Firms Skid On Rising Oil And Gas Prices

CEOs struggle to find solutions to meet their bottom lines

Valerie Daniels-Carter runs her Burger King and Pizza Hut franchise business more than 1,000 miles away from the Gulf Coast region that was hit by Hurricane Katrina. She may seem like an unlikely victim of Katrina, but her business didn’t escape the economic storm that followed after the hurricane devastated several major U.S. oil refineries.

Daniels-Carter, the chief executive of Milwaukee-based V and J Holding Cos. Inc. (No. 42 on the BE INDUSTRIAL/SERVICE 100 list with $90 million in sales) says her company’s bottom line was directly affected by a $100,000 increase in utility costs.

Gulf Coast states hit hardest by Hurricane Katrina were Louisiana, Mississippi, and Alabama, where 6% of BE 100S businesses are located. But the economic repercussions were felt nationwide by BE 100S companies, ranging from car dealers such as Wade Ford Inc. and trucking companies such as MV Transportation Inc. to less predictably affected companies outside the transportation industry.

After Katrina, the commercial sector experienced a 45% national increase in the cost of natural gas from the 2004 heating season, according to the Energy Information Administration. The heating season extends from October to March. The EIA forecasted that 2005 retail gasoline prices would average close to $2.35 and anticipates that this year’s gas prices will average $2.45.

Norris McDonald, president of the African American Environmentalist Association, a nonprofit environmental protection organization, projects a lower gas price average by spring. “It will probably hover around $2,” McDonald says, which is still above 2004′s average of $1.85 a gallon. “Global supply and demand are tight. High gas prices have a negative impact on the bottom line of all companies, and the BE 100s are no exception,” he says.

Daniels-Carter’s company depends largely on natural gas, which is used for everything from heating commercial ovens to filling delivery vehicles. In an effort to curb utility costs, “we turn on our [food processing] equipment during the low peak hours,” she says. Consumers’ dining habits have also changed. Now, it’s much more convenient and cost-effective for consumers to save their gas and “call out for a pizza delivery.” Daniels-Carter has increased pay for her delivery drivers to absorb the cost of gas increases.

Steven R. Ewing, chief executive of Wade Ford Inc. (No. 19 on the BE AUTO DEALER 100 list with $103.4 million in sales), says truck sales were cut in half as a result of spiking gas costs. Forced to find creative ways to call attention to his Smyrna, Georgia, business, he mapped out a grassroots plan for a recovery.

Ewing bought a 45-foot motor coach with wraparound Ford Co. logos and a design of the Atlanta skyline. The motor coach started rolling out in Metro Atlanta communities, with volunteers on board providing non-invasive health screenings, coat and canned food drives, reading programs, and community park clean-up crews.

It served as a way to “stay engaged with people,” he says, and to remind them that “our franchise is part of the community. We have to continue to reward people for buying our products.”

Jon Monson, chief executive

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