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Rohm & Haas plans to cut $25 million, including 120 jobs

Published on 2004-03-10. Author : SpecialChem

 

Rohm & Haas plans to cut about 120 jobs at its Louisville plant as part of an effort to reduce costs by $25 million.

Higher prices for power and raw materials, coupled with low-cost imports, have hurt the plant's profitability in recent years, said company spokesman Dan Hicks. A tough competitive environment prevents the company from raising prices, so the only way to generate profits is to cut costs, he added.

"More than half of our operating costs are people related, so there's no way we can do this without cutting jobs," Hicks said.

The $25 million cost-cutting target represents 25 percent of the budget for the plant, which has 493 employees. Hicks said managers and employees will study the plant's expenses for the next two months to try to make reductions that don't affect employees.

"If we really do well at this, we might be able to save some jobs," Hicks said. "We hope it won't be 120 jobs. We'll do everything we can to keep it below that."

The company informed employees of the cost-cutting initiative Tuesday. In May, it will tell them how many jobs will be lost.

Plastics additives, the plant's largest product line, use lots of oil by-products, and oil prices have increased by about 25 percent in the past six months. Natural gas prices also have increased, raising the cost of power to run the plant.

Plastics additives are chemicals that make plastics hard or soft and clear or opaque. The plant also makes acrylic coatings used in some paints and emulsions, and chemicals used in paints and adhesives. Hicks said the plastics line faces the biggest cuts because it is the least profitable. The emulsions line is performing well, but its expenses will also be under review, he said.

Hicks said Rohm & Haas has not been able to pass on raw materials cost increases to customers because competitors in Asia are keeping global prices low.

In addition to the raw materials price spikes, the plant is facing other cost increases. The Rubbertown plant was in an enterprise zone, which provided some tax breaks. That zone expired at the beginning of the year, and the General Assembly has not renewed it. Also, the plant faces potentially higher sewer rates this year.

Marion Gee, budget and finance director for the Metropolitan Sewer District, said his agency is working on a new rate structure to phase out a lower sewer rate that had been applied to large businesses.

The standard sewer rate is $2.17 per 1,000 gallons of wastewater. Industrial facilities that dispose of more than 1 million gallons of water per month qualify for a $1.15 rate. Without the lower industrial rate this year, Rohm & Haas and other heavy sewer users would have paid 89 percent more for sewer service.

"We had a rate study ... last year, and we discovered that industrial customers should be paying $4 million more per year," Gee said.

The MSD's board approved a proposal last year to eliminate the industrial rate. Gee said he will propose rates for 2004-2005 in May. He said while some industrial clients will pay more in basic rates under that plan, the district plans to lower some fees charged to businesses that release water that needs additional cleaning.

Hicks said the tax and sewer rate issues represent about $1 million of the $25 million in costs the plant needs to cut.


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