R. J. Reynolds Says It Will Slash Work Force by 12%

WINSTON-SALEM, N.C. — R. J. Reynolds Tobacco Co. said Thursday that it will cut about 12% of its work force in a move meant in part to reduce costs after parent RJR Nabisco Inc.’s $25-billion leveraged buyout.

The reduction, part of a wide-ranging restructuring, is the second by the tobacco subsidiary since RJR Nabisco agreed to be taken private last year by Kohlberg Kravis Roberts & Co. in the biggest takeover in history.

In a leveraged buyout, purchasers buy a company with borrowed funds and use the company’s operations or sale of assets to generate cash to repay the debt.

R. J. Reynolds said it would cut 1,640 salaried and hourly workers, reducing its staff to about 12,500. The company said the move was mainly an attempt to adjust to market conditions and become more competitive.

5% Cut in April

But analysts said the reduction, split almost evenly between salaried and hourly employees, was an attempt to reduce costs in the face of the massive debt load RJR incurred in the buyout.

Last week, RJR reported a second-quarter net loss of $309 million, contrasted with a year-earlier profit of $350 million. Its debt and interest expense in the most recent quarter amounted to $1.05 billion.

In April, R. J. Reynolds cut its hourly work force by about 700, or about 5%.

The company said the new round of reductions will eliminate 825 salaried, 700 hourly and 115 temporary positions as part of a change in its size and structure to reflect current business and competition in the tobacco industry. Cigarette consumption in the United States has been dropping steadily.

Betsy Annese, an R. J. Reynolds spokeswoman, said the increased debt load of the parent was part of the reason for the work force reductions.

“It’s a factor, but the real reason is to prepare for competition,” she said. “This reduction would have been necessary whether or not there was an LBO.”