Reynolds to Cut 400 Jobs

Reynolds American announces it will be cutting several hundred jobs.
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NEW YORK (

TheStreet

) --

Reynolds American

(RAI)

announced Wednesday that it will be cutting several hundred jobs in a move that it says will help streamline its business and save the company millions of dollars.

But, of course, "good" things often come at a cost, and for Reynolds, cutting the 400 jobs will lead to a roughly $47 million charge in the fourth quarter of 2009.

Reynolds says that the charge is connected to severance packages and other related items for the departing production workers. All the employees are leaving voluntarily, Reynolds says. In the statement announcing the move, Reynolds said that it last offered production associates "the opportunity" to "express interest in receiving a severance package" in 2003.

Their severance packages will consists of two weeks of pay for every year of service, capped at 78 weeks, and retirement and benefits-related payments. Most of these employees will leave Reynolds next year, beginning in January. The remaining few will depart in early 2011.

"Actual release dates for each individual will be determined based on both the needs of the business and any milestones the employee needs to reach in order to be eligible for retirement or other benefits," says Tommy L. Hickman, senior vice president of operations for R.J. Reynolds. "The company benefits from additional streamlining that will better align our staffing level with business requirements and enable our manufacturing operations to phase in new productivity programs over time."

The cuts will lead to cost savings of about $17 million next year and about $30 million the year after.

Last week, Reynolds completed its acquisition of Niconovum, a Swedish company that helps smokers kick their habit. Niconovum markets its gum, pouch and mouth-spray products under the Zonnic brand name in Sweden and Denmark. Reynolds believes the $44 million purchase is a good long-term investment as the company expands into the smoke-cessation industry.

Reynolds, which sells some of America's top-selling cigarettes -- like Camel, Pall Mall, Winston, Kool and Doral -- has advanced 0.4% to $53.30 in morning trading. Meanwhile,

Altria

(MO) - Get Report

has added 0.2% at $19.70. Altria declared on Wednesday a regular quarterly dividend of 34 cents per common share, payable on January 11, 2010.

Lorillard

(LO)

is up 0.6% at $80.10.

Philip Morris International

(MO) - Get Report

has risen 0.4% to $50.30.

-- Reported by Andrea Tse in New York

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