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Natural gas prices burn U.S. manufacturers

Facing a recent setback from Congress'' rejection of a bill allowing drilling for oil and natural gas in the Alaska National Wildlife Refuge and the Outer Continental Shelf, the National Assn. of Manufacturers (NAM) will continue to make oil and gas development a priority for manufacturers. High natural gas prices are beginning to impact U.S. manufacturers leading to salary freezes and lost market share, according to the results of a recent survey by NAM.

Nearly 45% of those surveyed said they will be forced to lay off workers or impose wage reductions. About 22% of respondents said their companies would cut health care or other benefits in an attempt to keep up with energy costs. "This is a crisis. It''s the worst I''ve seen since we started this company 45 years ago," said Virginia Ferrell, president of Capital Engineering and Mfg. Co. (Chicago). She added that her company would impose job reductions, wage freezes, benefit cuts, and move to a four-day work week to survive energy costs that have doubled. "This is serious enough to put us out of business," she said.

James Marshall, president of automotive molder Sur-Flo Plastics & Engineering Inc. (Warren, MI) isn''t happy with the situation either, saying the cost of oil and natural gas has increased material prices by as much as 93% since March 2004. "We will have to resort to job cuts, wage freezes, and benefit cuts to stay in business."

Graham Packaging (York, PA), a global packaging supplier of blowmolded containers, announced on Dec. 5 that it would raise prices across the board 3% effective Jan. 5, 2006, saying in a statement that cost improvements and productivity gains could no longer offset sharp increases in energy-related costs. "This is above and beyond our normal wage inflation and is the first time in more than 20 years that we have seen our costs rise this significantly," Phillip R. Yates, Graham chairman and CEO, said in a release.

About two-thirds of respondents said natural gas is their primary energy source, while about 15% cited oil, and 3% cited coal. "The results of this survey should set off alarms in Congress-high energy prices pose an immediate threat to the U.S. economy," said NAM President and former Michigan Governor John Engler. "We need to increase our energy supply and infrastructure, starting with developing our vast resources in Alaska and the Outer Continental Shelf," Engler told an audience in a recent speech in St. Louis, MO.

U.S. manufacturers use 33% of the nation''s natural gas, which has doubled in price during the last year and is more than six times higher than during the late 1990s. "The U.S. has the most expensive natural gas in the world," Engler said. "Congress must take action to increase the diversity, flexibility, and quantity of our energy supply if we are to stay competitive in the global economy."-Clare Goldsberry; [email protected]

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