Industry Intrinsic to Va. Now Vulnerable

By Fredrick Kunkle

Sunday, February 8, 2009

This is the first of two stories examining the impact of tobacco and changing attitudes about it in Virginia.

RICHMOND — Twenty-four hours a day, five days a week, freshly cured tobacco flows along an intricate freeway of ramps, conveyor belts and pneumatic tubes inside Philip Morris USA's plant here.

It arrives by the ton inside wooden hogsheads. It spins inside giant drums that blend chocolate, corn syrup, eye-watering doses of menthol or other flavorings. It blows through high-tech, high-speed German machines that can roll the dried weed into paper, insert filters and spit out Marlboro cigarettes at the rate of 20,000 a minute.

That's almost 29 million smokes a day from a single machine — and still just a tiny fraction of the product that has made Philip Morris the world's largest tobacco company. With revenue that rivals Iceland's gross domestic product, Philip Morris contributed $632 million to Virginia's economy through employee wages alone in 2007 and paid $87.1 million in payroll, property and corporate taxes.

Now, Gov. Timothy M. Kaine is leading an aggressive campaign to promote public health, perhaps at the expense of a homegrown industry that until last week was considered almost invulnerable.

On Thursday, Kaine (D) and House Speaker William J. Howell (R-Stafford) compromised on a bill to ban smoking in restaurants and bars, a monumental decision in a state where tobacco has thrived for hundreds of years. To pay for health damage from tobacco, Kaine had also sought to double the state excise tax on cigarettes to 60 cents a pack.

But many lawmakers and their constituents have been wary of imposing taxes or smoking bans. Mindful of the jobs and state revenue generated by Philip Morris, they warn against doing anything to hurt one of the commonwealth's most lucrative businesses.

"If it wasn't for Philip Morris up here, there'd be 4,000 people out of work," said Ken Davis, a truck driver who hauls for Philip Morris and smokes two packs a day. "Virginia was built on tobacco. And now they want to take tobacco away."

Such concerns killed the tobacco tax in a House committee and blocked a companion bill from reaching the Senate floor. Although some legislators in both parties have said they think the tax could remain in play until the session's final days, as lawmakers try to close a $3 billion budget gap, others said the defeat showed tobacco's clout.

"They pay an awful lot in taxes," said House Minority Leader Ward L. Armstrong (D-Henry). He said he was leery of targeting only one industry, which, although steadily declining, still provides a valuable kick to the economy.

In Keysville, some of the best wages can be found at S&M Brands, a closely held company that makes Bailey's Cigarettes. The company, founded in 1994 by Malcolm "Mac" Bailey and his son Steven, employs 170 people and generates net sales of $44.6 million a year.

But the Marlboro Man is still king here. Philip Morris USA's parent company, the Altria Group, is Virginia's biggest public company in terms of market value. Last year, Altria moved its corporate headquarters to Richmond, four years after Philip Morris relocated its executive suites just south of the James River.

The company's Richmond plant employs 2,500 people, including 500 salaried employees. The blue-collar workers are diverse: 32 percent are black or Latino; 31 percent are female. They make $15 an hour as entry-level workers and as much as $33 an hour for senior, skilled craftsmen.

Although Philip Morris is laying off employees after getting out of the international cigarette business and closing its plant in Cabarrus, N.C., the Commerce Road plant here is absorbing some of them and taking on more work.

The economic ripples spread far. More than 500 Virginia growers sell tobacco to Philip Morris, and their crop is collected at a privately owned receiving station in Danville.

They are also visible outside the factory's gates. Follow Jefferson Davis Highway behind the plant, past the Grab N Go, a mobile-home park, auto parts shops, hamburger joints, several motels that rent by the week, a boarded-up car dealership and many weedy lots, and you arrive at Patrick's Restaurant. Open from 7 a.m. to 2 a.m. seven days a week, the bar fills with every shift change at Philip Morris.

Outside, the parking lot is full. Inside, dart teams toe the foul line in a haze of cigarette smoke during a league match. Meatloaf is on the menu, Pabst Blue Ribbon in the cooler and AC/DC on the jukebox. There is a lot of sympathy for smokers and the company that makes their cigarettes. There is none for raising the tax or imposing a smoking ban.

"I don't think it's fair, because I smoke and I pay enough taxes," said Barbara Burgess of Richmond, shaking a Marlboro Light from her leather holder.

Burgess's table alone illustrates the web of jobs tied to Philip Morris. At one end sits a machinist whose firm services the plant's equipment. At the other is a guy whose company rents cranes to the plant. Burgess's former husband worked his way up from a janitor there. Her girlfriend's company supplies packaging materials.

"We buy cars. We go to local restaurants," said Susan Taylor, a former Philip Morris office employee from Chesterfield. "If you stop and think about it, without Philip Morris, anybody that sells anything in the area would be affected. The malls. Grocery stores. Hairstylists. What is the first thing women give up?"

x Darleen and E.C. "Chip" Karpus Jr., who bought the restaurant 10 years ago, estimate that one in five of their customers works for Philip Morris, or used to.x

"Those guys make good money, and they take care of their families really well and don't mind dropping their money in here," Darleen Karpus said.

Chip Karpus said that he dislikes the idea of raising the tobacco tax and that he thinks the smoking ban is even worse. Ninety percent of his customers smoke, he said, and he worries that they would stay home if they couldn't smoke in his bar, perhaps killing a business that grosses $300,000 a year and pays $100,000 in taxes.

"We're the ones that are going to get hurt," he said.

Tomorrow: Tobacco's effect on state health care.

Tagged: smoking ban, State news

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