Energy costs hit N.C. plants

Natural gas soars; layoffs, prices rise

This winter, hundreds of manufacturing employees across the state will head to the unemployment office. Among them will be at least 150 workers from the Pine Hall Brick company.

For the month of January, the Winston-Salem company will shut down half its production, chief executive Fletcher Steele said.

The culprit: high energy bills.

Since hurricanes Katrina and Rita disrupted the gas supply, Pine Hall Brick's monthly gas bill has doubled.

In August, the company paid $700,000 for the natural gas it uses to power the kilns that heat the raw materials used to make the bricks, Steele said. In October, the bill was $1.4 million. "It shocks a lot of people," he said. In 2001, Steele said, the company was paying just $200,000 a month.

Although gasoline prices at the pump have gone down in recent weeks, natural gas is a different story. Utilities across the state raised their rates to record levels after hurricanes destroyed processing plants and pipeline facilities in the Gulf of Mexico. The spike in prices has led companies to lay off workers, increase their prices or both. Consumers will eventually feel the effects as companies push the costs down the supply chain.

Nationally, nearly 45 percent of manufacturers say high energy costs will cause them to lay off workers or impose wage freezes or cuts, according to a new survey by the National Association of Manufacturers. About 200 companies responded to the survey.

Two weeks ago, Alcoa Inc., the world's biggest aluminum maker, closed its Frederick, Md., plant, putting about 575 employees out of work. For months, Alcoa had been shopping around for a cheaper supplier for its 350 megawatts of power -- enough to power 280,000 homes -- with no luck. The company's smelter plant in Stanly County, east of Charlotte, has been idle since 2002.

The National Association of Manufacturers president, former Michigan Gov. John Engler, has lobbied Congress to take action to lessen the energy costs for businesses. Testifying in front of Congress earlier this year, he called energy prices "an immediate threat to the U.S. economy."

Engler pointed out that U.S. manufacturers use 33 percent of the nation's natural gas, which has doubled in price in the last year and now costs more than six times what it did in the late 1990s.

The high costs have some companies wondering how they will keep their doors open.

"Our first reaction [to the gas bill] was, 'How do we survive the next week?' " said Steele of Pine Hall Brick.

After some brainstorming, company executives decided to shut down one kiln for a month at each of its four plants -- three in North Carolina and one in Atlanta. They chose January because it's typically a slow time in the construction industry and the demand for bricks softens.

The plan is flexible, Steele said. If the weather is warmer than expected, the plant could return to full production sooner. On the other hand, if it's a bitter cold winter, the shutdown could go beyond January.

The company is giving some employees an option to either take the month off or work every other week.

Energy costs were also a factor in layoffs at a Hanes Dye and Finishing plant in Winston-Salem and a Klaussner Furniture plant in Robbins, in Moore County.

"China was the big reason, but energy costs make it difficult to compete in the global market," said Mike Vaughan, vice president of operations and general manager for Hanes. Vaughan said the company uses a significant amount of natural gas to operate the machinery at its facilities. In the past three years, he said, the costs have tripled.