Closures at Bedford furniture plant will affect 90 workers

One of the city of Bedford’s largest employers plans to shutter most of its operations early next year, a move that will affect about 90 workers.

Frank Chervan Inc. announced the move on Wednesday, citing rising healthcare and electricity costs and an expected decline in demand for furniture. Its plant on Dawn Drive currently employs about 120 people, said Greg Terrill, president.

The company will continue to operate a lumber mill with 30 employees in Bedford and a factory in Roanoke.

Some of the affected workers could be offered jobs at the Roanoke site, but Terrill said he wasn’t sure how many. The company expects to close the operating units in Bedford by February.

A layoff of 90 workers could double the city’s unemployment rate to about 8 percent, depending on how many of the workers live in the city.

“This was one of the toughest decisions we have had to make,” Terrill said in a written statement.

Elizabeth Berry-Mosley, the city’s economic development director, said she looks at the announcement in a broad context.

“The economy is doing a bad turn that’s probably going to make everybody suffer,” she said. “We need to work with our existing industries to help them out as much as we can.”

City Manager Charles Kola-kowski said the city would work with several agencies to help displaced workers, and to help Frank Chervan sell its buildings in the city.

The 80-year-old furniture company has had the Bedford plant for about 60 years. It specialized in making unfinished wooden frames for furniture.

Two years ago Frank Chervan Inc. bought a plant in Roanoke from Hooker Furniture Company, which was closing. The new plant allowed the company to expand and create finished furni-ture. Those products have done well, Terrill said.

Business has been great for Frank Chervan this year. Its sales increased 30 percent above 2007. But the sales failed to keep pace with employee healthcare ex-penses, which jumped at least 40 percent this year, Terrill said.

Also, the company expects to get fewer orders in 2009. Some of its major customers were banks and financial institutions hit heavily by Wall Street’s financial crisis this fall. As those customers finish furnishing the buildings they had already started building or renovating, business for Frank Chervan could drop off, Terrill said.

The choice to move the Bedford facility’s operations and much of its machinery to Roanoke came for several reasons.

At 250,000 square feet, the Roanoke site is more than 50 percent larger than the Bedford plant. It has an environmental permit required to spray finishing chemicals onto furniture.

“When we were looking to take some expense off the table, it wasn’t really an option to move the finishing line to Bedford,” Terrill said.

High electricity rates in Bedford played into the decision. “There’s been some rapid utility rate increases,” Terrill said. Electric bills “are nearly double what they are in our (Roanoke) facility.”

The city, unlike Bedford County, is not on the Appalachian Power Company system. It has a hydroelectric generator on the James River and buys whole-sale electricity to meet the city’s peak electrical demands.

Kolakowski said the wholesale electricity market is not regulated, making APCo’s regulated rates less expensive.

Frank Chervan Inc. already has begun discussions on how to put the Bedford facility to use for someone else. “We’ve had some discussions, both with some other area businesses (and with the city). There’s a lot of ideas on the table, but there is not a cer-tain plan right now.”

He said the Bedford facility is more marketable than the Roa-noke factory would have been. “Not that any industrial property is marketable now,” he said.

The company told employees about shutting down of opera-tions on Tuesday. Employees have until Dec. 19 to choose whether to apply for a job at the Roanoke plant.

Terrill said that possibly half of the employees in Bedford could be transferred to Roanoke, but the final decision could be different.

Kolakowski said the city is working with the state and several agencies to help the workers who end up unemployed.