Democrat and Chronicle from Rochester, New York on February 8, 1981 · Page 76
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Democrat and Chronicle from Rochester, New York · Page 76

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Rochester, New York
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Sunday, February 8, 1981
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Page 76
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SUNDAY DEMOCRAT AND CHRONICLE. ROCHESTER. N Y.. FEBRUARY 8. 1981 ?HIS STORY HAS AN ERROR CORRECTION ?fGJOLL0LPSr By JACKIE FARNAN D&C Business Writer In recent years, rapidly rising steam rates have kept downtown building owners sizzling. In 18 years. Rochester Gas & Electric Corp. has lost more than 350 steam customers 25 in 1980 alone. It has 270 steam customers left and it isn't sure of their loyalty. No wonder. It's getting hard to be faithful. In 1963, a downtown building owner paid less than $1 for 1,000 pounds of steam. Today he pays more than $10.50. But a government report, expected to be released soon, says Rochester's steam district doesn't have to fizzle. It can be saved and made to operate efficiently. The rescue may take several years and require research' and costly investments by Rochester Gas & Electric Corp. Government grants could offset some of the costs. But while more studies and grant applications are made, the city and RG&E will have to figure out how to keep remaining customers, says the report by workers at the Oak Ridge National Laboratory in Tennessee. The study, part of research sponsored by the U.S. Department of Housing and Urban Development, was done to discover if Rochester's steam . svstem has problems that would qualify the city and RG&E to apply for a HUD-Urban Development Action Grant to revitalize the system. It does. Grants can cover up to 40 percent of costs but typical grants cover about 14 percent, said Mi- trex By PHIL EBERSOLE D&C Business Writer Eltrex Industries Inc. is a company with two bottom lines. One bottom line is profit. The other is jobs and opportunity for black and inner city workers. Both are important, according to president Matthew Augustine. Eltrex is more profitable today than it has ever been before. The years 1978-79 and 1979-80 were years of record sales and profit, and the first time the company has been profitable for two years in a row. Orders are running ahead of last year's, Augustine said. The company now produces more than 300 electrical transformers a day, and output of its two main types of industrial vacuum cleaners now is about 15,000 a year each, he said. Last February, the company, which had operated in a 35,000-square-foot plant at 65 Sullivan St., doubled its space by leasing a second 35,000-square-foot building at 961 Lyell Ave. But the company never has forgotten the social goals that led to its incorporation in 1968, Augustine said. About 85 of its 100 or so employees are black. The company does try to hire the hard-core unemployed, he said, and, once hired, provide them with opportunities to learn and advance within the company. For higher-level jobs, such as quality control or metal stamping, Eltrex provides on-the-job training, supplemented by some classroom instruction. Managers also hold evening seminars on different aspects of business, Augustine said. However, he added, much of Eltrex's work is routine, and only requires learning good work habits. Fight Inc., a black community activist organization which helped start the company in 1968, transferred its stock in the company to employees about seven years ago, Augustine said. A majority of the stock is owned by employees with more than seven years' experience, he said. bo y New chairman eager to start G By JAMES V. HIGGINS UPI Auto Writer DETROIT Mention 1985 and Roger B. Smith's eyes brighten. The new General Motors Corp. chairman bubbles at his company's prospects in the latter part of this decade, almost as if the U.S. auto industry's 1980 disaster hadn't happened. "I can hardly wait to get there," Smith tells an interviewer in his ornately wood-paneled office on the 14th floor of GM's headquarters building. . GM, he points out, already is the biggest manufacturer of control computers in the world a result of seeking to mate fuel economy and tailpipe emission controls with acceptable car performance and it's opening up new technical vistas. "I think the world of electronics, the electric car and other thirgs I see coming down the road, are where the real growth and the real profit potential are going to be," he said. "We've always made our best profits when we had technological leadership." " In speaking of change, Smith proves that some things never do. v He is as irrepressible an optimist as Thomas A. Murphy, the man he succeeded Jan. 1 as chief executive of the world's largest auto company. To fulfill hopes of a bright automotive future, the battered U.S. industry will have to get there, and Smith's optimism isn't clouded by the bare fact that mighty GM and its domestic competitors will need help. . '. He anticipates the government and the United Auto Workers union will recognize that as a , necessity. M s if s m 1 1 s I 3 -3 .V ' . chael A. Karnitz, an engineer and researcher with the Energy Division at Oak Ridge. He wrote the draft report and is working on the final version. RG&E officials say suggestions for equipment changes made in the report are too expensive to carry out. And they say the percentage of help available from federal grants is too low. and most of the rest is owned by former employees. He said the directors are discussing a stock ownership plan for newer employees. The company was formed as Fighton Inc. in a cooperative effort between Fight Inc., Xerox Corp. and Rochester Business Opportunities Corp., an non-profit organization to help minority businesses. Start-up money was lent by Marine Midland Bank, and guaranteed by Rochester Business Opportunities Corp., which holds title to the Sullivan Street plant, and the U.S. Small Business Administration. Xerox through the years has been a major customer. Beginning with 15 employees, the company gradually grew to 120 jobs. It made a $36,000 profit in 1969-70, hovered just below the breakeven point for several years, then surged to a $74,000 profit in 1973-74. Then recession hit. Sales, which had gone up each year to a peak of $2.5 million in 1973-74, fell until they hit $1.9 million in 1975-76. The loss that year was $150,000, and many feared the company would go bankrupt. In late 1976, Augustine, a Harvard MBA who had been director of management information systems for Adage Inc., a Boston computer company, was brought in. Employment was down to 60, and the company was so shaky that Augustine had to lend it $10,000 out of his own savings one Friday to meet its payroll. The name was changed from Fighton to Eltrex to make clear that it was a business, and not part of Fight. Gradually the company was turned around, by putting in new management controls and bringing in a strong management team, Augustine said. The management team includes: Leon Jackson, director of marketing, who, like Augustine, holds a master's degree in business administration from Harvard University. Earl Myers, director of manufacturing, who has a Ph.D. in engineering. Turn to ELTREX, Page 2F goals go uture: Electronics, electric car y f - i "if a 3 t h Roger B. Smith Also an optimist First, there should be a "dramatic, visible, tangible start" for the new administration of Ronald Reagan, something to restore consumer confidence and fulfill expectations that are running as high as those that greeted Franklin D. Roosevelt in 1932. "We need some help out of Washington and we r m ystem Meanwhile, city officials are working on the assumption that the steam system will be revitalized someday. They have applied for a grant that would allow them to help owners of buildings use steam more efficiently. Officials at HUD want to see cities develop district heating systems. The systems, with central steam-generating plants, use less energy than boilers in individual buildings. But the main advantage is flexibility in the choice of fuels. Systems in Europe burn everything from coal and refuse-derived fuel to wood chips, Karnitz said. . The city has a lot of incentive to take the lead in saving the steam system, says the report. If the steam system fails, the city would lose more than $1 million in taxes each year and would have to pay several million dollars to convert its buildings from steam to another fuel, such as natural gas. But RG&E has little economic incentive to save the downtown steam system, or at least keep it from being cut in size, Karnitz said. RG&E operates both the steam and natural gas systems in Rochester. The customers it loses from the steam system, it picks up on its gas system. The steam system is actually two systems: one on the west side of Rochester that supplies 25 industrial customers such as Delco Products Division of General Motors Corp., and the downtown system, which has some large customers, such as Genesee Brewing Co. Inc., but which serves primarily small, downtown office buildings. It is the downtown system, with its low-volume steam users, that has lost the most customers. if t " '. fjP " m3 JV. ' . if " ' ? idft " j D&C Photo by Jim Laragy Bruce Gilbert works on milling machine at Eltrex Industries, 65 Sullivan St. The stock in his machine will be used to make safelights for Eastman Kodak Co. need it desperately to get the economy going," he said. He looks toward a fulfillment of numerous campaign pledges for a less interfering, more sympathetic government. "That's all the American people really need," he said. "I honestly believe that the American people are fed up enough with inflation and understand what it's doing to their lives, to their parents, to their pensions and everything, that they're willing to make the sacrifices. All they need is some leadership. "There's going to be some sacrifices involved that come about through the cuts in spending, and we've got to do that." Smith spoke more strongly than ever about the prospect of wage relief from the UAW, now that it has granted substantial wage concessions to Chrysler Corp. "You just know that you cannot have a two-tiered wage industry here," he said. "That's the problem we're having right now in the world market, we've got a two-tiered wage setup. Chrysler's found that out. "It won't do the UAW any good, even in their own best interests, to push the problem from one to another around our domestic industry." He didn't specify exactly what kind of concessions GM had in mind, but didn't rule out the possibility of seeking to reopen the current labor agreement which expires in September, 1982. Ford also has talked about a renegotiation. "Certainly, when they finish up over at Chrysler, I'm sure (UAW President) Doug Fraser and everybody knows they're going to have to come over and deal with Ford and General Motors," Smith said. e sav Many downtown building owners, whose utility costs represent a large proportion of their overhead, have found it cheaper to install boilers in their buildings than to pay high steam rates. But many large industrial customers, whose steam bills represent a smaller chunk of their operating costs, can't afford to build the small steam generating plants they'd need to supply steam. Problems Rochester's steam system has only recently begun to have problems. In 1963 the svstem was the fourth largest in the U.S. It had 621 customers and was growing steadily. Then came urban renewal and, more recently, high steam rates. Problems arose: Reconstruction of much of downtown as part of urban renewal programs meant that many steam-heated buildings were destroyed. Most of those customers have not been replaced. The customers left pay a larger share of the costs of maintaining the whole system. The cost of new pipes required by downtown constuction was spread among remaining steam customers. In the early 1970s, federal air quality legislation required that coal boilers be converted to oil and natural gas another cost to be shared by customers. RG&E officials say that a recent ruling by the Federal Energy Regulation Commission (FERC) Turn to STEAM, Page WF Even though GM sulfered its first annual loss since the 1920s last year, UAW officials have indicated they believe the company has the least convincing argument for wage relief among the Big Three U.S. automakers. Its recent history and immediate prospects are comparatively brighter than its competitors'. GM's car lines in 1979-80 were better matched to the disordered U.S. car market than its competitors, Smith said. Consequently, its sales fal-loff was considerably less last year 16 percent compared with 28 percent for Chrysler and 30 percent for Ford. Smith said he believes GM's spate of record losses is over although he emphasized it depends on whether "this new administration has got the guts" to attack inflation. There are signs government concerns over GM's size and power 63 percent of the U.S. car market in 1980 are abating in a growing recognition that competition is heating up on a global scale. "You know what our market share is? Our market share is 23 percent," Smith said. "That's what we sell worldwide. If it isn't a worldwide market, what the hell are all those funny little cars doing running around out there? "The guy up there working on the assembly line in Flint is in direct competition with that guy over there in Nagasaki, just as if he were in Pontiac." In recent weeks, GM has subtly escalated its appeal for limits on Japanese cars imported here and Smith contends that "not only the U.S.. but Turn to GM, Page 6F backgrounder In June 1980 the Democrat and Chronicle ran a four-part series by Jackie Farnan detailing Rochester Gas & Electric Corp.'s problems with its steam system and steam customers' problems with increasing steam rates. At that time, the city of Rochester had commissioned several studies to see whether it would be cheaper to install its own boilers to produce steam for its buildings or to stick with RG&E's steam system. This article is about the content of one of those studies, soon to be released. The city had good motivation to study the issue: If it switched to its own boilers it could cut its $900,000 annual steam bill by 30 percent. But if it did that, other downtown businesses still on the steam system would be forced to pay prohibitive prices for steam, install their own boilers or move to the suburbs. City officials now are assuming the system will be revitalized and are working to help building owners use steam efficiently, they say. But there's a lot of disagreement over methods suggested in this study. This article details the disagreements. Merchant marine to expand? By LEROY POPE UPI Business Writer NEW YORK American shipbuilders and operators of U.S. flag cargo liners hope the Reagan administration will take action to expand the merchant marine. President Reagan said in his campaign speeches that he wants to do so. However, the depth of the President's commitment could be diminished by the division between the U.S. flag shipowners and tl ; rators of American-owned vessels that fly forei:i flaps and sail with foreign crews. The American owners of flag-of-convenience' ships, mostly tankers and dry bulk carriers, operate at much lower costs than the U.S. Hag fleet. They are not nearly so interested in expansion as are their subsidized brethren. The subsidized owners of the U.S. flag cargo liners are pinning much of their hope for greater help from the new administration on the belief that three new cabinet members who have the most to do with shipping will advocate a strong U.S. flag merchant fleet. The three are Commerce Secretary Malcolm Baldrige, Defense Secretary Casper Weinberger and Secretary of State Alexander Haig. According to Chairman George F. Lowman of Farrell Lines, the largest U.S. flag common carrier line, Haig's attitude could be crucial. Low-man told United Press International that, for a generation now, the State Department has been the toughest obstacle to building a strong U.S. flag fleet. "The State Department has seemed to us to operate on the principle that one of the easiest ways to make friends in the world is to give other nations nearly all the ocean cargo traffic in and out of American ports," Lowman said. He said he believes this attitude will change under Reagan and Haig. He said he had talked with the heads of five of the seven biggest U.S. flag shipping lines and they share his optimism. Lowman said the great buildup of the Soviet merchant marine, and the advent of the new-South Korean, other Asian and South American merchant marines has awakened many Americans to the danger of continuing the "soft" policies of the years since World War II. He said there appears to be an awakening in Congress, in the business community and among the public to the dangers inherent in treating ocean cargo traffic as a purely economic issue. "We should think of merchant shipping in terms of sea power," he said. "A strong merchant marine is a cheaper way to maintain the nation's sea power than an inflated Navy. The merchant ships do useful work in peacetime and earn money." Lowman thus implied that Americans again should take to heart the lessons in Admiral Thayer Mahan's famous 1890 book, "The Influence of Sea Power on History." Mahan argued that a big nation without both a strong Navy and a strong merchant marine would be in grave danger in time of emergency. As far as the Navy is concerned, Congress and successive presidents have heeded Mahan's advice, but the merchant fleet has been periodically neglected much more so under the Carter administration that in the past, Lowman said. He said the U.S. flag fleet has dwindled until it carries only 5' 2 percent of the nation's ocean commerce. He said that total should be built up to about 30 percent. But Philip Loree, chairman of the Federation of American Controlled Shipping, which represents American owners of foreign-flag shipping, disputed the significance of Lowman's figures. Loree said more than one-third of the nation's ocean commerce moves in American-owned vessels although most of these ships fly foreign flags and have foreign crews. He also said the U.S. flag cargo liners have about 27 percent of the liner traffic in and out of American ports. These differing pictures of the situation could Turn to MERCHANT, Page 5F L

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