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RICHMOND, Va. -- The decline in cigarette sales is being felt at Altria Group Inc., which plans to cut the number of salaried workers at its cigarette business and related services by 15 percent.
Altria, the parent company of Philip Morris USA, aims to cut $400 million in annualized costs by the end of 2013. This will include about $300 million in employee separation costs and additional reductions in spending, according to the Associated Press. The news came as the company was discussing its third-quarter earnings this week.
"Cigarette industry volume has declined significantly following the 158-percent increase in the federal excise tax in April 2009, resulting in our need to continue reducing cigarette-related infrastructure. This new cost reduction program is expected to deliver $400 million in annualized cost savings by the end of 2013," explained Chairman and CEO Michael E. Szymanczyk.
All total, Altria's companies employ 10,000 workers, including 4,600 in Virginia. Cigarettes make up the bulk of the business, the AP report added.
Cigarette sales have taken a hit in recent years and states continue to look at increased excise taxes as a way to balance budgets that have suffered in these economic times. At the same time, more municipalities are enacting smoking bans. Consumers also face economic challenges and unemployment.
The number of cigarettes that Altria sold declined 9 percent in the third quarter to 33.3 billion cigarettes compared with a year ago, and the segment's revenue during the quarter fell 6 percent to $3.64 billion, excluding excise taxes, according to the news outlet.
Tobacco companies like Altria have tried to offset declines in cigarette sales by reining in expenses and raising prices. During the third quarter, Altria said it completed a multi-year cost savings program, exceeding its goal of reducing costs by $1.5 billion between 2007 and 2011. That program included the 2009 closure of its Cabarrus manufacturing facility in North Carolina.