British American Tobacco said it's planning to cut 530 jobs in Southampton, UK and 66 jobs in Dundalk, Co. Louth, Ireland, due to separate reviews into the prospects for both factories.

"Regrettably higher costs in Western Europe and the increasing trend toward local production have combined to turn the tide against our manufacturing operations in the UK and Ireland," said Allan Short, head of UK and Irish operations. The job cuts will result in restructuring charges of around 160 million pounds, mostly to be taken in 2005, and will result in 40 million pounds a year in savings.
Irish unit PJ Carroll is planning to close its plant in Dundalk, 80 km north of Dublin, which employs 66 people. It is operating at 45 per cent capacity following rises in tobacco taxes and Ireland's ban on smoking in public places.
A BAT spokeswoman said the closures were forced by the two plants running at low capacity, a new European Union directive on higher-tar cigarettes and the cost savings from producing cigarettes nearer the markets where they are consumed.
The restructuring will cost around 160 million pounds (US$ 283 million) said BAT, most of that charged to 2005, but would save 40 million pounds a year thereafter.
BAT is a relatively small player in the UK cigarette market with around a 6 per cent share through brands such as Rothmans, Dunhill and Lucky Strike, in a domestic market dominated by Imperial Tobacco and Gallaher Group.
The Southampton plant will be working at 45 per cent of its 50 billion cigarette annual capacity when 25 per cent of its capacity switches over the coming months to Korea and Singapore in move announced last month. The remaining Southampton production will probably switch to Romania, Switzerland and Poland, the spokeswoman added.
She said an EU directive due to be implemented in 1 January 2007 will ban the export of cigarettes of higher tar and nicotine which are already banned for sale in the EU. Around half of Southampton's production is currently in these products.
BAT, which sold 853 billion cigarettes in 2004, performed strongly in countries such as Russia, Turkey, India and Pakistan last year. The group, including associated companies, employs more than 90,000 people worldwide.
 The tobacco group, second only worldwide to Altria's Philip Morris, has cut its supply chain cost over the last two years by 120 million pounds, largely through plant closures.
It expects other substantial savings in the years ahead, which analysts read as large-scale factory closures in Europe pushing savings to 200 million pounds over the next one to two years, which include the closure of the British and Irish plants.(pi)