Imperial Tobacco to close Ontario manufacturing plants, cutting 635 jobs

Imperial Tobacco plans to shut down its Canadian manufacturing operations and shift production to Mexico, a move that will cost 650 jobs.

Imperial Tobacco Canada will close two Ontario plants and shift production to Mexico as the company ends all of its production in Canada, the company announced Thursday. The move will result in 635 people losing their jobs.

The company said it will shut down its Guelph plant in 2006, which makes cigarettes, tubes and sticks, for a loss of 555 jobs. The Guelph plant has been in operation since 1959.

The company will also close its Aylmer fine cut and roll-your-own plant and tobacco processing facility in 2007, eliminating 80 positions.

Another 15 jobs are expected to be eliminated at the company's headquarters in Montreal.

Imperial said it will shift its production to Monterrey, Mexico.

"The yearly decline in tobacco sales is affecting the company's manufacturing, and its unit costs have escalated to a level where the company can no longer ignore the situation," Imperial said in a release.

The company said its tobacco volume has declined between December 1994 and June 2005 from 32.7 billion cigarettes annually to 20.5 billion.

Imperial said it will take $525 million in charges over the next three years to write off the cost of the closure. The company said the largest portion of the charges will be taken in the fourth quarter of this year.

Imperial said it will continue to keep investing in research and development in Canada and will continue to buy Canadian tobacco for use in its cigarettes.

"Only the assembly location ... will change," the company said.

Imperial Tobacco is a wholly-owned indirect subsidiary of British American Tobacco.