Chapter 23, Part 1

By Frank Tursi, Susan E. White and Steve McQuilkin
JOURNAL REPORTERS
© 1999 Winston-Salem Journal

Deep in the woods, about 12 miles north of downtown Winston-Salem, lies R.J. Reynolds Tobacco Co.'s mammoth Tobaccoville factory. With a roof that could cover 17 football fields, the plant could easily swallow Hanes Mall. But from U.S. 52, only the smokestacks of its $50 million power plant are visible. It burns enough coal to power 56,000 homes.

A conveyor belt moves tobacco into cleaning and mixing stations at RJR's Tobaccoville plant. (Journal Photo By David Rolfe)

To step inside this sprawling factory is to enter a cavernous wonderland of steel machinery that gyrates and hums in a choreographed rhythm like a high-tech ballet.

Miles of pipes and conduits rise toward the illuminated ceiling, a maze of bent metal. Conveyor belts move thin strips of burley, flue-cured and Oriental tobaccos to cleaning and mixing stations. Some of the shredded leaf will be flavored with chocolate, licorice and sugar, partly accounting for the sweet aroma that wafts throughout the plant.

The tobacco is eventually pumped through box-like towers down to a lower floor where it is cleaned, flavored and cut once again. Inspectors occasionally run their fingers through the thick mounds of tobacco, which is warm to the touch after being sprayed with steam and hot air.

In the making-and-packing room, workers sit on stools, thumbing through magazines as they keep watch over their automated machines, which assemble and spit out thousands of cigarettes a minute. Tobacco goes in one end and cartons of Winstons, Salems and Dorals pop out the other.

The plant runs 24 hours a day, five days a week. On an average day, it goes through nearly 865,000 pounds of tobacco, about the annual yield of a 325-acre tobacco farm.

More than 2,000 employees keep Tobaccoville going. In the middle of it all stands Joe Inman, the unofficial mayor of the place. At 6 foot 5 inches tall, Inman has the lanky frame of a pro-basketball player. Dressed in a blue-checkered, long-sleeve shirt and blue jeans, he appears about as comfortable and easygoing as a farmhand. He even has the boyish smile and charm.

The R.J. Reynolds Tobacco Co. was once the largest cigarette company in the United States with a powerhouse of best-selling brands: Winston, Salem and Camel. But times changed, and as the case against smoking became more pronounced in the 1960s, RJR failed to adapt to the marketplace. Its rivals would eventually rush past it, and RJR's efforts to catch up would have a profound impact on the company and the cigarette industry.

But make no mistake; Inman isn't any blue-eyed pushover. He's R.J. Reynolds' vice president for manufacturing, the man who makes sure that Tobaccoville spits out more than 2.5 billion cigarettes each week at the lowest cost and highest quality possible.

''I love it, absolutely love it,'' Inman said of his job, his voice accenting a full Southern twang.

At 2 million square feet, Tobaccoville was the world's largest cigarette factory and the envy of the industry when it opened in 1986. It was a $1 billion high-tech marvel far removed from the brick factories that the company once relied on in downtown Winston-Salem. And it overshadowed Whitaker Park, the industry's and RJR's showcase factory that opened in 1961. (RJR Annual Report footnote; information on Reynolds manufacturing growth.)

But Tobaccoville's more than just a big place to make cigarettes. When Reynolds began planning the factory in 1980, it was the largest domestic cigarette company. By the time the factory opened in 1986, Reynolds was No. 2.

Company officials had hoped that a bigger, more efficient plant could help return them to the top. And coming at a time when legal and regulatory pressure on the industry was accelerating, Tobaccoville was an expensive vote of confidence in the future of cigarettes and a symbol of the industry's and Reynolds' resilience.

Once Upon a Time. . .

Inman was barely out of East Surry High School in 1969 when he was hired to work at Reynolds. The job paid about $3 an hour, nearly twice what he had been earning as a yarn boy at a hosiery plant in Pilot Mountain.

At the time, RJR controlled a third of the U.S. market. Its top cigarettes -- Winston and Salem -- were such successes they practically sold themselves. Maybe it was a sign of the times, but selling cigarettes required little skill. It was almost too easy.

''We used to joke that the train would leave here on Monday full of cigarettes and come back Wednesday full of money,'' Inman said. ''I don't know what the management back in those days actually did. They made a lot of money, so I don't know what they worried about.''

Inman drags on a Winston as he speaks about the early days of Reynolds. At 48, he doesn't look like an old-timer. Gray is just beginning to streak his thin sandy brown hair. But Inman is a link between RJR's past and its future.

Starting as an ''O1O'' or ''learner,'' Inman cleaned bathrooms and swept floors at Whitaker Park from 4 p.m. to midnight. ''It was one of the best jobs I ever had,'' recalled Inman. ''It was low pressure. Nobody expected that much out of you.''

Nobody except for Bill Hobbs, the tobacco company's president in the mid-1970s. Employees had been warned that Hobbs was a tough taskmaster and a perfectionist who was prone to making unannounced visits to Whitaker Park. To Hobbs, flaws were a sign of weakness, even in something as insignificant as a dirty floor.

''Back in those days, Whitaker Park had a beautiful parquet floor. . . and if he (Hobbs) saw anything, anything -- one cigarette or a filter -- laying on that floor it was not a pretty picture,'' Inman said, laughing. ''He would raise Cain. The supervisor didn't care how many times a night you swept it, you swept it because you never knew when he was going to bop across the street.'' The parquet floor, nicknamed ''Hobbs Hall,'' has since been removed.

Other executives were more endearing to employees, particularly John C. Whitaker, a former president and chairman, and William Hanes, the vice president for manufacturing in the late 1970s.

Robots, like the one at right, are used for carrying material around the Tobaccoville plant. (Journal Photo By David Rolfe)

Hanes liked to visit the manufacturing plant at night so he could chat with employees on the late shift. He was usually spotted roaming the plant floors in his trademark white short-sleeve shirt and black tie. His tousled hair and mouthful of chewing tobacco told employees that Hanes was one of them. His visits became so popular employees anxiously anticipated them.

''Oh, God, everybody would talk about it,'' Inman said. ''You'd go home and tell your wife, `Will Hanes was in the park today.' `Oh, really, what does he look like? Is he really as friendly as we hear?' And he was. He would sit down and talk to you. He was just a normal, regular guy. You didn't think of him as some big executive for a tobacco company.''

In some ways, Hanes personified the grandfatherly mystique R.J. Reynolds himself had created within the company. Reynolds was regarded as an employer that took care of its own.

Inman saw signs of it not long after he started there. By 1971, Inman was ready to buy his first car. He had his eyes on a shiny red Corvette parked in the middle of the showroom at Modern Chevrolet. But the $7,200 sticker price was a little more than Inman could afford. Surely no one would lend a 20-year-old that kind of money. He was wrong.

''If you worked for Reynolds, you could borrow the money to get just about anything that you wanted in this town. You could go up to somebody and say `I work for R.J. Reynolds Tobacco Co.,' and they would look at you like, `OK, what would you like to buy? Can you get me a job?' It was that kind of feeling.''

Reynolds' fairy-tale image probably evolved because the company paid more than anyone else in town, offered better benefits and encouraged employees to buy company stock.

In the 1950s and '60s, it was not unusual to find several generations of one family working side by side on the manufacturing floor.

''In those days, manufacturing was IT. We were number one,'' Inman said. ''We were walking tall and everybody of course was very proud to work here. People are still proud to work here. But there was a lot of pride around then.''

Even though Inman didn't have a college education, Reynolds thought he had potential and quickly moved him up within the company. By 1979, he was a supervisor in the cigarette making-and-packing division. For Inman, who had gotten married five years earlier, life was almost perfect.

''Even back then, I couldn't think of anything I had rather do than make the money I was making here,'' Inman said.

''That was another big thing back in those days -- nobody ever dreamed back in the '70s that the tobacco business would be in the predicament we're in today. That was the mindset. If you can get a job at Reynolds, you can retire there. It's almost an entitlement unless you steal cigarettes, get into a fight, not come to work or quit. You're going to have a job there the rest of your life.''

Planning for the Future

Until the 1980s, hardly anyone questioned tobacco's future, particularly in states such as North Carolina and Kentucky where the crop remained king. Cigarette manufacturing was a stable industry. But it was also fiercely competitive. Companies had to change or get out of the way.

Executives at Reynolds were keenly aware of the stakes. RJR had been the country's biggest cigarette maker since 1958. But by the late 1970s, it was clear that Philip Morris, led by its top-selling Marlboro brand, was gaining.

Cigarettes come off the assembly line at the Tobaccoville plant. (Journal Photo By David Rolfe)

In September 1980, Ed Horrigan, the chairman and chief executive of Reynolds Tobacco, announced a massive building and modernization program.

It included the Tobaccoville plant, just south of Stokes County; an expansion and overhaul of Whitaker Park and a 1.2 million square-foot factory in downtown Winston-Salem to replace aging buildings such as Buildings Nos. 1, 12, 64 and 256.

Reynolds executives called the 10-year, $2 billion plan a clear sign that the company was ''absolutely and unequivocally committed to the tobacco business.'' (Winston-Salem Journal footnote; information on Reynolds manufacturing growth.)

Included in the Whitaker Park upgrade was a new 420,000-square-foot blending and processing building. The plant makes RJR's reconstituted tobacco, a mixture of tobacco leaves, stems and dust used in every cigarette the company makes.

RJR developed reconstituted tobacco more than 50 years ago as a way to get the most out of the tobacco leaf. The company produces 60 to 70 million pounds of the recycled blend annually. Without it, Reynolds estimates it would have to buy between $80 million to $100 million more tobacco each year.

Making reconstituted tobacco is like making paper. The tobacco scraps are stirred into a thin, watery mixture, then spread across screens and pressed to remove most of the water. Nicotine and other compounds are taken out of the mixture beforehand and sprayed back onto the sheet, along with a soup of chemicals including flavorings, preservatives and moisteners. The finished sheets resemble the brown paper in grocery bags.

Stopping the Train

Reynolds' grand construction plans did nothing to stop Philip Morris. By 1983 -- three years before Tobaccoville opened -- the company did as expected and knocked Reynolds out of the top spot.

''Oh, it was devastating,'' recalled Inman, who was Reynolds' plant quality-assurance manager at the time. ''We all saw it coming. All of us knew that market share was inching closer and closer. There was a lot of frustration. What caused this? What could we have done? What can we still do?''

RJR's peak was in 1982, when it made 209 billion cigarettes for sale in the United States. The next year, production dropped 20 billion cigarettes. The growth was over, and two new factories and a major expansion to a third no longer made sense. The loser in all this was downtown. The new factory -- planned for Fifth Street and Patterson Avenue -- was shelved. Tobaccoville's opening -- along with slumping demand -- ultimately spelled the end for the factories, which sat in the shadow of the Reynolds Building.

The closings severed much of Reynolds' historic ties to downtown. The first Reynolds plant, a two-story wooden factory now affectionately called the ''Little Red Factory,'' had been built next to the railroad tracks on Depot Street -- now Patterson Avenue -- in 1875. Over the years, it was replaced with larger brick buildings, many of which took up entire blocks. Employees who had spent much of their careers in those old multistory buildings -- many pushing trays of tobacco across creaky maple floors -- had been reluctant to leave them for the mall-like atmosphere of Whitaker Park. But, in time, they adjusted, and they adjusted again with Tobaccoville. They had to. (Winston-Salem Journal footnote; information on Reynolds manufacturing growth.)

Cigarette manufacturing had changed since Reynolds first introduced Winston in the 1950s. Instead of just a few brands, the company now had more than a half-dozen brand families, each with its own assortment of different packs, styles and strengths.

There was also the export market, making American-style cigarettes for foreign smokers. In some cases, a style change was as simple as altering a brand's packaging. But every change cost the company time and money. Machinery had to be cleaned and recalibrated, a process that took from 15 minutes to three days, depending on the switch. The complexity of the changeovers forced the company to plan production schedules at least three weeks ahead of time.

Over time, Tobaccoville's high-tech machinery and the $574 million expansion and renovation at Whitaker Park were expected to help Reynolds balance costs with production and keep profits strong.

The savings and profits are found in volume; shaving even hundredths of a penny from the cost of making each cigarette quickly adds up at Tobaccoville, which makes 110 billion cigarettes a year. Cut costs by .01 cents a cigarette and $11 million goes straight to the bottom line.

Computers run nearly every operation within the plant. Like groceries headed for a checkout line, a 1,000-pound bale of tobacco is marked with a computer code the minute it enters the factory. The code tells the computer whether the tobacco is to be processed or stored. From there, the tobacco begins its journey through the building before entering the making-and-packing room, where it meets the paper and filter and is assembled into a cigarette. {{pr}

Self-guided robots patrol the concrete floors in these final stages. They emit high-pitched beeps, alerting employees to stand clear as the machines move cardboard boxes filled with cigarette cartons to a cellophane-wrapping machine. The robots work for six hours before notifying an operator that their batteries need recharging. Years ago, workers had to do much of the processing by hand. Automation has meant higher quality and more control over consistency, the primary factors driving customer satisfaction. Customers expect each Camel to taste the same, just as McDonald's customers expect every Big Mac to taste the same.

But progress has come with a price. When Tobaccoville opened, some employees saw the technology as a threat to their jobs. The company had been trimming its work force since the early '80s, but Reynolds executives reassured the public, telling people that Tobaccoville would employ nearly 2,300 people.

Still, there had to be changes. Many of the employees who started at Tobaccoville had to be retrained. For example, a worker who once operated a drying machine now had to know how to monitor the process by computer.

Tobaccoville also enabled Reynolds to introduce a ''new'' manufacturing employee -- one with an education in engineering, electronics and computers. Today, many of these workers oversee monitoring stations that look like a control room at NASA. (Winston-Salem Journal footnote; information on Reynolds manufacturing growth.)

Reynolds officials gambled that its highly skilled employees would ultimately help the company produce better products and possibly boost RJR's position within the industry.

''There's no doubt in our minds that both Philip Morris and Reynolds will strive to continue to increase our share of the market because that's really the history of American business in any category that you can think of,'' Jerry Long, the former president and chief executive of Reynolds Tobacco, said in December 1985. ''It's just like playing in a ballgame and everybody wants to win, and we want to win very badly.''

But Long's comments were almost a moot point. It had been two years since Philip Morris had blown by Reynolds. The company was still No. 2 and still pumping out 188 billion cigarettes a year, but that wasn't enough to keep all of its factories open.

At midnight, on June 29, 1990, 95 workers completed their last shift at RJR factory No. 12 on Third and Chestnut streets. It was the end of cigarette making in downtown Winston-Salem.