Frontier Mills looks to cut power costs, Preserve jobs at Wetumpka, Ala., plant
RELEASE - Alabama PSC: Alabama Public Service Commission member Terry Dunn never expected his efforts to help an Elmore County textile plant lower its power bill would involve a lesson in U.S. trade policy. It just worked out that way.
Frontier Spinning's yarn plant in Wetumpka is one of Elmore County's largest employers - a reminder, Dunn says, that while much of Alabama's apparel industry has moved offshore, the textiles that go into those finished goods remain one of the state's most important products.
"I think most Alabamians know that our manufacturing sector is critical to the state's economic health overall," the commissioner said, "and we're fortunate our automotive plants and their suppliers helped prop up the sector through much of the recession. We have a lot of work to do in other areas, though, and the textile industry is a perfect example."
Frontier Spinning's Wetumpka operation isn't the company's only connection to the state. Its corporate parent, Sanford, N.C.-based Frontier Spinning Mills Inc., is headed by Alabama native John L. Bakane, who has more than 30 years of experience in the industry. Bakane graduated from the University of Alabama at Birmingham before earning his MBA at the Darden School of Business at the University of Virginia.
Historically, the textile and apparel industry took hold in the South because the region offered a large supply of cheap labor. Today, Bakane says, that advantage has long since disappeared.
"Textile manufacturers in the United States offer good wages and benefits," he said. Their foreign competitors do not.
Bakane said textile manufacturers in the South have been able to survive their stark disadvantage on labor costs through the years because their foreign competition generally has had to pay more for electricity. With the exception of wages and benefits, electricity is the largest single manufacturing conversion cost at Frontier Spinning's Elmore County plant.
The PSC regulates investor-owned utilities such as Alabama Power Co., which serves the Wetumpka plant. Dunn asked Alabama Power to work with Frontier Spinning's management to determine whether changes in rate options, operations or equipment could produce substantial savings. That work is continuing.
Bakane said the issue of affordable power will only become more important over time, especially because the South's textile industry is now facing another serious, long-term threat. A trade agreement involving the United States and a number of Pacific Rim countries, including Vietnam, could unfairly disadvantage U.S. textile manufacturers, Bakane said.
Negotiations on the trade agreement, known as the Trans-Pacific Partnership, are expected to wrap up this year. Bakane noted that while many U.S. trading partners subsidize their textile and apparel industries, the degree of government support in Vietnam "goes beyond subsidy." Vietnam is a non-market economy, and the government there essentially runs its major textile producers outright.
Bakane is watching the trade negotiations closely to make sure that the U.S. textile industry does not become a pawn, with U.S. manufacturers' interests compromised unfairly in order to achieve concessions in other areas. This has happened too often in the past, he said.
Not surprisingly, the details are complex, and some of the U.S. moves toward Vietnam are really aimed at addressing national security concerns about China, Bakane said.
"A bad final agreement would hurt us very badly," he said. That is why Bakane and other textile industry leaders continue to lobby hard to make sure the final agreement does not put textile companies and their workers at risk.
Because U.S. manufacturers lead the world in the use of technology, electricity costs will continue to be a strategic concern for the textile industry no matter how the trade deal turns out.
Dunn said he's hopeful the savings Frontier Spinning achieves from its consultation with Alabama Power will be significant, but he acknowledged that "what we have achieved thus far is incremental improvement - modest gains that will add up over time."
The commissioner said he would encourage any industrial operation in Alabama to contact the power company and start a similar search for cost-cutting opportunities.
"Alabama Power brings a lot of expertise to the table in performing energy audits for industrial operations," Dunn said. "I can't promise a windfall, but I do believe any company that chooses to work cooperatively with Alabama Power to reduce energy costs will be glad they made the effort."
Frontier Spinning's Bakane said he appreciated Dunn's willingness to get involved and learn more about the challenges facing Alabama textile manufacturers.
"Commissioner Dunn isn't making promises he can't keep," the CEO said. "Instead, he's working with us day to day to help us ensure our Alabama operation remains viable. That's all we ask."