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

by Macy, Beth

  The barbs about quality came next. Domestically produced Bassett Furniture was poorly made, the opposition argued, and its company executives were resistant to change. In the company’s defense, Bassett CEO Rob Spilman told the commission that J.C. Penney had dumped the company in favor of Chinese imports, even after Bassett reengineered its products and slashed its prices by a third.

  After which J.C. Penney’s operations manager Jim McAlister leveled a torrent of grievances against its former vendor: Customer complaints had soared about Bassett Furniture defects. A quality audit of Bassett turned up a 50 percent defect rate—nicked finishes, for instance, and dresser drawers that didn’t open smoothly. The defect rate on imports was only 1.9 percent, he said.

  J.C. Penney had asked Bassett and others to come up with a corrective action plan to prevent further defects. “To this day, we have not received a corrective action plan from any of the domestic producers,” McAlister said.

  Rob Spilman all but called him a liar, reminding him that Bassett had won Penney’s 1999 Supplier of the Year award. “Penney has never told Bassett that it had any concerns about our quality or service.… The only reason we have lost this business to imports from China is price.”

  Speaking for the newly formed Committee for Free Trade in Furniture, importer Bill Kemp showed two slides targeting what he called the “disingenuous stand by the petitioners because they are doing the same thing I am: importing furniture from other countries.”

  The first slide was one of Vaughan-Bassett’s ads from Furniture/Today from the same series as the “Ohhh ship” caricature. This one had a man and a woman dressed in business suits, clutching briefcases and cell phones—and wearing gas masks. It had run in furniture-trade publications during the height of the SARS scare, with the kicker: “Is this how your buyers dress for work?”

  “While I’m disturbed by the ad and it really bothered me, [along] with a lot of the people I work with in plants around the world, the point I would like to make about it is, in the left-hand corner there’s a sign that says, ‘Vaughan-Bassett Furniture, made in the USA,’ ” Kemp said.

  Then came Kemp’s punch line. His next slide featured a furniture carton bearing Vaughan-Bassett’s logo and Made in China prominently written on its side. The photo had been taken years earlier, Wyatt said later, before the company slashed its imports to 1 to 2 percent. (In 2013, it did away with imports entirely.)

  Kemp throttled the coalition’s biggest public companies—Stanley and Bassett—by quoting from their own Securities and Exchange Commission filings. Stanley “continues to implement a blended strategy of combining its domestic manufacturing capabilities with an expanding offshore sourcing program… [that] will lower costs, provide design flexibility, offer a better value to its customer.” Bassett Furniture reported to the SEC that it was embracing change in the industry “by reducing its domestic production of product that can be more efficiently sourced overseas.”

  Jeffrey Seaman, the CEO of Rooms To Go, then the nation’s largest retail chain, said the petition was really about the loss of control—and profits—manufacturers felt when they realized “the retailers were smart enough to do it” themselves.

  “So if you were Vaughan-Bassett, hypothetically, bringing in a bedroom [suite] for $1,000, reselling it to some of their customers… for $1,500 and that retailer sells it for $3,000, then you have another retailer who says, ‘We don’t need you, Mr. Vaughan-Bassett, to import for us. We’ll bring it in, we’ll pay $1,000 or $1,100 to import it and we’ll sell it for $2,000’—well, the retailers selling for $3,000 are going to try to import it themselves.”

  In a follow-up hearing, Greenwald summarized his opposition by quoting from a 1960s British television program called Beyond the Fringe:

  It’s a dark office in a war room. There is an elderly colonel who calls in an enthusiastic young lieutenant, Lieutenant Jenkins.… “Jenkins, we’re going to drop you 300 miles behind enemy lines and we want you to attack the Germans from the rear.” And Jenkins says, “Yes, sir. But why are we doing this, sir?”

  The colonel replies, “These are dark times, Jenkins, and what Britain now needs is a futile gesture.”

  Greenwald beseeched the commissioners not to interfere with globalization’s natural economic course. “I hope you are not in the business of making futile gestures,” he said.

  Joe Dorn had spent too many Saturday mornings on the phone with John Bassett not to have his own gotcha moments carefully rehearsed and finely tuned. His first return volley was to point out that the Furniture Retailers of America, newly organized to oppose the petition, in no way represented all of the nation’s furniture stores—or even a majority. As proof, he ceremoniously dropped letters from seven hundred retailers on the ITC table. They landed with a thud.

  John Bassett had spent the past year calling many of the seven hundred stores, mostly mom-and-pops, and beseeching his sales staff to gather letters in support of the petition. They were now the bulk of his own customers—and the core of his VBX sales—and they were already being priced out of the market by container loads of furniture they were not themselves large or rich enough to buy.

  Stick to the statute, Dorn reminded the commissioners. The statute asks the commission to consider the impact of imports on domestic producers as well as on American factories and American workers.

  The petitioners had lost more than half of their operating income from 2000 to 2002. In three short years, sixty-eight bedroom-furniture plants had closed.

  “Furniture Brands has been more hurt by imports from China than any member of our coalition, but they won’t admit it,” Dorn said. “They’re afraid that those Chinese factories will cut them off if it does not oppose the petition,” and that major retailers will stop buying from it for the same reason.

  “Most importantly, Furniture Brands is afraid because it has bet the future of its company on dumped imports from China,” Dorn said. “It cannot afford to tell Wall Street that its strategy is predicated on unfairly priced imports.”

  Dorn punctuated the point by introducing as evidence paperwork for eight applications for Trade Adjustment Assistance, representing eight of Furniture Brands’ shuttered factories. “In each case, the Department of Labor certified the employees as eligible to receive adjustment benefits based upon a finding that increased imports contributed materially to their layoffs,” he said.

  The ITC, in other words, need look no farther than another branch of the federal government for proof that Furniture Brands’ workers had been injured by Chinese imports.

  After the first hearing, Dorn’s firm had limousines waiting for JBIII and his crew. After the second, the coalition was faced with raising more money for legal fees, and to get back to Dorn’s office, those same clients could either take a taxi or walk. On the way out of the ITC fortress, John Bassett smiled at Wyatt and asked what he thought of their top-shelf lawyer. Was he really worth all the money they were in the midst of trying to raise?

  Father and son were strolling past the Smithsonian when Wyatt gave his answer. “If I were on trial for murder and I was innocent, I’d want Joe Dorn representing me.”

  But if he was guilty, he’d want John Greenwald on his team. Greenwald reminded Wyatt of his mother, Pat. As a child, when the family arrived home on a Sunday night after a trip and found the pantry bare, Wyatt marveled at his mother’s ability to fashion a remarkable meal out of toast and bacon with a sauce conjured up from stale cheese and a can of beer.

  Years later, Wyatt laughed as he recounted this exchange with his dad. He was sitting at his Vaughan-Bassett desk, which was littered with wood samples and drawer hinges, components of a new suite he was helping design. (He had just returned from a powwow upstairs with engineer Linda McMillian, and he reeked of her Marlboros.)

  Greenwald didn’t have the Tariff Act on his side, Wyatt said, and yet he had still managed to fashion “forty-five minutes of very entertaining stuff.… It may not be legally sound, but has he whipped someth
ing out of nothing? You’re damn right he has.”

  Within a month, the Department of Commerce initiated its investigation to determine whether the Chinese factories were truly dumping. In results released a month later, the ITC unanimously voted in the coalition’s favor, pronouncing that domestic workers and manufacturers had indeed been injured by illegally dumped imports—something the people in Bassett could have shown them if anyone had bothered to look.

  With the Byrd Amendment still intact, the Chinese dumpers were going to have to pay. But the preliminary duties assigned in 2004 were disappointing to JBIII and his sons: 14 percent, compared to the 35 to 40 percent Dorn had estimated.

  But Dorn had a plan B that he believed would net the coalition its rightful due. The coalition had the right to participate in annual Department of Commerce reviews of the dumping margins. The process was as complicated as it was controversial, but, if successful, it just might level the playing field for the coalition. And it would very definitely bury Wyatt Bassett in spreadsheets and legal bills for many years.

  21

  Factory Requiem

  Should I hate a people for the shade of their skin Or the shape of their eyes or the shape I’m in.

  Should I hate ’em for having our jobs today No I hate the men sent the jobs away.

  —JAMES MCMURTRY, “WE CAN’T MAKE IT HERE”

  Just before the preliminary hearings, Bassett Furniture was on the verge of closing its Dublin, Georgia, plant, and Bassett CEO Rob Spilman prepared to deliver the news. The weekend before his flight to Georgia, he showed up at Joe Philpott’s front door with a fifth of single-malt scotch.

  “He said, ‘I got bad news. Monday morning, we gotta close the damn plant,’ ” recalled Philpott, the retired senior vice president for manufacturing. “It was like drinking at a funeral,” he said.

  Henry County, once home to the largest percentage of manufacturing jobs in Virginia, now had the state’s highest unemployment rate—13.3 percent, three times higher than the state average. And the two executives were about to hold their first factory wake.

  That week Joe Philpott’s cousin bet him a hundred bucks that every one of the Bassett factories would be closed within five years. Philpott shook his head as he recounted the story, chuckling at his own naïveté. He had refused the bet. “You’re crazy as hell,” he told his cousin.

  It was 2003. Bassett still had six plants in North Carolina and Virginia—including the company’s cash cow, Bassett Superior, the one Philpott had managed himself for decades. His baby.

  “I couldn’t steal your money like that,” Philpott had said.

  But Rob wasn’t so hopeful. He’d seen what they were up against in China with his own eyes. His first trip to China was as a Bassett Furniture vice president in 1994, back when some Asian managers still rode bikes and wore straw hats. On one of his subsequent thirty trips, he toured Dongguan from the back of Lacquer Craft executive Samuel Kuo’s scooter. “He wanted to sell to me, and it was just mind-blowing how big this factory he was building was,” Rob recalled. “We had big factories here, but this was three times the biggest factory I’d ever seen. There were so many workers huddled around the furniture, they were like bees.

  “I thought, My God, these guys are planning to take over the world, which of course they were. They were like we were in the fifties and sixties,” he said. “They were like my great-grandfather Bassett… and, man, do they work.”

  His father was incredulous when Rob reported back on the lack of safety measures in the Dongguan finishing rooms—no fans, no masks, nothing. Rob actually had a fondness for the smell of finishing material, but these fumes were so strong he had trouble catching his breath. “How do they stand it?” he had asked the plant manager, choking as he spoke.

  “Spray two years and die,” the manager said.

  At which point there would be twenty more lined up to take the fallen worker’s place.

  “How you coming along with my nephew?” John Bassett asked me. Halfway through the writing of this book, I’d spent weeks camped out with my laptop and notebook in Bassett but had not once penetrated the Taj Mahal walls. So I wasn’t coming along too well with his nephew. Still angry about a 2012 newspaper series on the aftereffects of globalization I’d written a year before, Rob ignored my first several interview requests.

  Behind the scenes, a relative intervened on my behalf, pointing out that my book would be published regardless of whether he cooperated or not. That same relative (who asked not to be named) then coached me to e-mail Rob again and explain that, yes, this was my first book, and, no, I wasn’t really a business writer, but I had won more than a dozen national journalism awards, as well as a yearlong Nieman Fellowship in Journalism at Harvard in 2010.

  “He doesn’t take you seriously,” the relative said.

  So, reluctantly, in an e-mail, I dropped the H-bomb.

  A day later, Rob agreed to meet with me—for exactly one hour, preferably after his workday, the implication being that he would not waste work time on the likes of me.

  When Rob gave me nearly three hours the first time we met, I understood immediately why industry insiders described him as being more likable than his mom, dad, and uncle combined. “I’ve been around a lotta heat my whole life,” he said. “Hell, everybody can’t be that way.”

  When he first became CEO, his dad called him regularly, never saying hello but simply launching into a tirade about some decision Rob had made, a tirade that usually began with “What in the hell were you thinking?”

  Months into it, Bob Spilman caught his son on a bad day.

  “Dad, are we friends?” Rob stopped him mid-rant.

  “Uh… well… yeah, I guess we’re friends.”

  “Look, Dad, as a friend, get off my fuckin’ back!”

  Astonishingly, once Rob stood up to his father, he did.

  Rob described how the task of plant closing fell mainly to him when he became CEO in 2000. It was part of a wholesale strategy shift that favored imports and retail stores, but it resulted in the laying off of thousands. He had initially been optimistic about joining his uncle’s coalition, hoping the antidumping duties might stave off the last of the plant closures—and maybe even keep the smokestacks humming at Bassett Superior Lines, by then the only furniture factory still operating in Bassett.

  But unlike Vaughan-Bassett, Bassett Furniture was a publicly held company directed by a board filled with figure men, as Spencer Morten referred to them—high-powered CEOs who were a Who’s Who of Southern commerce. “We’ve been a public company since 1930, with shareholders that have to get profits,” Rob said. “At the end of the day, we are not a social experiment.”

  The first round of antidumping duties, or Byrd money, was disbursed to petitioners in 2006, and Bassett Furniture’s share would amount to $17.5 million over the next six years. “The duties helped some, no question, but I felt like the horse was already out of the barn by the time they arrived,” Rob said.

  The ITC decision made the duties possible, but the ITC could not stipulate what the recipients of the cash had to do with the money. Bassett Furniture directed much of its Byrd money toward reinventing its retail operation, Bassett Home Furnishings. “A lot of it was perpetrated by the unfair advantage that the Asians had,” Rob explained. “Our customers gleefully went over there [to Asia] and started buying directly from them so they could get it cheaper, just like Walmart’s done.

  “It wasn’t our idea to change that model of prosperity we’d been operating under for decade after decade,” he added. “The world changed. And it’s been painful for us as a company to change. It’s been emotionally taxing.”

  The evening after one of the plant closings, Rob called his school-age children together to watch the local cable-television news. The station was known for its populist bent, and Rob knew the story would make him look bad. He told them, “Forget your homework and sit down and watch this with me tonight because your dad’s gonna get crucified.”

&n
bsp; His daughters cried, and his son was furious. Rob told them, “People are scared; they’ve lost their jobs. And I want you to realize what we’ve had to do, how serious this is. You’ll hear about it at school. You’ve got to be sensitive to what’s happening here. You’ve got to understand it and know y’all are fortunate kids. This is serious stuff.”

  Down in Dublin, retired plant manager Buck Gale felt sick to his stomach as he watched his former workers file out of the factory for the last time. Retired for two years, he’d had Bassett’s Dublin plant earning seven-figure profits annually on his watch, surpassing even Bassett Superior Lines. Gale said he personally reinvented the production process for the low-end line of Bassett’s products—only to be stymied by the company’s new interest in higher-end products and its growing Ethan Allen–inspired retail program. (By 2003, Bassett Furniture had doubled its number of stores in five years, to 101.)

  “Our product was priced so much lower than the other Bassett bedroom lines, it didn’t blend with the image Bassett wanted,” Gale said. “I wanted to, just pardon my French, kick somebody right in the damn teeth,” he added.

  Buck had grown up in Bassett and still owned property there. As a child, he’d worn John Bassett’s hand-me-down clothes, passed down to his mother by John’s mother at Pocahontas Bassett Baptist Church.

  “They lost the fight, but they lost it not because of the factory workers in those plants. It wasn’t nothing but greed,” Gale said, so angry both times I talked to him on the telephone that he sounded near tears. Paul Fulton, the CEO who was supposed to be the placeholder until Rob Spilman grew seasoned enough to assume the mantle, had closed or sold off twenty-eight plants during his three-year reign.