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Updated 11:00am - Nov 26, 2014

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Hambro cuts benefits

By Kelley Atherton

Hambro Group employees, including about 120 in Del Norte County, have lost their dental coverage and at the beginning of December will also be without a health-care plan.

Hambro blamed the cutback on a troubled economy and decreased sales in particular.

"We're preparing for a severe winter," Dwayne Reichlin said, referring not to the weather but to a housing freeze that he predicts won't thaw until next year.

Reichlin, president of the seven companies that make up the Hambro Group, recently made the decision to cut health-care benefits for all Hambro employees, including himself.

"I've labored over this for the last year," he said. "I had to make a decision to save the paychecks going out into community rather than lose the whole thing. We would not survive the winter."

Nationwide, health-care premiums have risen by about 78 percent since 2001, according to the Kaiser Family Foundation, a non-profit organization that focuses on health-care issues. The U.S. Labor Department reported that benefits eat up about 30 percent of employers' compensation costs.

"I can't tell you how many people have said they don't know how we could hang on this long," Reichlin said. "I'm seeing it more and more all the time."

Reichlin said he intends to reinstate health-care benefits when the economy rebounds and Hambro gets busier again.

He said Hambro is helping employees find alternative medical coverage.

‘Turned upside down'

The Hambro Group is comprised of companies in Crescent City, Arcata, Lenior, N.C., and Grants Pass, Ore. Three of the companies, including Hambro Forest Products on Elk Valley Road, make particle board out of recycled wood fiber and sell mainly to homebuilders.

The housing crisis across America has resulted in not only a glut of homes for sale, but a decrease in the demand for manufactured wood products.

Hambro's customers in housing, furniture and cabinets are producing at 40-60 percent of their capacity, Reichlin said.

Two years ago, there were 2 million homes being built; now that's down to under a million, he said.

"There's no market out there," he said. "We haven't lost any customers, but if we don't have the products they want to buy, we can't pay our bills."

Reichlin said Hambro companies had been netting $55-60 million a year. That has fallen into the $40-45 million range. In Crescent City, Hambro Forest Products netted over $19 million in 2007, but that is expected to drop to about $16 million this year.

Reichlin said he held off on cutting health-care benefits for a while, hoping the economy would rebound and spur more homebuilding.

"The whole country is turned upside down," he said about the surplus of homes for sale.

Economists now say home sales will fall 11 percent from 2007 to just over 5 million homes this year.

This is the worst the wood products market has been since he starting working for Hambro in 1969, Reichlin said. He became president in 1984 when Hambro became an Employee Stock Ownership Plan (ESOP), which makes the employees owners of stock in the company.

Recession-like economy

"This is the toughest economic crisis for wood products I've ever seen in 40 years," Reichlin said. "We've come through some tough times, but this takes the cake."

Nationwide, companies are grappling with how to deal with a weak economy and keep jobs with good wages and benefits. In August, the unemployment rate hit 6.1 percent — a five-year high and the most severe rise in joblessness since 1981. Only the government and health-care industry added jobs in August, while the rest of the country cut 84,000 jobs — a total of 600,000 positions in 2008.

As Americans cut back, the stock market follows accordingly. On Tuesday stocks once again fell. Hambro's stock for the long run has been strong, Reichlin said, but it went down in the last year with the rest of the market and hasn't come back up.

But it's not all doom and gloom. The economy will bounce back, he said, but he predicts that won't happen until February.

"It's like anything else that has to adjust — we're going through an adjustment right now in stocks," he said. "It has to work through the down cycle to get back into profitability."

The latest good news for the economy is that the price of oil and food commodities dropped, which could ease financial troubles for Americans.

"It will eventually turn around," Reichlin said, adding that he's doing what he can right now to save Hambro companies. "We want to be there when it turns around and be one of the survivors."

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