s dip in earnings was the Mt. St. Helens eruption; the resultant pollution obliged Longview to purchase a water clarifier it had not previously needed. This was added to $6 million worth of other unanticipated repair bills that year. Financially conservative like his father, Longview President Dick Wollenberg invested approximately $35 million back into the company’s paper business. This included $5 million for two new chipping plants so Longview could reduce its dependency on outsiders. This would prevent a repeat of the painful month of April Longview had in 1980, when the company was forced to shut down its paper mill for two weeks because of a shortage of chips. The overall strategy was to focus more on high-margin items such as bleached papers and lighter-weight papers. Despite paper-making being a highly capital-intensive business, it had long been a profitable one for Longview Fibre.

Over the next two years, many modifications were made in Longview Fibre’s paper machine, pulping, power, and recovery areas in order to save on energy costs and increase efficiency. This was part of the company’s overall upgrading. Energy costs are substantial in an operation the size of Longview’s. Still, the continuing recession rocked the industry. The price of 1,000 board-feet of logs dropped nearly 28 percent in 1982 from its high in 1979. By 1984 Longview’s margins on logs was only 23 percent.

Longview continued its capital improvements agenda, investing close to $100 million in its pulp and paper mill and converting plants by 1987. This translated into gains in output and quality; reduction in energy costs; and improved product mix and mill utilization. Fourteen converting plants were at work making corrugated and solid-fiber shipping containers and paper bags in Washington, California, Idaho, Minnesota, Wisconsin, Illinois, Iowa, and Massachusetts, while Longview’s primary paper grew to maximum capacity. Longview also acquired a site for a box plant in Spanish Fork, Utah, and closed down an unprofitable bag plant in Kansas City.

Prices rose on all four of Longview Fibre’s product lines in 1987, as domestic and export markets revived. In 1986 about 40 percent of the company’s timber production was sold in Japan, China, and Hong Kong. The company-owned 487,000 acres of tree farms looked well poised to profit from a decline in competition from Canada and the South, as well as from government-owned timber in the Northwest.

More expansion projects were announced in 1988, including a twelfth paper machine to produce lightweight bag and specialty kraft paper grades and a new recycling plant to process old corrugated containers and new kraft clippings. Between 1983 and 1988, improvements had been made on every paper machine at the Longview mill, greatly increasing production rates. Other changes alongside the mill modernization program was Longview’s handling of raw material. Whereas previously close to 90 percent of the company’s materials arrived by rail, by 1989 truck dumps had been rebuilt to accommodate larger rigs, and 274 trucks, 4 barges and 60 railcars were handled daily. Also in 1989, the company built a new used-box recycling plant. It has since been expanded twice and reuses boxes from the Midwest and the Pacific Northwest. The used-box recycling plant, recognized as state-of-the-art in its field, reflected the growing public demand for recycled fibers, but was also built, according to Longview, because of reduced wood supply brought about by environmental pressures—particularly the issue of the northern spotted owl—in the timberlands.

The northern spotted owl, threatened with extinction, has a native habitat in the Pacific Northwest. To protect the bird, restrictions were placed on harvesting and foresting within its habitat circles. That habitat encompassed private as well as public lands, and restrictions impacted the industry. A wood shortage due to reduced harvesting drove up the price of wood chips—they more than doubled between 1990 and 1993—in the Pacific Northwest, and owl protection restricted Longview’s managing of its timberlands. Longview was still buying nearly half of its wood chip supply from independent saw mills in 1993, and as the major wood source for independent mills was federal forests, costs soared. The best use for timber is not to grind up entire trees for making paper, but to use the residual from trees cut for lumber.

The Pacific Northwest had been in the center of the spotted owl/ ancient tree controversy and also the worldwide dioxin/water quality controversy, which came to a full boil in the early 1990s. While the world was overcutting forests from Scandinavia and Canada to Africa and South America, demand for tree products kept growing, particularly in foreign markets. The forest-rich Pacific Northwest became a prime base for export, which intensified the struggle for its preservation. Longview was considered the most conservative of loggers in the region; in fact, it was said to be the only lumber company in the region that could accelerate its timber harvesting. Profits in all product lines inched upward as the battles raged on. The spotted owl issue became a point of war between the lumber industry and environmentalists, and with the change of administration in 1993, the shift of focus in Washington, D.C., went from industry to environment.

Meanwhile, Longview Fibre’s healthy cash flow brought about talk of leveraged takeovers and, by the spring of 1990, the Robert Bass Group owned 8 percent of Longview. Just over a quarter of the company was owned by officers, directors, descendants of the company’s founding families, and employees. While log prices improved somewhat, prices for wood chips remained high and earnings low. Takeover rumors peaked, then calmed when the Bass Group lowered its stake in the company to less than 5 percent. In the summer of 1990, a strike was averted when pulp mill workers approved a new four-year contract that had been in dispute. That same year, the company’s twelfth paper machine started producing lightweight paper.

Fire weather caused some concern in 1992, when a long west coast drought threatened to limit log production. Nonetheless, Longview Fibre officials said demand and prices were strong in the log market. Prices for paper and paperboard products declined during that same time. While earnings improved by 93 percent in 1992, the mill production was still down due to lagging paper markets and industry over-capacity. In 1992 Longview Fibre started the first ever solid wood products mill; the central Washington mill utilizes very small logs and includes special equipment from Finland. The mill produces dimension lumber and timbers in both standard and metric sizes for markets at home and abroad. Meanwhile, Longview Fibre Company’s main pulp and paper mill maintained a daily production capacity of 3,000 tons, in addition to three container divisions and bag plants. Its size and longevity in a changing industry have attested to the company’s adaptability.