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One cheer for
Philip Morris
by
Peter Galuszka
Virginia
Business
April 2003
Forgive me if I don’t join the laud now that Philip
Morris USA is moving its headquarters from New York
City to Richmond. In early March, the tobacco giant
announced that it would move about 500 well-paid executives
from their Park Avenue offices in mid-town Manhattan
to the modern building in the state capital that for
years had been Reynolds Metals’ headquarters until
its takeover by Alcoa two years ago.
On
one level, the news is good for the Richmond area, since
the capital is having trouble hanging on to its Fortune
500 companies. It has lost several in recent years,
most recently CSX Corp. Just a few weeks after former
Chairman John W. Snow was approved as the new U.S. Secretary
of the Treasury, CSX announced it was bolting to Jacksonville,
Fla., headquarters for its rail unit. Nabbing Philip
Morris USA so soon more than makes up for the loss.
CSX
had only about 30 executives at its Richmond headquarters,
but Philip Morris USA will bring in many times that.
Many make salaries in the six figures and that is certain
to boost sales of luxury housing in the $500,000 range
in the West End and elsewhere. The company is generous
in its community giving. One example: it funds the chair
in international business at the business school of
Virginia Commonwealth University. Richmond is already
home to one of the largest cigarette plants in the world.
It and other Philip Morris operations in the state employ
more than 6,800 workers.
Fact
is, however, that Philip Morris USA is coming to Richmond
under duress. Its core brand, Marlboro, has been hammered
by competitors, especially discounters. There are still
billions of dollars at stake in myriad health-related
lawsuits against the firm. The company will save about
$60 million a year in real estate by moving to Richmond.
But stock analysts say there’s a sense that Philip
Morris’ newly renamed holding company, Altria Group
Inc., which still has Kraft Foods and other operations,
is trying to distance itself from its controversial
tobacco operations. The move to Richmond could presage
a spinoff of the cigarette company. If that happens,
it’s anyone’s bet whether Philip Morris USA
will stay in Richmond for very long or move offshore.
After all, the only market that’s really growing
for cigarettes is overseas.
There’s
another basic irony, too, albeit one that’s been
around for a while although no one has yet come to terms
with it. The Marlboro Man has been riding under a cloud
ever since 1964 when the U.S. Surgeon General linked
smoking with cancer. The American Lung Association of
Virginia, citing data from the Centers for Disease Control,
reports that 9,100 Virginians die each year from smoking-related
illnesses. Moving to Richmond won’t change that
fact unless more Virginians stop smoking. Just a few
months ago, Philip Morris saturated the Richmond market
with a 22-page mailing that essentially told people
not to buy its products. Go figure.
So,
before we pop the champagne cork, consider the arithmetic.
Philip Morris USA contributes $1.7 billion to the state’s
economy, not including the headquarters move. Cigarette
smoking overall costs Virginia $1.6 billion in health
bills, cancer groups say. So where’s the real benefit?
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