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

by Macy, Beth

  That sounded good to George Cartledge Jr., a second-generation retailer based in Roanoke whose eighteen-store Grand Furniture chain had been selling Vaughan-Bassett Furniture since John Bassett’s father-in-law was in charge of sales, some fifty years before. Grand was big enough to import containers, and it managed its own store-credit program too. But the advertising assistance would now come directly out of the Vaughan-Bassett sales rep’s commission, which resulted in a discount for the store.

  More important, Cartledge admired how tirelessly JBIII worked—“At his age, he doesn’t have to”—and the way saving the business was an all-hands-on-deck enterprise. Factory wages were frozen, including managers’, and sales rep commissions slashed.

  When Ashley Furniture asked Grand to join the FRA in opposition to John’s coalition, Cartledge immediately refused. “We’re not that concerned about whether the Chinese have to add another six or eight percent onto the cost,” he said, even though Grand imports about 70 percent of its bedroom and dining-room inventory. Cartledge tries to sell as much made-in-America furniture as he can but worries the American consumer is already hooked on imports and what he calls “disposable furniture.”

  That trend has been buoyed by the surge in do-it-yourself decorating shows; catalogs like Restoration Hardware’s and Pottery Barn’s; and Super Bowl deals on Ashley recliners for $249—for sale in your local grocery store, not to mention Walmart and Big Lots. (“If there’s something wrong with that recliner, do you think Kroger knows how to fix it?” John Bassett snaps.)

  No one buys a sofa with the idea of passing it down to kids and grandkids anymore, lamented Cartledge’s son and the company president, George Cartledge III. Grand’s number one upholstered-sofa color? Beige. “Because beige is a blank canvas. Consumers can take beige and put anything they want with it.” Four to six years later, the younger Cartledge said, eight if they’re lucky, the stained beige couch gets hauled to the curb—and the typical customer returns to do it all over again. As a New York Times writer recently observed, “You never hear children fighting over who gets the sectional.”

  Grand picked up most of the slack when the fifty-one-store chain Schewels Furniture cut nearly all its Vaughan-Bassett orders, according to Vaughan-Bassett sales rep Mike Micklem. In a last-ditch effort to maintain Schewels’ business, John personally went to meet with Marc Schewel, the fourth-generation CEO, to hear him out.

  “John was great,” Micklem recalled. JBIII “let [Schewel] talk for longer than he normally listens to anyone,” and he took copious notes in a rare (for him) show of tongue-holding. Though he often has a tin ear when it comes to workaday diplomacy, his hearing tends to sharpen when there’s money at stake.

  Schewel advised JBIII to read Milton Friedman’s Free to Choose in a speech that would have made the other Friedman proud (Thomas L. Friedman, author of The World Is Flat; no relation). When the low-paying furniture jobs were among the last to go overseas, Schewel explained, Americans everywhere paid less for imported furniture, just as they had for shoes and clothes, creating a rise in living standards across the board.

  In the case of his stores, imported bedroom suites were typically 20 to 25 percent cheaper than domestically made ones. Because of cheaper hand labor overseas, a decorative suite that would have cost twenty-five hundred dollars years ago now costs fifteen hundred dollars, a benefit Schewel likes to refer to as “a higher perceived value.”

  When Schewel was finished talking, John gave his perspective, and he focused on the part the Friedmans typically overlooked in their zeal to promote offshoring: the thousands of displaced workers who were too broke to benefit from globalization’s consumer deals. “Look, the people who shop in your stores are the people we’re trying to protect: the factory people,” he said.

  By the end, Marc Schewel and John Bassett were laughing and shaking hands—and agreeing to disagree. Schewel told me later it was the better value of the imports, not the antidumping fracas, that kept him from buying more Vaughan-Bassett furniture. (He still carries one Vaughan-Bassett group.)

  “It was nasty, and to be honest, from a rep’s standpoint, we just wanted it to be over,” Micklem said. “You got so tired of going into stores and, whether they were for you or against you, that’s all they were talking about.”

  What John Bassett never said publicly was that he believed the retailers were pocketing much of the profits rather than passing them along to their customers—a claim every retailer I interviewed vehemently denied. “John is full of BS,” as Schewel put it. “I would say you could get a little higher markup initially, but pretty soon competition took care of that.”

  Schewel did weaken his argument when he added, “What difference does it make? Consumers were getting a much better deal even if dealers got a little higher markup.”

  Jake Jabs, who had once ordered two to three million dollars of furniture a year from Vaughan-Bassett, had a similar response, though he dropped his entire Vaughan-Bassett order. Probably some of those “smaller hillbilly North Carolina and Virginia retailers” did pocket more profits by selling imported furniture, he said. “But here in Colorado, we have a seventy percent market share, and we didn’t get to have that by not giving people a value. We mark up goods thirty-five percent with everybody, whether they’re domestic or import, whatever.”

  The political drama came to a crescendo that fall shortly after the preliminary duties began to arrive. Newspapers and Furniture/Today played the story down the middle, but many economists and politicos were as riled as the retailers. The Cato Institute called the case “the poster child for antidumping reform.” Politicians were too easily cowed by the phrase level the playing field to wade through the complexities of the law, the libertarian think tank argued.

  “The filing of this case was a tactical maneuver by one group of domestic producers that seeks to exploit the gaping loopholes of the antidumping law to get a leg up on its domestic competition,” trade analyst Daniel J. Ikenson wrote. “This case is a perfect example of how porous antidumping rules are abused for commercial gain.”

  For John Bassett, the most surprising moment of all had nothing to do with duties or retailers and everything to do with another cheap Louis Philippe. This time, the knockoff was his own creation, and a Chinese manufacturer who felt he had dibs on the design didn’t like it one bit.

  The manufacturer and his lawyer visited John in the Vaughan-Bassett showroom at High Point and threatened to sue him for copying their suites.

  “He said, ‘Our Louis Philippe is very similar to your design,’ and I said, ‘No, it’s not. It’s exactly like your design, and I have every right to continue making it,’ ” John recalled.

  Imagine the publicity: in the midst of sixty-plus American furniture factories shutting down because of Asian imports, a Chinese manufacturer was going to sue Vaughan-Bassett, one of the last domestic factories standing, because the company’s executives had used their knowledge of trade-dress laws to knock off the guys whose knockoffs had been hammering them.

  “What else you got?” John snapped, according to several Vaughan-Bassett managers who’d watched the exchange. “Because I’m not gonna waste my time talking about something this uninteresting.

  “Go ahead, sue me!”

  There was no denying it: He was already the bogeyman. Why not revel in it?

  But his interactions with the Chinese weren’t all heated. In the lobby outside a competitor’s showroom, John noticed a scrum of Asian businessmen whispering and pointing at him. He imagined they were saying, There he is, the man giving us all this trouble!

  He walked over, smiled, and introduced himself, extending his hand. They giggled and asked if they could have their photo taken with him—to show their friends and colleagues back home. Otherwise, who would believe it?

  Flash went the cameras, and smiles all around. China’s public enemy number one had become a tourist attraction.

  Remember the five-point list? Number three was the call to constantly chang
e and compete. John wasn’t going to stop with the antidumping duties. Back in Galax, he gathered his designer, his sons, and their chain-smoking engineer, and together they took aim at their import-heavy competitors: Pottery Barn, Broyhill, Stanley, and the like. Before long, the sawdust was flying from a new Vaughan-Bassett suite called Cottage Collection. It had casual, modern lines and more finishes than the company had ever offered. It wasn’t complicated, requiring little hand labor and minimal machine downtime. A store like Grand could offer it at two-thirds the price of a suite from the more upmarket Pottery Barn, with its stylized, higher-rent showrooms.

  It looked at home in everything from a beach house to a country cottage. Colors ranged from creamy white to robin’s-egg blue to dark cherry—the last one suggested by a finishing-room employee.

  “You think it would look good in cherry, hell, make me a sample up!” JBIII boomed. While you’re at it, he added, make one in oak, because the Asians have to import most oak from the United States, turn it into furniture, then ship it back, whereas we can get it right here. “Oak is one of the woods that’s very hard to duplicate in the Far East,” he said. “There’s such a thing as Chinese oak, but it’s got a face only a mother could love.”

  Then came a second new line of furniture. He called this one the Appalachian Hardwood Collection and premiered it with the ad-campaign slogan “We’re not afraid to show our backsides.” The ad featured him standing behind a turned-around dresser, so customers could see the authentic, solid-oak underpinnings in the back.

  When a Philadelphia sales rep suggested a youth line for the Cottage Collection, the company introduced twin beds, bringing the offerings to six finishes and four bed sizes. A sales rep could now go anywhere in the country and sell the hell out of the Cottage Collection. Rustic oak appealed to the Midwesterners, pine was popular in Texas, and folks along the Outer Banks ate up the robin’s-egg blue. The simple design made it a natural competitor against the imports because it required less labor, and the routers didn’t require constant resetting.

  “What you do is, you put on your business brain and you say, How can I compete in America?” JBIII repeatedly told me. “That’s what this country needs to do more of, to get off its ass! Look, we do things football coaches do. We don’t do things MBAs do. Don’t make it complicated.”

  A smart factory re-creating its product line as a direct response to a competitor is no different from a team shifting its defense in the face of an opposing quarterback who can both throw and run. The Cottage Collection looked like the casual stuff the yuppies were ordering from Pottery Barn and Restoration Hardware, but with minimal labor and VBX delivery, it could be made faster and more efficiently. Which helped it become the company’s bestselling suite for six years in a row.

  In May 2013, JBIII spotted another hole in the defense when he learned of the bankruptcy and impending closure of a Kentucky-based importer of entertainment consoles. The company had been the only one of its kind east of the Rockies, and even though Vaughan-Bassett hadn’t made those products in years, JBIII considered the closure and the booming flat-screen TV market and saw an opportunity.

  A dealer had mentioned that he didn’t like having to assemble the stuff coming in from Asia, and he didn’t like that the imported consoles were available in only three finishes.

  Never mind that JBIII would be having back surgery that summer, and never mind that he’d have to buy all new machinery if the company suddenly shifted to offering consoles and tables. (Wyatt was also working on their new line of occasional tables, which had been among the first products to be offshored. “The smaller guys we cater to, they can’t bring in containers of these,” he said.)

  By the time the Kentucky factory closed, Vaughan-Bassett’s salesmen were pitching stores with the new products, which were pre-assembled and available in six colors. And they could ship them out within forty-eight hours. “Nobody’s turned me down yet,” Micklem said in August 2013. “Our dealers saw that it was an easy thing to add to their orders, and it’s going gangbusters.”

  John Bassett might have been flipping China the bird, but he knew enough not to blast the American retailers. Not for the record, anyway. In an article that appeared in the Wall Street Journal in the summer of 2004, Jake Jabs skewered John, but John said nothing personal about Jabs in response; he merely described what his factory was doing.

  “We took the high road and never criticized anybody for their choices,” he and Doug and Wyatt all told me repeatedly, as if reading from a family-authored playbook. All the change that roiled the industry—the laid-off workers, the lost customers, the severed friendships—was painful for everybody involved, they said.

  The high road looked lofty in print. But anyone who’d heard JBIII’s desert-island speech—about the lone girl on an island with twelve restless men—had to know there were a few other motives at work. If the dust settled and he managed to be among the very last furniture-factory men left standing in America, there was a chance he might win back the angry retailers who had dropped him.

  23

  Copper Wires and Pink Slips

  Some bones broken will forever be weak. They will ache and cause pain. The best we can hope for is acknowledgment. What drives me crazy is when people don’t want to acknowledge!

  —U.S. POET LAUREATE NATASHA TRETHEWEY ON THE IMPORTANCE OF DOCUMENTING PAINFUL HISTORIES

  Between 2001 and 2012, 63,300 American factories closed their doors and five million American factory jobs went away. During that same time, China’s manufacturing base ballooned to the tune of 14.1 million new jobs.

  That “giant sucking sound” predicted by Ross Perot ended up being less like a freeway sinkhole and more like a slow-motion collapse. And the media grew bored with the long-drawn-out story, as it often does. The U6 unemployment rate, which includes both the unemployed and the underemployed, continued to hover in the 14 to 15 percent range, but the political will to fix it seemed to fade along with the media’s interest.

  “The Byrd Amendment is so complicated that most reporters don’t really understand it, but it’s hugely important,” said Richard McCormack, the coauthor and editor of ReMaking America and the editor of Manufacturing and Technology News, a trade publication. “Or they write about outsourcing one time and think they’ve covered it.”

  National news outlets, many of them funded by Wall Street and retail advertisers, allowed the narrative of globalization to be hijacked by multinational corporations and mainstream economists, McCormack believes. “It’s very, very sad that these people have just stayed on their theoretical high horse while the country’s gone completely bankrupt because we make so little here of what we actually purchase,” he said.

  Or as Harvard labor economist Richard Freeman told me, after a long rant about how the wealthy have gotten almost all the benefits of free trade, “Most economists don’t know any real people. And, please, you can quote me on that!”

  Yet in the small towns of Martinsville and Bassett, where the Families had actively fought off the development of a diversified economy—to keep the wages depressed—unemployment was the prevailing story, with the highest rates in the state. And people were wondering: What good did it do to have access to cheap consumer goods if you had no money to buy them?

  Even globalization guru Tom Friedman, writing in The World Is Flat, briefly acknowledged the agony caused by offshoring: “When you lose your job, the unemployment rate is not 5.2 percent; it’s 100 percent.”

  Friedman’s 5.2 percent is much closer to the unemployment rate in Bethesda, Maryland, where he lives in an 11,400-square-foot mansion with his heiress wife. But it comes nowhere close to capturing the truth of Martinsville and Henry County’s double-digit unemployment and the problems that result, from the increasing need for food stamps and free school lunches and Medicaid to the rising rates of teen pregnancy and domestic violence.

  The Washington insiders may live in cushy suburbs like Bethesda, but five hours away a person driving into Bas
sett today will pass by trailer parks and a plethora of the small, old-fashioned nursing facilities called rest homes. Going south from Roanoke to Bassett, those in the know will drive very slowly on the curvy four-lane highway as they navigate the speed trap at Boones Mill. They’ll wind their way through Clearbrook, where in 2008 a twenty-four-year-old Iraq veteran suffering from PTSD and depressed about his lack of viable job prospects opened fire on county police after a low-speed chase—forcing officers to shoot him dead. There’s a makeshift memorial by the side of the road: a gravel-filled cinder block adorned with an American flag and a cross on which his father has written USAF and his son’s name, Micah Sword, in Sharpie marker.

  These small-town stories rarely made their way into the New York Times or the Washington Post. Small media outlets and regional papers like the one I write for still cover every factory closure and every new release of unemployment figures, but our resources have dwindled drastically with the Internet explosion. Besides, smaller media have never had the authority or the scope, to say nothing of the resources, to follow what happens at the WTO.

  Driving through Henry County now, you wouldn’t guess that it had once been the state’s industrial powerhouse, a place that launched governors, Fortune 500 CEOs, and Speakers of the House. In 1963, a Roanoke Times reporter swooped into Martinsville to write a three-part series about the industrial boomtown, which was then boasting an unemployment rate of less than 1 percent. Bassett Furniture was sinking two million dollars into its new Taj Mahal offices at the time. Stanley Furniture and American of Martinsville were expanding to the tune of a million dollars each, and DuPont was adding a twenty-eight-million-dollar addition onto its nylon yarn plant, already a behemoth tucked into a five-hundred-acre horseshoe bend of the Smith River.