Cabarrus County's gut-wrenching loss of the plant likely signals a deal to spin off the Marlboro maker's international tobacco business as a separate company.

The behemoth factory is part of Philip Morris USA and represents about half its U.S. manufacturing base, but about 20 percent of the cigarettes it made last year went abroad for sister company Philip Morris International.

On Tuesday, Altria said it would close the Concord plant and move production for U.S. sales to its headquarters plant in Richmond, Va. Foreign production from both factories will move overseas.

Two trends -- dwindling U.S. consumption and exports -- are snuffing the high-tech, efficient Concord plant that opened in 1983.

The shutdown follows 25 years of declining U.S. cigarette sales, amid growing concerns about deadly side effects, sharply higher taxes and smoking bans. The nation's cigarette exports also have plummeted as competition from foreign manufacturers increased and the quality of tobacco and overseas production improved. And sales are growing abroad.

Those factors make a case for letting the foreign unit stand alone, and that's how Wall Street analysts interpreted Tuesday's news.

"This is pretty much the first step," said Herb Achey, a senior equity analyst at U.S. Trust Co. in New York. "It's kind of like taking your family photos out of the beach house before you sell it."

The Concord plant is scheduled to close by the end of 2010, leaving Richmond as the company's only U.S. plant. North Carolina will still be home to the No. 2 U.S. cigarette maker, Winston-Salem's Reynolds American. The company, owner of R.J. Reynolds Tobacco, also has struggled with declining sales and layoffs.

Altria expects the consolidation will generate annual savings of $335 million by 2011. Upfront, the company will take a charge this quarter of $325 million, mostly for layoff costs.

What about incentives?

The N.C. Commerce Department is investigating whether Philip Morris USA should repay a state grant the cigarette giant was awarded for promising to keep jobs at its Concord plant.

The company received the grant and other tax breaks for agreeing in 2004 to invest $138 million in new equipment.

Threatening to take the investment to its Richmond plant, the company received $1 million from the state and $3.6 million in local property tax breaks to install cutting-edge machinery that would produce cigarettes faster.

There were no strings attached to the local tax breaks, but the grant from Gov. Mike Easley's One North Carolina Fund required the company to keep the same level of jobs and to invest in the new machinery over three years.

"It is possible the company may be required to repay some or all of the grant," Don Hobart, general counsel at the Commerce Department, said in a written statement.

The announced plant closing focuses attention on a system of state and local tax incentives that costs taxpayers money but sometimes doesn't bear financial fruit or persuade companies to stick around. State lawmakers convened a special committee earlier this year to review how tax incentives meant to recruit new investment and jobs are negotiated.

With Philip Morris, the state incentive was designed to keep the company and at least 95 percent of the about 2,500 high-paying tobacco jobs in Concord.

The cigarette maker has collected $750,000 of the $1 million grant. According to the agreement, payments would be doled out in four equal installments as Philip Morris invested the $138 million over three years ending this October. It's unclear whether the company will receive the rest of the grant -- or have to return some or all of the money.

The local agreement for the tax breaks did not include penalties or a payback provision if the company decided to leave. Cabarrus County Manager John Day said local officials in 2004 were concerned that adding such a provision might push the project to Richmond.

He said Philip Morris broke an unwritten agreement that, in exchange for the tax breaks, the company would not be leaving the county anytime soon.

Drop in sales

U.S. cigarette sales peaked in 1981 and have fallen since. Last year, Americans bought about 371 billion cigarettes. That's a little less than in 1950 when the nation's population was about half today's level.

Philip Morris USA dominates this declining market, accounting for half the smokes sold in America with Marlboro its runaway bestseller. The company's other main brands are Parliament, Virginia Slims and Basic, a discount brand.

In total, Philip Morris sold more than 183 billion cigarettes in the U.S. last year, a decline of about 1.1 percent.

Philip Morris International estimates it has about 15 percent of the foreign market, estimated at more than 5 trillion cigarettes a year. The company sells more than four times as many cigarettes overseas as it does in the U.S., and that volume grew last year.

The Concord and Richmond plants supplied about 80 billion cigarettes last year to Philip Morris International. By the third quarter of next year, cigarettes for foreign sales will be made overseas. The company says it hasn't decided where.