UPM's Number of Personnel will Reduce by 2557 Persons

Helsinki, Finland, 12 May 2006 – UPM's profitability program has advanced from planning to implementation phase. Local employee consultation negotiations at Finnish paper mills have been concluded. Negotiations were carried out locally, in a serious but constructive atmosphere. During the negotiations both the rationale and impact of the plans was discussed and alternative solutions to improve cost efficiency were identified. Continuing the operations of Voikkaa mill and the production lines now planned to be closed is not economically viable in the current over-capacity situation and changing business environment.

UPM will close Voikkaa paper mill and Kymi PM 7 during the third quarter of 2006. Tervasaari PM 6 and the oldest pulp line will be closed during the second quarter of 2007. In addition, the company will cease production of coated magazine paper at Jämsänkoski PM 4 and will convert that machine to produce label face paper at the beginning of 2007. To increase the profitability it has been decided to reorganize the production and functions at mills and the group head office during 2006-2008.

The implementation of profitability program will decrease UPM's personal by 2557 in Finland over the next three years, which is moderately less than earlier estimated. Notice will be given to 672 persons, out of which 575 persons are at Voikkaa mill.

UPM will finance pension schemes by EUR 40 million. The negotiations on positions and outsourcing will continue according to the collective labor agreement.

The overall target of the profitability program will remain as before and the employee consultation negotiations will continue also outside of Finland. UPM estimates that the financial targets set for the program are realistic.

"From Job-to-Job" program for the 672 dismissed

To minimize the impact of redundancy, UPM will start a "From Job-to-Job" program. The program supports retraining and relocation. UPM will provide special support to Voikkaa personnel, who are going through a serious change.

In all Finnish units, people will be encouraged to apply for UPM's internal vacancies and to move to new locations. Redundant employees are to be prioritized when filling vacancies, considering reasonable retraining to meet the job's requirements. The company will cover costs for internal retraining and a settling-in allowance equal to one month's remuneration if the new job requires relocation.

UPM will support re-employment training of the persons given a notice. EUR 600,000 is reserved to support participation and material costs for retraining up to EUR 2000 per person.

Furthermore, UPM has agreed on retraining cooperation with Aker Yards in Finland. UPM will support retraining by paying remuneration for the notice period, even if a person started retraining at Aker Yards before the closure of the notice period. In addition, UPM will pay removal expenses and a settling-in allowance equal to one month's remuneration. The retraining in Aker Yard's ship building institute will take one to six months in Turku.

To relieve the difficult situation at Voikkaa, UPM will extend the re-employment obligation for local employees to 24 months. In other units, the nine-months rule obligated by law will be followed. It has been found important that the employees given a notice will continue to have the right to use occupational health services. Unemployed redundant employees can use UPM's occupational health services during the re-employment obligation period, that is, for 24 months at Voikkaa.

UPM has signed a letter of intent according to which Empower Oy will employ 50-100 redundant Voikkaa employees. UPM is committed to use the services of the new company for a minimum of three years. Empower is one of the largest service providers in energy and telecom sectors in Finland, specializing in forest industries' maintenance. The aim is to sign the contract by the end of June.

In addition, UPM encourages its personnel to create new businesses by offering start-up support. The company has booked EUR 400,000 for this purpose. UPM's start-up support can be applied for until the end of 2008. Maximum support per business is EUR 10,000.

The company has received several contacts concerning Voikkaa premises and real estate. The proposals are being investigated.

The closures and streamlining of operations will affect the following units in Finland:

Unit Redundancies Early retirement or other arrangements
Voikkaa 575 103
Kymi 37 310
Tervasaari 2 213
Jämsänkoski 14 140
Kaukas 0 339
Kaipola 13 140
Kajaani 17 195
Pietarsaari 0 215
Rauma 0 173
Corporate
head office 14 57

Total 672 1885