Nailed by Higher Fuel Costs

American Woodmark can play hardball, too. It has not renewed contracts with several truck carriers this year "to avoid the prospect of extremely large rate increases," the company's chief financial officer, Jonathan H. Wolk, has told Wall Street analysts.

It isn't just transportation costs, though, that have burrowed deeply into American Woodmark's bottom line. The company uses fuel -- and products derived from oil -- for other purposes.

American Woodmark relies on heavy equipment to cut down trees, for example. And the equipment generally is powered by gas.

Most of the finishes on its kitchen cabinets, finishes with MTVish names such as Tawny and Spice, have a petrochemical base. So do glues used in the assembly process.

As the U.S. dollar has weakened against the euro, "other raw materials such as [imported] steel have gone up, too," Guichard said. "So have our hinges and other metal components. Particle board is higher than it was a year ago. Cardboard is, too."

It's enough to make a chief executive, even one who's supposedly on vacation, sound like the star of a Rolaids commercial.

"We just need some relief," Gosa said the other morning, before heading out to play a round of golf.

For many American companies, petro worries have become a way of life.

Michigan-based Masco Corp., the top U.S. cabinetmaker, cited higher energy costs as one reason its latest quarterly earnings were down 12 percent from a year earlier.

American Woodmark's neighbor, Winchester-based Trex Company Inc., which makes composite deck and railing products, posted a $1 million loss in its latest quarter, partly because of the increased price of polyethylene, a fuel derivative it uses in its products.

FedEx Freight has announced a general rate increase for some truck deliveries, and major steamship companies are raising their fuel surcharges to furniture importers.

In the retail sector, Home Depot upped its general delivery fee in the Washington region from $65 to $75 in May.

And beginning Sept. 1, AAA Mid-Atlantic plans to reduce the rebate it offers on gasoline purchases made by its Visa cardholders to 3 percent from 5 percent "due to the increased fuel price trends."

American Woodmark has been struggling to find a way to pass along these higher costs to its customers. As the beleaguered airline industry knows only too well, that's a dicey proposition. Set the price too high and fewer people will buy the product. Set the price too low and the company's profit could disappear.

"The question is: How do you do it?" Guichard said. "You are constantly walking that fine line, supporting the marketplace and getting what you want out of the marketplace in terms of pricing and the volume of business that you are getting. When you live in a competitive world, I mean, that's always the trick: How can you keep your growth up and your volumes up and still make an adequate return?

"Historically, it takes somebody in the industry to say: 'I have had enough of this.' Then they announce a price increase and the industry says, 'Wooooof! I'm glad somebody did that.' And we all follow."

In the end, American Woodmark chairman Gosa told analysts in June, his industry is transitioning from a non-inflationary environment to one that's decidedly inflationary, where everything is more expensive.

Guichard, in the interview last week, said customers should get used to that idea, too.

"We are back in an inflationary world where prices will go up from year to year," he said. "So we all need to reset our brains."