A SHORT HISTORY OFINTERNATIONAL PAPER

GENERATIONS OF PRIDE

INTROOUCTION

On the threshold of the 21St cen·tury. International Paper is a diver­

sified, global company with manufaCluf­ing operations in the Western Hemi­sphere, Europe. Asia and South Africa.Its international presence is the result oflong-term changes that evolved since thecompany's founding in 1898. Starling asa pulp and paper company based in theNortheastern part of the United States,IP expanded imo Canada and the Ameri­can South during the 19205. Three de­cades later the company began expand­ing beyond North America. This was fol­lowed during the 19805 by the acquisi­tion of subsidiaries operating in Europe,South Africa and Asia.

ORIGINS ANO GROWTH. 1898-1940

Incorporated in Albany, New York, onJanuary 31. 1898, International Paper

was a merger comprised of 17 pulp andpaper mills. Production facilities rangedfrom a small mill in Turncrs Falls, Mas­sachusetts-which produced II tons ofpaper per day-to the Hudson River millin Corinth, Ncw York, onc of the mostadvanced in the industry with a dailyoutput of 150 tons. Holdings also in­cluded 1.7 million acres of timberland inthe Northeastern states and Canada.During its early years. IP was thenation's largcst produccr of ncwsprint,supplying 60 percent of all newsprintsold in the United Srates and exportingto Argentina, England and Australia.

The company became an industrypioneer under rhe leadership of HughChisholm, who served as president from1898 to 1907. Milestones included theconslruction of Ihe first laboratory inthe American pulp and paper industry inGlens Fall, New York, the industry's firstcollcCtive bargaining agreemenl and aninnovative timbcr harvestingsyslcm that

protected young I'rces. Operating in IheNortheastern United States, the heart·land of the turn-of-the-century pulp andpaper industry, IP employed some of thenation's most experienced papermakers.many of whom had honed their skillsduring decades of shop floor labor.These workers knew their pulpwoodgrinders and paper machincs insidc andout and rarcly needed the advice ofmanagers, who usually concentratcd onadministrative and financial matters.

The company's ncwsprint businessdeclined after 1913, when the UnitedStates Congress climinatcd tariffs onlow-cost Canadian imports, whichflooded U.S. markcts, croding IP's mar-

Above lutenlaliOlwl P"per pl"yea a /lwjorrole ill Ille ,levelopmellt of tire "secOlla"alia "thira"forests ill the SOli til. This photois part of Ihe secOlla foresl IIcar Nalcllez,h-Iississippi,

FOREST HISTORY TODAY I 1998 19

We"slrclIgth lillerboord prodllud allIle Geo"&etolVJI alld CallI/It'll mills \\'as us((l,oproduu ,11I:s(' ..vboxes"for Americall scrvicemcII mId women o\'tTScas.

ket share. Moreover, the company be·came embroiled in a labor conOiet in19Z1that disrupted its system of collec­th't: bargaining. IP was subsequently ledby Archibald Craustein, presid~nt from19Z4 to 1936, Craustein reinvigoratedthe company's newsprint o~rations byforming Canadian International Paper,an IP subsidial'},that acquired vast tractsof timberland in Canada and con·structed some of the world's largestnewsprint mills in the Province of Que·bec. Within the United States, the com·pany diversified intO Southern knft pa·per production by acquiring two mills inBastrop, Louisiana, and one in MossPoint, Mississippi, and by building newmills in Camden. Arkansas, and Mobile,Alabama. Consolidating its operations inthe Northeastern part of the UnitedStates. IP sold or closed several oldermills and converted the remaining oncsfrom newsprint to book and bondgrades. The company also built up allextensive hydroelectric power businessin the Nonheast and Canada. This ven·ture had to be dissolved when Congres­sionallegislation prohibited the combi,nation of manufacturing operations andelectrical power production.

The Great Depression of the 1930smarked a difficult period, Like mostmanufacturing companies, InternationalPaper suffered 5t."\'Cre financiallosscs dueto the unprecedented economic down·tum. forcing the company to reduce out·put and layoff workers. In addition to

selling off poorly pelforming subsidiar·ies. the organization weathered thesehard times by illtroducing a range ofnew products and. later, by branchingout into the packaging business. In 1931,III became one of the first paper compa­nies to manufacture Iinerboard on theFourdrinier machine. which producedinexpensive. high-quality grades for usein corrugated containers. Major custom­ers for this product included a leader inthe corrugated comainer industr)'. theAgar Manufacturing Corporation.which was acquired b}' IP in 1940. Thistransaction made the company one ofthe first integrat'ed linerboard manufac·t'urers in the American pulp and paperindust'ry.

Other efforts to den:lop new businessfollowed the same pattern. In 1939. IPpioneered bleached kraft grades for fold-

;0 I:OREST HISTORY TODAY 1\1\18

ing canons. tags and file folders and sup­plied Ihe first bleached kraft' papergrades [hat were suitable for milk cartonproduction. The company sold the bulkof its milk canon board oUlput to SingleService Containers. Determined to ex­pand irs presence in the converting sec­tor. IP acquired Single Service in 1946and later turned it into an inregnted liq­uid packaging operation. The companyalso laid the foundation for its specialtyproduct'S business during the Creat De­pression, During the early 1930s. itformed Arizona Chemical as a joint vcn­lUTC with the American Cyanamid Com­pany. Arizona Chemical refined crude Ii­quorturpemine, a by·product of the sul­f;He pulping process, and later became aspecialry chemicals producer wit'h op­erations in the Unired States and over·seas. In 1939, Canadian Internat'ionalPaper teamed up with the Masonite Cor­porarion to build a hardboard productsplant in Carineau, Quebec. Almost' fivedecades later, IP acquired Masonite withoperations in [he United States, Europeand South Africa. The quest for new

technologies. products and market'S dur­ing the Great Depression of the 1930swas initiatcd b}' Richard Cullen. whoserved as presidcnt from 1936 to 1943,and as chairman of t'he corporationfrom 1943 to 1948.

VIEW FROM THE TOP. 1940·'960

The early 19405 marked a watershed inthe history of the compan)'. In 1941. In­ternational Paper completed a large­scale reorganization that recapitalizedthe company and simplified its corpo­rate srruct'ure. During World War II. In­tcrnational Pa~r converted some of ilSmanufacturing operations to the pro­duction of military items. These in·cluded Ihc V-I Box. an ulrra·strengl'hcontaincr developed by IP that rcplacedwoodcn cratcs for the shipment of mili­tary supplies. Featuring five layers ofmoisture·proof kraft board laminatcdwith insoluble adhesive, the V·I Box un·dCl"wcnr rii,'Orous tcst'ing, in which it' wasleft to soak in the ocean surf for Z4 hoursand then dropped repeatedly on a con-

"-

Eswblislled by tP illJ957, the Soutlt/mltisExperimtllf Forestbecame the compallY'oSumralforeoSt resenrchflldlity rltat dewlopt'dlIlalwgt'mOlf fedlllilllU$lIud tile' SIII'O'Tm:™.Fred C. Cragg (left), viC(prtsidflll (md gello~ral

mallager·woodin lids,Sowllcrn Kraft DivioSiollalld unvrcuuj. Kligle­1II1l11, vice prcs('Illalldgcnfral mallager-wood­lands, inspect a testplantatioll ofoS/aoSllpine trees groWll fromgenetically improved sudat the SEF in Bainbritlgt:,Georgia, 1966.

cretc floor. Using largc amounts of rc­cycled paper. [P also manufactured kraftcases for the transportation of gun shcllsand hundreds of other military items.Nitro·ccllulose for explosivcs was madefrom dissolving pulps produced by Ca·nadian International Paper's mills.

Thc postwar cra witnessed unprec·edented growth and prosperity. JohnHinman. who led the company as presi.dem from 1943 to 1954 and as chairmanfrom 1954 to 1961. reduced its debt to

zero and increased dividend payments.During his tenure. International Paperestablished a research laboratory at Mo·bile. Alabama, and the South lands Ex·periment Forest at Bainbridge. Georgia.which developed lP's SuperTrcc throughselective breeding of gcnetically superiorpine trees. In 1950. the company starteda dissolving pulp mill in Natchez. Missis­sippi, that was the first to usc 100 per­cent hardwood. and started a paper millin Pine Bluff, Arkansas. producing news­print, milk carton grades and light­weight white papers.

In 1956. IP acquired the Long·BellLumber Corporation in an attempt todivcrsifY into markets outside paper pro·duction and conversion. Although theFederal Trade Commission initially ar·gucd that this transaCl'ion violatcd anti·trust Icgislation, the merger was eventu·ally approved. The struggle with federal

authorities over the Long-Bell acquisi­tion. however. convinced IP 10 proceedcauriously with further eHorts to expandbcyond pulp and paper. As a result. IPbecame less diversified than major com·petitors during the 1950s and early1960s, leaving it morc exposed 10 thehighly cyclical market for newsprint andkraft paper products. Thc company triedto address the diversification problemduring subsequent years. but a viable so­lution was nor implemented until the1980s.

The late 1950s marked the bcginningof Imernarional Paper's expansion m'cr­seas. The company had bccn a majorexporter for dccades and maintainedsales offices in London. Paris, Zurich andJohannesburg. [n 1959, it added the firstoverseas manufacturing operationsthrough joint ventures with containercompanies in Israel, Germany. Greeceand [taly. The same year it organized anew subsidiary and built a liquid packag­ing plam in Caracas. Venezuela. It alsoacquired major shares in a bagasse papermill in Cali, Colombia; converting op­erations in Arecibo, Puerto Rico; and afolding carron plam in Mexico City. Alsoin 1959. International Paper firstachic\'ed S1 billion in sales.

Under the leadership of RichardDoane-elected presidcnt in 1954 andchairman in 1961-lmcrnational Paper

further developcd its pulp and paperbusiness. Responding to growing com·pctition that resulted in a decrease ofdomestic market share. Doane estab­lished a creative marketing center andlaunched an innovative sales trainingprogram. On the manufacturing side, IPadded new mills in Vicksburg, Missis­sippi; Gardiner, Oregon; and jay. Maine.In 1962. thc Georgetown, South COiro·lina. mill became olle of the first in thepulp and paper indust'ry 10 install com·putcrized information and process can·trol s)'stems. Improving its conveningoperations. IP built and acquired liquidpackaging. corrugated container andfolding carron planrs in the UnitedStates.

THE CHAllENGES OF CHANGE.1960-1980

International cxpansion continuedthroughom the 19605. Ovcrseas manu­facturing operations acquired during the1960s included corrugated containerplants in Catania. ital),; Bilbao. Spain;and Aries and Mortagne, France. Thesefacilities improved International Paper'spresencc in the European markcr. Thecompany also built new corrugated con­taincr plants in POl1lezia, haly: Guade·loupe. French West Indies: and LasPalmas. Canary Islands.

FORr:ST HISTORY TODAY J 1~~8 JI

IP's Thomas BuS('h developedmadlinery illal influencedlaterdevelopmt'Jlts in loggingoperations. The most famousis ti,e Busch combille or"Buschmaster- .'Ihou'?l herrrimJ J96O. It Olt indi...idlud

1rt't'S. delimbed tllmr, cuIfhnt! ira lengths alld stackedthmr.

Imemational Paper entered a criticalperiod in the late 19605. Controlling\'aluable and debt·free assets that hadbeen built up over decades. IP witnessedan era of an unprecedented number ofmergers and acquisitions. To avert a hos·tile takeover and tackle IP's diversifica·tion problem. Edward Hinman-electedpresident and CEO in 1966-increasedthe company's indebtedness and Ole·quired speciah"}' businesses. including amajor real estate developer and a mallu,facturer of medical products. However.like many leading corporations of thelate 19605 that diversified into marketSthat were unrelated to their core busi­nesses. IP found it difficult to integrateits recent acquisitions and most weresold a few )'ears later. A recession in thepulp and paper market meanwhile k-d [0a 30 percent drop in the company's earn­ings in 1970. producingaddi[ional finan­cial hardships.

Despite these difficulties. Interna­tional Paper scored a number of impor­tant successes during this era. Its non·woven fabrics division. which built aplant in leWisburg. Pennsylvania. madeIP an important nonwoven fabrics pro­ducer and laid the groundwork for

Jl FOItEST HISTORY TOI)A\' I lQol)8

VeTOltec. a specialty business launched in1987. Another major initiati\'C of the late19605 and early 19705 was the construc­tion of the Corporat'e Research Centerat Sterling Forest, New York. This facilit)'has pioneered important manufactUringand environmental technologies as wellas innovath'e products during subse­quem decades. IP also built state-of-the­aTl pulp and paper mills in Ticonderoga,New York, and Texarkana, Texas.

Edward Hinman was succeeded by~redcrick Kappel who served as chair­man of International Paper's board ofdirectors from 1969 to 1971. Formerlychairman of American Telephone &Telegraph. Kappel was the first leader ofImernational Paper since Philip Dodge(1912-1924) who had spent most of hisC2reer with another company.

Streamlining i[s operations duringthe 1970s. International Paper phasedOUI sc\'eral facili[ies and improved itsmarketing organization. These [;ISks fellto Paul Gorman-who scrved as chair­man from 1971 to 1974-and his succes­sor j. Stanford Smith. who led the com­pany until 1980. During their respectivctenures, IP closed or sold older mills inLivermore ralls, Maine: Panama Cit),.

Florida: and Springhill. Louisiana. Alarge-scale corporate reorganization in19i6 replaced the Southern Kraft Divi·sion and the Northern Division withfunctional business units: white papers.consumer packaging. industrial packag­ing, wood products and specialty pack­aging. In each busincss unit, productionmanagers were encouraged 10 think asmarketing and financial managers, andvice versa. As a result. strategic changesin a unit's manufacturing' operationswere made with a keen e)'e on earningsand sales.

MEETING THE CHALLENGES OFCHANGE.IBBO-PRESENT

This restructuring led to a major newinitiative in the 19805. when IP launcheda large·scale overhaul of its mills. Led byDr. Edwin Gee-who served as chair·man &om 1980-1985-IP conducted in·depth studies of mills and plants. TheBastrop. Louisiana, mill had to be closedin 1982. Other mills received extensiveupgrades in a 56 billion capital improve·ment program that included a completereconfiguration of the Ceorgetown.South Carolina, mill. The program

phased out inefficient linerboard opera­tions and switched to more profitablebleached paper products. The programalso included the reconfiguration of theMobile, Alabama, mill from newsprintand kraft grades to white papers. Thesemill reconfigurations enhanced produc­tion efficiency and contributed to a 5percent cost decrease in per-ton produc­tion of white papers from 1982-1988. Fi­nancial resources for the corporate capi­tal program were raised through the saleof Canadian International Paper, Gen­eral Crude Oil Company and other sub­sidiaries, stock offerings and loans. Inaddition to reconfiguring existing facili­ties through the corporate capital pro­gram, International Paper built a highlyefficient containerboard mill inMansfield, Louisiana, which helped thecompany reduce containerboard pro­dunion costs by 18 percent in a six-yearperiod.

The decade from the mid-1980s to

the mid-1990s marked a period of un­precedemed expansion when sales morethan quadrupled, reaching $20 billion in1996. This trend reflected the growth ofhigh-value product lines, enhanced bythe acquisition of the Hammermill Pa­per Company in 1986. This $1.1 billiontransaction was engineered by JohnGeorges, chairman from 1985 to 1996. Inaddition to a rich tradition in fine paperproduction and nine mills, Hammermillbrought invaluable marketing experi­ence into the partnership. Recognized asthe "best-known name in paper,"Hammermill had developed a distribu­tion network and a reputation for qualitythat were unrivaled in the Americanpulp and paper industry. As a result ofthe merger, IP learned valuable market­ing lessons and Hammermill improvedthe profitably of its manufacturing op­erations. Hammermill's extensive distri­bution network later became the foun­dation for ResourceNet International. alarge-scale marketing organization thatsold a wide variety of products made byIP and other leading companies. Operat­ing in 250 locations at the time, the dis­tribution operation sold graphic artssupplies and equipment, printing paper,industrial packaging, janitorial andmaintenance supplies, retail packagingand related products. ResourceNet Imer­national was renamed xpedx in 1998.

One year after the Hammermill ac­quisition, a labor conOict emerged at [n­ternational Paper. In an effort to controlproduction costs, the company had ne­gotiated a number of agreements withthe United Paperworkers InternationalUnion and others to eliminate premiumpay for work performed on Sundays andholidays. However, strikes took place at

Hugh Chisholm (1847-19121,

one of International Paper'sfounders, served as the company'spresident from 1898 to 1907.

Born in Canada. Chisholm beganhis career as a newsboy on trainsrunning between Toronto and Detroit.Possessing considerable businessacumen, he soon controlled news­paper distribution on major U.S. andCanadian railroads and steamboats.In 1865, he sold the business to hisbrothers, emigrated to the UnitedStates and became an Americancitizen.

As a newspaper dealer and ownerof a publishing house in Portland,Maine, Chisholm became interestedin the paper business. After an ex­haustive study of industry condi­tions, he acquired a small mill inLivermore, Maine, and organized theUmbagog Pulp Company in 1881. By1885, Umbagog operated two papermachines. Two years later, Chisholmorganized the Otis Falls Paper Com­pany, which was followed by anotherventure that led to the formation ofan extensive paper mill and powercomplex at Rumford. Maine in 1891.

Believing that a large-scale merg­er of American paper companieswould stabilize the industry, Chis­holm joined William Russel, A.N.Burbank and other industry leadersto form International Paper. At thecompany's first board meeting,William Russel was elected presi­dent but he died in less than sixmonths. Hugh Chisholm, who hadbeen elected first vice-president,then became president of the newenterprise, which was the world'slargest paper company.

three mills and there was a lockout at afourth. The strikes and lockout ended inthe fall of 1988. In 1993. the companyand the union signed a "peace accord"and agreed to return a positive relation­ship.

[n the late 1980s, International Paperdevised a viable solution to its diversifica­tion problem. [n the pulp and paper in·

Widely considered the mostpowerful man of the time in theAmerican pulp and paper industry,Chisholm helped IP gain control of60 percent of the American news­print market. His skillful financialmanagement enabled the companyto post significant profits through­out the early years. Chisholm'ssuccess raised the ire of newspaperowners who argued that the "papertrust" charged exorbitant prices fornewsprint. Chisholm denied theseaccusations at several highly pub­licized Congressional hearings.During his tenure at the helm of thecompany, Chisholm initiated IP'sfirst forest management programs.In 1901, he issued instructionsforbidding the harvest of immaturetrees. He also forged a close re­lationship with Yale University'sforestry program, whose facultyand students helped IP select treesfor cutting.

In 1907, Chisholm resigned asIP president so that he could devotehis eHorts to developing the OxfordPaper Company at Rumford Falls,Maine. He was succeeded by A.N.Burbank.

FOREST HISTORY TODAY I 1998 JJ

dustry, whose core business was highlycyclical, a secure foothold in less-volatilemarkels was necessary to maintain ahealthy balance sheet when earningsfrom paper producls declined. IP hadlearned painful lessons during the late19605, when il made acquisitions that didnOI fit into the overall organization. De­termined to avoid this mistake, IPstrengthened its position in markets forspecialty products that were related ro itscore business but less cyclical in earningsthat the pulp and paptcr market.

In 1988, for example, the companyacquired the Masonite Corporation,modernized its manufacturing facility inLaurel, Mississippi, and later built an ad·ditional plant in Ireland. These invest·ments fulfilled their purpose. In 1996.when the printing papers business stag·nated, earnings in IP's specialty panelsbusiness grew at double·digit rates. IPderived similar benefitS from other spe·cialty businesses. including chemicalsand petroleum. nonwoven fabrics andsilicone-coated products.

The late 1980s and early 1990smarked a period of international e~an­sion. Prior to this era. the compan)' hadexported a significant share of its prod·ucts to overseas markets but most of itsmanufacturing operations were locatedin the United States. the world's largestpaper markel. During the 1980s. how­ever, overseas demand for paper rosesharply with the introduction of officecopiers, computer primers and fax ma­chines. In Europe, paper consumptionper person rose at an annual rate of 3percent, compared to 1 percent in theUnited States. In 1989,Imcrnalional Pa­per acquired two European companies:Zanders Feinpapiere AG. Germany'sleading producer of coated papers thathad been founded in 1829; and AussedatRey. a diversified French manufacturerof office copying paper. specialty panelsand related products whose origins dateback to the 18th century. In 1992. IP ex­panded its European presence with theacquisition of Kwidzyn. Poland's mostmodem paper mill. which subsequentlywas expanded and upgraded.

During the early 1990s, IP also ~oaincd

a major presence in the Pacific Rim.where it established over time a majorityshareholder stams in Caner Holt Harveyof ew Zealand. Founded in the 19thcemury, Carter Holt Harvey became aleading manufacturer of pulp, paper. tis­sue, containerboard and wood productsoperating primarily in ew Zealand andAustralia. It also acquired a presence in aChilean energy and forestry company.COPEe. Carter Hoh Harvey's di\'ersi­fied holdings centered around a corebusiness in wood products fit well withIP's o\'erall organization and corporatephilosophy. IP acquired majority share·holder status in Carter Holt HaT\~Y in1995.

The most recent chapter in the his­tory of International Paper. which beganwith John Dillon's election as chairmanand CEO in 1996, was still unfoldingwhen the company approached its cen·tennial. One of the leaders of IP's corpo­rate strategy development during the1980s and early 1990s, Dillon's philoso­phy emphasizes customer focus. low­cost production, technological innova­tion, workforce diversity, and employeeinvolvement in running the business.

At the beginning of Dillon's tenure aschairman. IP extended its long traditionof community im'olvement by provid­ing building malerials for the reconstruc·tion of churches that had been destroyedby a series of arson anacks. MoreO\'Cr, IPwas a major sponsor of the 1996 Olym·pic Games in Atlanta, Georgia.

One of Dillon's first business objec·tives was the successful integration ofFederal Paper Board into the Interna­tional Paper family. Fedcral merged withIP in March 1996 in a £3.5 billion transac­tion that included mills in: Augusta,Georgia; Riegelwood, North Carolina:Versailles, Connecticut; the Tait mill inInverurie, Scotland, as well as extensivepackaging and wood products opera­tions. The merger has exceeded its fman­cial expeCtations.

Also in 1996. International Paperopened the new Cincinnati TechnologyCenter, a major facility that includes,

among many operations, pilot projectplants for dcvelopment work in priming,packaging and extrusion coating. TheCincinnati Technology Center continuessome of the function of the Erling RisResearch laboratOry which was phasedOUt.

Under Dillon's direction. the com­pan)' undertook a thorough evaluarionof its business leading to decisions thatwould guide the allocation of capital andset new requirements for acceptable lev­els of profitability. As a resull of thisanalysis, the company announced, inmid·I997. a performance improvementplan that would include the sale of SIbillion in assets.

THE IP WAY

As in the past, International Paper iscommined to continuous improvementin everything it docs and the key is thepeople who make up the company. In1898, a typical paper mill was run byskilled workers who knew more aboutpulp production, paper machines andproduct quality than anyone else in theorganization. One hundred years later.International Paper is committed to be­coming a High Performance Organiza­tion. a company with a greater degree ofteamwork and greater decision·makingpower delegated throughout the organi­zation in order to bener satisfy custom­ers and beat the competition.

Employees sharing their ideas andexperiences to improve the business ispart of what has come to be called "theIP Way." More formally. "the IP Way"includes a commitment to be a globalleader and earn an excellent return. Itincludes being the company of choicellOl only for customers but employees.shareholders and suppliers.

In 1998, as International Paper entersthe new millennium. its success in fulfill·ing its vision will depend on the abilityto conlinue its legacy as a company ofemployees who think and act with ere·ativity. energy and. most of all. the driveto succeed. 0

Printed With pemussion from Genetatlons ofP"dB. A Centennial HislOi)'oIlnletna!1Otla1 Paper. Cos:rtr9l1 19!11. International Paper Company.

J~ FOREST HISTORY TODAY I 199