Factory Man : How One Furniture Maker Battled Offshoring, Stayed Local - and Helped Save an American Town (9780316322607)

by Macy, Beth

  Now the owner of a nursing-home chain based near Chicago, his brother-in-law was happy to fill in some details. Too many look at globalization and miss the nuances of the story, Zung argued. He and Moh took the American furniture makers down several notches, granted, but they didn’t manage that by cheap Asian labor alone.

  “We approached it totally differently than the U.S. manufacturers,” Zung said. They did it by targeting volume and efficiency through reverse-engineering and factory streamlining. Once a chair was designed, Zung adapted the blueprint to fit basic settings on his machines, which were geared to reduce assembly-line downtime. Consumer choices were also whittled down with regard to size and finish. The pieces were made in Asia, then shipped to assembly plants strategically stationed in Japan, Canada, Sweden, Saudi Arabia, Wales, Australia, and the United States. The focus was to push out the largest volume in the shortest amount of time and, most important, at the cheapest price.

  This was furniture, after all, not cars. Few people looked at the bottom of a chair to see where it was made.

  Certainly not the masses, Zung knew, reciting almost exactly the same Henry Ford–ism spouted by John Bassett and his glit-making lieutenants. “My slogan is always, ‘Sell to the masses, live with the classes,’ ” Zung said.

  PART V

  15

  The Storm Before the Tsunami

  If it’s made north of the Mason-Dixon Line, it’s a furniture set. If it’s made south of the Mason-Dixon Line, it’s a furniture suite.

  And if it’s made in China, it’s junk.

  —MARC SCHEWEL, CEO OF SCHEWELS FURNITURE

  It formed over the eastern Atlantic near the Cape Verde Islands on September 9, 1989. It weakened after killing thirty-four people in the Caribbean, then surprised everyone by regrouping and landing with a vengeance at Charleston Harbor. It killed twenty-seven in South Carolina, rendered a hundred thousand homeless, and caused ten billion dollars in damage. When the tail end of Hurricane Hugo sailed toward the ridge at Roaring Gap, the bedroom windows on Pat and John Bassett’s mountainside manor started buckling.

  Pat protested when John made her get out of bed at three in the morning so they could barricade themselves in the kitchen. But after the ninety-mile-an-hour winds finally died down, the couple returned to the bedroom to find giant, jagged pieces of glass stuck in the wall—where their heads would have been.

  The damage was nothing compared to what happened in Sumter, though, where winds peaked at 106 miles an hour. The hurricane ripped off the roof of the V-B/Williams factory, along with an attached sprinkler system, sending 350,000 gallons of water rushing into the factory.

  If glit had a kryptonite, it was water. The whole lot of it reverted to a soggy mush of paper, sawdust, and glue. The factory’s dust collectors, funnel-shaped vacuums that were, ironically, already named cyclones, were toppled. The tall, aluminum contraptions had stood sentinel for decades atop the plant, but now they were splayed out on the ground, dented, smashed, and strewn helter-skelter, like a tea party for giants gone horribly awry.

  By the time Buck Higgins, Vaughan-Bassett’s elder statesman, reached John by phone to tell him about the damages at the factory—some two million dollars and counting—Buck was in a full-blown panic.

  “John, we’re wiped out,” Buck said. “Wiped out!”

  Vaughan-Bassett and investors had sunk millions into the Sumter plant, and they were still on the hook for another $5 million in loans. John had taken care of the arrangements himself—the deal-making with shareholders, the bank loans, even the multiple insurance policies required to keep the banks happy. So he knew what Buck didn’t: the company had coverage not just on the building and its equipment but also the inventory and the loss of business that would occur as they rebuilt the factory.

  “Buck, we’ve got at least twenty-five million dollars in insurance, don’t worry,” he told his wife’s uncle.

  There was a long pause before Buck finally answered.

  “John?”

  “Yes, Buck.”

  “Maybe we’re not wiped out.”

  In the patriarchal world of furniture-making, amid the cutthroat spirit that sliced through families and companies like a ripsaw, Little John was almost fifty-two years old and, finally, not so stupid after all.

  Garet Bosiger remembered the first call he took about the hurricane. It was John on the phone—at 6:00 a.m., no surprise—and it was maybe John’s tenth phone call already that day. From his Galax office, JBIII had already lined up contractors from Mount Airy. He knew the hurricane hadn’t hit his competitors in Henry County and Lenoir, so he needed to move swiftly or risk the other glit makers moving in on his turf.

  “Let me tell you something,” Garet said. “When things go all to hell, that’s when it’s like the most fun to him. He’s giving instructions, and he’s positively gleaming. He’s like a general!”

  That was the first thing Wyatt Bassett, John’s younger son, had noticed about his father when he went to work for him in the middle of the recession of 1990. Wyatt had just spent two years working for Heilig-Meyers, learning the retail end of the industry. The Gulf War was on, unemployment was growing, and gas prices were up—all of which took a toll on buying, especially among the Sumter demographic. Orders dried up within a matter of weeks.

  “What I learned from him during that time most distinctly was, you don’t panic. It’s a waste of time,” Wyatt recalled. He also got his first lesson on the importance of knowing your BEP, or break-even point, as it’s taught in Economics 101. His father introduced him to the ins and outs of depreciation, demonstrating how a company could show a profit by simply breaking even because of the tax benefit of depreciating, or writing off, purchased factory equipment. He learned his dad’s theory on depreciation management: If you don’t regularly reinvest the money in new equipment, your company will find itself behind the times on efficiency and, ultimately, not meeting its BEP.

  “Guys, we’ve got to compete like a business, not a country club,” John told his managers. Nouveau Bassett could engage in aristocratic frippery if it wanted, but Vaughan-Bassett would be run like the Bassett Furniture of yore—lean, mean, and with very careful oversight.

  That especially applied to the sales staff. JBIII personally went on the road with his salesmen, selling furniture the best way he knew how—eyeball-to-eyeball, calling on retailers from San Diego to Miami Beach. They flew coach, with the men booked two to a hotel room. Bob Spilman was still jet-setting around in Bassett Furniture’s corporate plane, but John used the excuse of the recession to implement austerity measures and eliminate company cars for good, something he’d long wanted to do.

  JBIII took that lean attitude and sharp scrutiny inside the factories as well, meaning the hog got inspected on a regular basis, another of Mr. J.D.’s parsimonious edicts. The hog was the machine that ground scrap wood into smaller chips, which were then burned in the boiler to generate steam for the kilns. “The hog is adequately named because if you don’t watch it, it will hog all your profits,” Mr. J.D. liked to say, referring to employees who were eager to cover up miscuts and other mistakes by throwing them into the hog to burn their blunders.

  “You get what you inspect, not what you expect,” John told his managers.

  When I asked if the company had ever had a corporate plane, he barked, “Oh hell no!” He pointed to his spare second-floor corporate office in Galax, where the command center—his conference table turned desk—is enveloped, cubicle-style, in 1970s-era fake wood paneling and furnished with mismatched desks and chairs, most of them veneer. The arrangement allows him to communicate JBIII-style—that is, loudly and directly. When he wants to know the daily account balance or when he needs his secretary, Sheila, to get someone on the phone for him, he simply hollers around the partial walls, which are papered with posters of golf courses he belongs to, drawings by his grandchildren, and printouts of slightly off-color jokes.

  Vaughan-Bassett’s corporate offices were designed to
be the exact opposite of Bassett’s headquarters, with its matching high-backed leather chairs and gilt-framed executive portraits. It was so showy that in the 1980s, the townspeople had stopped referring to it as the Taj Mahal and rechristened it the Ivory Tower.

  JBIII had to make some tough choices during the first recession of his corporate presidency: V-B/Williams managers took a 10 percent salary decrease, and one was let go. The line workers’ salaries weren’t cut, but at the lowest point in 1990, forty laborers were laid off.

  John took no salary at all, slept fitfully, and when Sheila tried to hunt him down during lunch once (before cell phones), she had to call all around town. She found him, finally, eating at Rose’s five-and-dime—but only after describing him to the waitress as “that guy who wears the white hat and talks to himself all the time.”

  He was muttering a lot those days, in between ass-chewing and penny-counting. His wife, Pat, said that when she really wanted to know what he was worrying about, she stood outside the shower door and listened to him talk through the conversations he was planning to have that day. He’d already improved Buck Higgins’s method of cash-flow management. Fearful of credit, Higgins had long been ordering his accountants to pay the company’s bills via checks—only to stash the checks in the company safe until there was money in the banks to cover them. Some checks sat for weeks, others for months. (In Buck’s defense, he had not grown up with a family business that kept $80 million or more in the company savings account, as John had.) The company was just barely liquid when JBIII showed up, operating on a four-day workweek and trying to manage a 27 percent decline in profits in 1983, according to the annual report. (A cash snapshot from 1982 shows a cash balance of just $14,229, with stockholder equity at $11.5 million, less than one-tenth its current size.)

  As punishment for the company’s paying bills late, most of Vaughan-Bassett’s suppliers upped their prices. So John established new lines of credit. As the company’s bill-paying record improved, he negotiated discounts with suppliers and, ultimately, shifted the BEP in the company’s favor.

  He did not waste time on political correctness, former personnel manager Tim Prillaman recalled. “When I interviewed with him in the mid-nineties, he asked me not one legal question. It was, ‘Who’s your mama? Who’s your daddy? Who’s your mama’s mama?’ ”

  Prillaman’s grandparents on both sides were bootleggers who’d served time. When he explained his family tree, John brightened. Hell, back in Bassett, John had hired every bootlegger he could find because they worked hard and they were good businessmen—they just happened to be in an illegal business.

  “So, you a corn-fed boy, am I right?” JBIII wanted to know.

  “Yes, sir, I am!” Prillaman said, and he was hired.

  At one point when they were perilously close to the BEP in Sumter, Garet remembered, JBIII wrote a personal check for $300,000 and told the bankers, “If the boys need this, cash it. If they don’t, tear it up.”

  He was already employing a labor-efficiency tool he’d discovered years earlier in Mount Airy and filed away for later use. A distraught wife who worked at an apparel plant had sought John out on her lunch hour and begged him to rehire her husband, whom he’d fired for showing up drunk. John didn’t rehire the man, but he did get an idea from the woman after she nearly ran him over in a scramble to get back to work before her lunch break ended.

  “Why the frantic rush?” he wanted to know. She told him that each month, as long as she didn’t miss any days or clock in late a single time, her factory paid a monthly attendance bonus, which added an extra 6 percent to her pay. But the best part was this: the bonus was written out on a separate check, making it possible for a woman with a penny-pinching husband to hide the extra check without said penny-pincher being any the wiser.

  When John implemented the bonus in Sumter (and, later, in Elkin and Galax), absenteeism went down from 5 percent to 2 percent. One line worker thanked him effusively, admitting that she squirreled the bonus away for personal needs.

  Panty-hose money, she called it.

  John Bassett winked at the panty-hose money all the way to the bank. “People love to work for something,” he told me. “You just have to be sure that what you get out of it is more than what they get out of it!”

  “By the mid-nineties, a lot of furniture was shifting to China, but we still thought bedroom was immune because of the freight costs,” Wyatt Bassett told me. American furniture makers still clung to the belief that beds and dressers were not likely to be offshored because bedroom furniture was bulkier than tables and chairs, didn’t break down easily, and involved shipping a lot of air-filled drawers.

  Wyatt had grown up grouse hunting with his dad—though he never really enjoyed shooting the birds, his mother said. “He’s the one who, whenever we were anywhere with two cars, he always rode home with John and everybody else rode with me. He just really wanted to please him and still does.”

  JBIII recalls counseling his younger son before an admissions interview with Northwestern University’s Kellogg School of Management, then the number one MBA program in the country. Wyatt’s grades had been so-so at Washington and Lee—not unlike his father and grandfather before him, he had partied hard—though his GMAT scores were in the 98th percentile.

  “At the interview, they’re going to ask you if you have anything you want to say,” JBIII predicted. What Wyatt should say, advised his father, was this: As a fourth-generation soon-to-be factory manager, Wyatt was probably among the very few applicants destined to run a factory. Chances were even better that he would be the only one headed to Appalachia after graduate school instead of Wall Street.

  For the first time in family history, a Bassett would represent himself as an element of group diversity—which, considering the elite Northwestern B-school crowd, he probably was. The professors’ heads nodded, the interview went far beyond the allotted time, and the strategy worked. (“With every negotiation in life, ya gotta figure out: What do they want?” JBIII said.)

  When Wyatt returned to Galax with his MBA, Vaughan-Bassett was importing some components of its furniture—drawer sides from Russia and Latin America—and Wyatt had already begun traveling to Asia with his dad. The Chinese were getting better at manufacturing all the time. Cheap Chinese furniture no longer meant the Chinese furniture was cheaply made, and the Asian competitors had the economics of production and shipping nailed.

  By the time labor rates started to rise in one country, Larry Moh was already eyeing the next cheap market. As his son, Michael Moh, told me, “He always stayed ahead; he was always looking to the next developing market, even if the infrastructure there was poor, and the ways of doing business were more difficult.

  “If things were perfect, he knew, you were already too late.”

  Lucky for Moh and Zung, container lines were building larger and larger ships, driving down the cost per unit. When Zung first joined his brother-in-law’s company, in 1972, they paid $1,800 to float a container from Taiwan to the United States. Two decades later, they paid even less—about $1,500 per container. The ships were larger than before, and the Asian factories were now the shipping lines’ number one customers, which gave Zung the freedom to negotiate better bulk rates. “We guaranteed them two hundred containers a month one way, and more importantly, we said, ‘We can guarantee you another fifty or seventy-five a month coming back the other way,’ ” Laurence Zung recalled.

  The boats that had once returned empty to China now went back laden with lumber—much of it harvested in the Appalachians, not so far from the Smith River banks. Whether that wood would eventually be sawed and lathed into beds and dressers—then shipped right back to Bassett, Stanley, Vaughan-Bassett, and the rest—was the question.

  But before that question could be answered, John Bassett found himself staring down the barrel of yet another problem, one that was more familiar than the Asian invaders and every bit as deadly. In 1995, Vaughan-Bassett premiered a new suite of bedroom furniture
called Golden Memories. It was Victorian in design, with ornate carvings and brass drawer pulls. But according to furniture giant Lexington Furniture Industries, the suite did more than simply hearken back to the memory of Queen Victoria. It was a near replica of Lexington’s spin on that design, called Victorian Sampler, which had long been Lexington’s bread-and-butter suite, generating more than $50 million in annual sales and becoming one of the bestselling furniture groups in the history of the industry.

  Vaughan-Bassett employed a thousand people at the time and reported sales of $103 million. Lexington Home Brands, then the nation’s largest manufacturer of residential furniture, employed more than five thousand people and had sales of $426 million. And it was owned by Masco Corporation, the multibillion-dollar enterprise that had bought Moh’s Universal.

  In a federal lawsuit, filed in Greensboro, North Carolina, Lexington claimed Vaughan-Bassett had infringed on its intellectual property, a violation known as trade dress. And true enough, Vaughan-Bassett had bought the Lexington suite, examined every piece of it, and made a near identical copy that sold for two hundred dollars less than the Victorian Sampler. But a company’s trade dress could be violated only when the look of its product was so distinctive and well-known that the item itself served as a kind of trademark—like the egg-shaped L’eggs hosiery container or the curvy glass bottle of Coke.

  Clever copying skills had long cloaked a dearth of originality in the furniture trade, which had always suffered from a lack of brand loyalty among consumers. The surest bet, then, was to copy something that was already selling well, then sell it for less. As Mr. W.M. Bassett had told his brother, Doug, in 1960, after Lane Furniture filed a similar lawsuit against Bassett over the knocked-off modern table group called Acclaim, “There’s no way we can settle. It would nullify our whole design program if we did!”

  Besides, unless a piece was boldly contemporary or represented a wholly unprecedented design, chances were good that a clever furniture maker could find something in the annals of furniture history that resembled the newly produced suite—even when that designer had “knocked it off cold,” as the saying went. (That’s what Leo Jiranek had done in response to the Acclaim lawsuit, finding the original design, from the 1800s, in a Philadelphia museum.) There were usually earlier precedents to be found for any design. But now Lexington was trying to change the game, sending out cease-and-desist letters to competitors premiering designs similar to those for which Lexington already held a patent or a patent pending. The letters were working too; Bassett and several other furniture makers had backed off upon receipt of Lexington’s written threat. Vaughan-Bassett had too, initially, tweaking its first version of the Victorian knockoff and reintroducing it with a few changes, including a new name: Remembrances.