Philip Morris Limited Announces Plans to End Local Manufacturing in Australia

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April 2, 2014

Philip Morris Limited (PML) today announced to employees its plans to end cigarette manufacturing at its Moorabbin site by the end of the year.

As part of Philip Morris International’s (PMI) review of its manufacturing operations, PML has decided to cease cigarette manufacturing in Australia by the end of 2014, and transition all Australian cigarette production to our affiliate in Korea, which will produce the same high quality products for our Australian consumers.

"This is an extremely difficult decision, and devastating news for all of our employees," said John Gledhill, Managing Director Australia, New Zealand and Pacific Islands.

"Philip Morris Limited has a proud history of nearly sixty years of manufacturing in Moorabbin, being the first Philip Morris affiliate established outside of the United States, and many of our employees have been with the company for a significant part of that journey," said Mr Gledhill.

With the Australian market in gradual decline over the last decade, in 2006-09 PML substantially invested in the Moorabbin factory to capitalise on export opportunities across the region. However, these forecast export opportunities have not been realised due to Australian Government reduced-fire risk requirements introduced in 2010 on all locally manufactured cigarettes that do not match consumers’ preferences in other markets in our region.

"Despite the introduction of plain packaging and the continued growth in illicit trade, PML’s volumes were stable in 2013. However, with any significant export opportunity restricted by Australian Government regulations, our Moorabbin factory is significantly under-utilised, operating at less than half of its currently installed capacity," said Mr Gledhill.

"Our Operations Team have led the PMI business in terms of quality, and set numerous records for productivity and performance. However, regrettably factors beyond our control prevent us from fully utilising the facility, and accordingly it’s been identified for closure."

Mr Gledhill said approximately 180 employees directly involved in manufacturing will be impacted by the planned closure, and extensive support will be provided to all employees throughout this period, including redeployment opportunities where feasible, counselling and coaching, career transition and outplacement support, and financial and retirement advice.

"Our focus now is to consult and work through these plans with our employees and their representatives, our suppliers, customers and other business partners to ensure a successful transition, and continuity of supply of our high quality products to Australian customers and consumers."

"Although closing the factory will require a review of our usage of the entire Moorabbin site, PML will maintain a strong ongoing commercial presence in Australia employing around 550 people and will continue to be headquartered in Melbourne," said Mr Gledhill.

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