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Altria to Move Some Cigarette Production to Europe

Altria Group, the parent of the Philip Morris cigarette companies, said Tuesday it will close a North Carolina manufacturing plant that employs 2,500 people as it moves cigarette production for non-U.S. markets to Europe.

The company's announcement will makes its U.S. and international cigarette units more independent. Some analysts have predicted that Altria would like to split the businesses into two companies and expect an announcement of the split as early as August.

A tobacco business split-up would be part of a restructuring designed to increase value for Altria shareholders that started with the parent company's spinoff in March of its remaining majority stake in Kraft Foods .

Altria said in a statement that it planned to increase production at plants in Europe by the third quarter of next year.

Altria's Philip Morris USA unit will close its Cabarrus, N.C., plant, and consolidate manufacturing for the U.S. market at its Richmond, Va., plant by 2010.

Most North Carolina-based hourly employees and many salaried employees will be offered positions in Richmond, Altria said. Others will be eligible for between three and 20 months of severance pay and benefits, depending on length of service, plus outplacement counseling.

The company said it expects cost savings of about $335 million by 2011, of which $179 million will be realized by Philip Morris International and $156 million by Philip Morris USA.

Altria expects Philip Morris USA to record an initial pretax charge of about $325 million, or 10 cents per share, in the second quarter, mainly for employee separation. There will be about $50 million in charges for the remainder of 2007.

Total expenses through 2011 will be about $670 million at Philip Morris USA, including accelerated depreciation charges of $143 million, employee separation expenses of $353 million and relocation costs, partly offset by gains on sales of land and buildings, of $174 million.

Altria shares rose 50 cents to $69.25 in premarket trading.

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