Weyerhaeuser Company Business Information, Profile, and History

Company Perspectives:

To achieve its vision of becoming the best forest products company in the world, Weyerhaeuser must lead the industry in forest management and manufacturing excellence. This vision also includes a commitment to employees, customers and shareholders to support the communities where the company does business, to hold itself to the highest standards of ethical conduct and environmental responsibility, and to listen to and communicate openly with Weyerhaeuser people and the public.

History of Weyerhaeuser Company

Weyerhaeuser Company is the world's largest private owner of softwood timber and the world's largest producer of softwood lumber and market pulp. This diversified forest products company owns 5.1 million acres of timberland in the United States and license for 27 million acres in Canada. Weyerhaeuser also produces fine paper, containerboard, bleached paperboard, and a variety of wood products, and it is one of North America's leading recyclers of office wastepaper, newspaper, and corrugated boxes. The company is also involved in real estate development and construction, specifically single-family housing, residential lots, and master-planned communities.

Early History

Weyerhaeuser Timber Company, headquartered in Tacoma, Washington, was incorporated in 1900 as a joint venture in Pacific Northwest timber by James J. Hill, railroad magnate, and Frederick Weyerhaeuser, joint owner of Weyerhaeuser & Denkmann, a Midwestern lumber company that relied on forests in Wisconsin and Minnesota. Weyerhaeuser remained privately owned, primarily by the Weyerhaeuser family, until 1963.

Prior to World War I, the company was run by Frederick Weyerhaeuser. A German-born immigrant to the Midwest before the Civil War, his business philosophy evolved over his lifetime and became the operating philosophy for the new company. Weyerhaeuser felt that "the way to make money is to let the other fellow make some too."

Timber holdings doubled in the period preceding World War I. The company opened a sawmill to produce lumber and soon had the nation's first all-electric lumber mill, in 1915. Company plans to market lumber on the East Coast, using the new Panama Canal, were delayed until the end of World War I.

Although demand for lumber for railroad cars declined during World War I as steel was utilized, demand for lumber for military planes and other military uses increased. In the early days of the lumber mill, itinerant single men formed the core of the mill's laborers. Represented by the International Workers of the World (the Wobblies), they pushed for better working conditions, including an eight-hour work day. A struggle resulted, and labor unrest threatened the war effort. To ensure a steady supply of lumber for war material, the federal government established a union for the industry, something never done before or since. The union, the Loyal Legion of Loggers and Lumbermen, prevailed in its demand for the eight-hour day and 40-hour week. The hours changed the workforce; family men then constituted the core of workers in lumber.

The surplus of naval vessels at the end of the war allowed Weyerhaeuser to purchase ships at a reasonable cost to transport lumber to the East Coast through the Panama Canal. Weyerhaeuser Sales Company had been established in 1916 to promote this postwar expansion of markets.

Pioneered in Reforestation Beginning in the 1920s

John P. Weyerhaeuser, eldest son of the founder, led the company during the war and through the 1920s. He relied heavily, as had his father, on George Long, general manager from 1900 to 1930. Long, an early proponent of reforestation, approached the federal government before the war to lobby for cooperative forest fire prevention and for lower property taxes for timberland to make reforestation economically viable. This lobbying led to the Clark-McNary Act in 1924, which addressed these issues and expanded the national forest. The act also encouraged changes in taxation policies at the state level to promote reforestation. Weyerhaeuser responded by creating the Logged Off Land Company in 1925 to handle the sale of "logged off" land, to study reforestation, and to lobby at the state level for lower timberland taxes.

By the end of the 1920s Weyerhaeuser was the largest private owner of timber in the United States. At the beginning of that decade the company had produced its first national advertising campaign, promoting the lumber industry. By the decade's end the company's advertisements focused on the recently upgraded quality of its lumber, by trademarking and grademarking lumber, as well as by taking more care in handling the lumber during shipment to market.

The Great Depression produced hard times for the company, as few businesses or homes were being built. The depression in the lumber market would have been devastating if not offset by the company's diversification into pulp in 1931. By 1933 profits from pulp offset losses from lumber. The New Deal's Civilian Conservation Corps assisted in reforestation of logged off land during this period. State tax laws in the Pacific Northwest were amended to provide lower taxes for timberland, promoting reforestation. In 1940 the company started the first tree farm in the United States, near Gray's Harbor in Washington.

In 1935 the kidnapping of George Weyerhaeuser, the nine-year-old son of CEO John P. Weyerhaeuser, Jr., catapulted the Weyerhaeuser family to national attention. The Weyerhaeuser kidnapping ended happily, with the child safe, the ransom recovered, and the kidnappers apprehended. George Weyerhaeuser grew up to become president of his family's company.

In 1940 the company expanded its lumber business to include plywood and paneling. The Lend-Lease Program to assist the British prior to U.S. entry into World War II found Weyerhaeuser transport ships utilized to carry lend-lease material to the British in Egypt. During the war itself, the company served as an agent of the War Shipping Administration, directing 68 freighters and troop ships, of which two were sunk in combat.

Rapid technological and commercial changes in the lumber industry after the war affected Weyerhaeuser. The hand-operated whipsaw was replaced by the power chainsaw, and truck hauling replaced hauling by rail. Pent-up demand in construction, from the 1930s and early 1940s, led to greatly increased sales of lumber in this postwar era.

The company's organizational structure, highly informal and fraternal, was altered to accommodate rapid postwar expansion: more formal programs and reports were instituted, and subsidiaries were absorbed. A philanthropic foundation was established, and the Weyerhaeuser Real Estate Company replaced the Logged Off Land Company.

Diversified in the Postwar Era

Under the continued leadership of the Weyerhaeuser family, the company expanded into particle board production, ply-veneer, hardboard, and hardwood paneling in the 1950s. Timberland holdings expanded beyond the Pacific Northwest for the first time, as land was purchased in Mississippi, Alabama, and North Carolina.

In 1958 Weyerhaeuser Sales Company, established in 1916, was absorbed into the parent company and Weyerhaeuser International S.A. was created to expand into foreign markets. With its increased diversification, the company in 1959 dropped "Timber" from its official name to become Weyerhaeuser Company and adopted its current trademark, a triangular tree over the word "Weyerhaeuser."

In 1960, for the first time in company history, the presidency of Weyerhaeuser passed out of the family to Norton Clapp. Under Clapp, the company went public in 1963. It expanded into the Japanese market as a result of surplus lumber involuntarily "logged" by Typhoon Frieda's 150-mile-per-hour winds in 1962. Weyerhaeuser's first overseas office was opened in Tokyo in 1963. In 1964 and 1965 European offices were opened in France and Belgium, respectively. The company acquired a wood products distribution firm in Australia, and it entered into a joint venture for bleached kraft pulp in Canada.

Clapp was succeeded as CEO in 1966 by George Weyerhaeuser, who served until 1988. Growth per year in the high-yield forestry program doubled, while the company contracted its first long-term debt. By the end of the 1960s annual sales exceeded $1 billion.

The 1970s were years of phenomenal growth, with sales surpassing the $2 billion mark in 1973. Sales doubled in five years and doubled again before the end of the decade. Weyerhaeuser entered the disposable diaper business in 1970; moved its corporate headquarters to Federal Way, Washington, in 1971; and centralized research in Tacoma in 1975. At the decade's end the company concluded an agreement with China to work there on the world's largest reforestation effort. In 1979 company sales were $4.4 billion.

If the 1970s were a boom decade, the early 1980s were a bust, with tight credit in housing leading to a depression in lumber similar to that of the 1930s. The volcanic eruption of Mount Saint Helens in May 1980 was also a blow to the company. Weyerhaeuser's Saint Helens Tree Farm was just below the mountain's dome, and the company lost 68,000 acres of timberland. Fortunately, the eruption took place on a Sunday, and fewer workers were in the path of the devastation. As a result of the eruption timberland values in the Northwest fell 75 percent. The company maintained dividends by diversifying into real estate and financial services. In 1986 Weyerhaeuser became the first U.S. forest products company listed on the Tokyo Stock Exchange and soon became the third most traded foreign stock there.

In response to difficult economic conditions, downsizing and economizing became company emphases in the 1980s. In one dramatic example, Weyerhaeuser instituted safety measures that reduced workers' compensation claims from $30 million to $10 million by 1990. To cut production costs still further, the company introduced a plantwide computer integrated manufacturing system.

Creighton Launched Reorganization and Restructuring in the Late 1980s

In 1988 John Creighton became president of Weyerhaeuser, and George Weyerhaeuser became chairman. Creighton reevaluated the company's diversification into areas outside of forest products. During the 1980s the company had become involved in insurance, home building, mortgage banking, garden products, pet supplies, and disposable diapers. While these businesses contributed greatly to the company's sales volume, they added very little to profits. As the head of Weyerhaeuser's nursery operations noted in the Wall Street Journal several years later, after the divestiture of his unit, "Weyerhaeuser was darn good at growing trees, but they sure didn't know anything about garden supplies."

Creighton reorganized Weyerhaeuser to focus the company's priorities and develop a coherent long-term strategy, selling off less profitable businesses and returning to a focus on forest products. As part of the restructuring program, Creighton altered the company's incentive system to reward each mill for profitability rather than the amount of product it manufactured. He also whittled Weyerhaeuser's product lines to concentrate on high-quality, higher-margin products such as white papers and high-grade lumber. By 1990 the company had sold or closed operations that had previously accounted for nearly $1 billion in sales. The loss of this revenue, however, affected virtually none of its profits.

As the restructuring program was gaining momentum in 1989, an economic recession loomed. After posting a record high of more than $10 billion in sales in 1989, Weyerhaeuser's sales dipped to $9 billion in 1990 and profits fell by 35 percent. The decline was attributed to decreased housing and other construction projects as banks grew more reluctant to lend money and, in addition, to an oversupply of pulp and paper in the market that lowered the price of paper. In 1991 the financial situation did not improve. Sales fell to $8.7 billion, and the company recorded a loss of $162 million compared to a profit of $565 million three years earlier.

Although significant, the losses suffered by Weyerhaeuser were not as large as those incurred by the rest of the forest industry. Beyond the damaging effects of the recession, other companies also sustained losses due to the protection of federal timberlands that reduced their supply of wood. With 5.5 million acres of federal timberland cordoned off in the Pacific Northwest, lumber prices soared, and Weyerhaeuser was able to reap the benefits, harvesting timber on land it owned. This enviable position resulted in greater earnings for the company, and it was able to rebound from 1991's disastrous year. Profits in the first quarter of 1991 jumped 81 percent and, for the year, the company recorded earnings of $372 million. Also in 1991 Creighton added CEO responsibilities to his duties as president.

By 1992 the company had closed 50 plants--representing roughly 20 percent of its operating facilities&mdash part of its restructuring program, and it continued the divestiture of businesses that did not support the company's core business strategy. In 1993 Weyerhaeuser's diaper business was sold for $215 million; GNA Corp., Weyerhaeuser's consumer finance unit, was sold for $525 million, which represented the largest divestiture ever made by the company. In addition to shedding businesses that no longer fit the company, Weyerhaeuser strengthened its core businesses through the purchase of two pulp mills, several sawmills, and approximately 175,000 acres of timberland in Georgia from the Proctor & Gamble Company in 1992 for $600 million. The company also undertook a $1 billion modernization program to overhaul three of its largest paper mills--in Plymouth, North Carolina; Longview, Washington; and Kamloops, British Columbia.

Despite its large landholdings, Weyerhaeuser was not exempt from federal environmental regulations, and the company had to strike a deal with federal wildlife regulators to log in areas of Oregon inhabited by the endangered northern spotted owl. The company agreed in 1995 to leave corridors of larger, older trees, which the owls could use to move from Weyerhaeuser land to that of national forests. It was in large part through Creighton's leadership that the company began to shed its reputation as an inveterate clear-cutter, through such compromises. Creighton believed that it was in the company's long-term interest to take a more cooperative approach to environmental issues; he told Business Week in 1995: "Although we own huge amounts of [private] timberland, to some degree we operate at the sufferance of the public." Another environmental concern that Creighton faced was that of salmon runs in the Pacific Northwest, which critics claimed were stilted up by heavy logging. Weyerhaeuser studied the effects of logging on 12 Northwest river basins, then formulated plans for minimizing the impact of future logging. In addition, in response to demands that chlorines be eliminated from the paper production process, Weyerhaeuser, as part of its paper mill modernization program, brought in new technology that enabled it to eliminate most chlorines from these mills.

Additions and Subtractions Continued in the Later 1990s

As the 1990s continued, Weyerhaeuser made additional moves that altered the company's operational makeup. The company bought 240,700 acres of timberland in the U.S. South in December 1995, then bought 661,200 acres in Mississippi and Louisiana and two sawmills early the following year. Later in 1996 Weyerhaeuser sold its facilities in Klamath Falls, Oregon, and 600,000 acres of forest to U.S. Timberlands for $309 million. This divestiture was part of a company strategy to return to its core Douglas fir processing activities, as the Klamath Falls acreage consisted mainly of ponderosa and lodgepole pine trees. In a further narrowing of the company's focus, Weyerhaeuser sold its mortgage company subsidiary and its Canadian chemical business in 1997. Also that year, the company made its first investment in the Southern Hemisphere, purchasing for $185 million a 51 percent interest in a joint venture in New Zealand that held 193,000 acres of fast-growing softwood timberlands.

In late 1997 Creighton retired and was succeeded as CEO and president by Steven R. Rogel, who became chairman as well in April 1999, taking over for the retiring George Weyerhaeuser. The appointment of Rogel, who had previously served as CEO and president of rival Willamette Industries Inc. of Portland, was a departure for Weyerhaeuser, which had never before chosen an outsider to run the company. Rogel had earned kudos for his tough-minded restructuring efforts at Willamette and was expected to focus on improving Weyerhaeuser's profitability, which had been on the decline since a peak in 1995 of $799 million. Rogel's focus on margins was likely to result in a further narrowing of Weyerhaeuser's interests; along these lines the company in early 1999 announced that it would table a proposed expansion of its pulp capacity and in April 1999 announced an agreement to sell its composite products business and a ply-veneer plant to SierraPine Limited. At the same time Weyerhaeuser was expected to increase its global presence, and in 1999 it opened plants in Mexico and in Wuhan, China, and acquired timberlands and sawmills in Australia through a limited partnership.

Principal Subsidiaries: Westwood Shipping Lines, Inc.; Weyerhaeuser Asia Ltd.; Weyerhaeuser Canada, Ltd.; Weyerhaeuser Financial Services, Inc; Weyerhaeuser Forestlands International, Inc.; Weyerhaeuser International Inc.; Weyerhaeuser Real Estate Company.

Principal Operating Units: Timberlands; Wood Products & Distribution; Pulp, Paper and Packaging; Real Estate.