Answering to a hirer power

Turmoil roils payrolls of companies that can’t help but feel the weight of the world on their shoulders.
By Edward Martin

Continental Tire North America gave workers at its Queen City plant an ultimatum in January: Surrender 35% of your wages and benefits or we’ll cut employment almost in half, slashing 513 jobs, leaving only 573. Even then, we still might shut the place down and shift production — more than 20,000 tires a day — to other plants, including a new one in Brazil.

“The Charlotte plant has the highest manufacturing cost of all Continental plants worldwide,” says Rick Holcomb, general counsel for the Charlotte-based subsidiary of Germany’s Continental AG. “We can make tires more cheaply in Europe, Romania, Malaysia.” Things were different in 1978 when Mark Cieslikowski, president of the union local, came to work for the company, then General Tire. “Back then we were fighting the rest of the industry — Goodyear, Firestone, Goodrich. Now we’re fighting globalization — the rest of the world.”

In ways big and small, say experts who compiled Business North Carolina’s list of the largest for-profit employers, the global factor increasingly impacts employment in the state. “The growing companies are not the traditional manufacturers such as tire, furniture and textiles,” says Michael Luger, director of the Carolina Center for Competitive Economies at UNC Chapel Hill’s Kenan Institute of Private Enterprise. “What you see at the top of the list is Wal-Mart, food stores, financial services. Companies involved in business-to-customer relations aren’t portable, so they’re the ones that’ll increasingly be dominating the list.”

Those that probably won’t be? Manufacturers, including those that make automotive components, one of the state’s top recruiting targets. Count among them Continental, which fell from No. 65 on the 2005 list to 98 this year; Asheboro-based Klaussner Furniture Industries, which slid from 37 to 69; and Greensboro-based Unifi, a textile maker whose employment dropped from 3,470 to 2,110. It went from No. 54 to 90.

Continental Tire’s labor costs, including benefits, total about $40 an hour in Charlotte, Holcomb says. The company wants to cut that to $26, which would save $32 million a year. Its German parent also owns Continental Teves, which has brake plants in Morganton, Hendersonville and Asheville.

Wayne Ranick blames mismanagement and the global trend toward consolidation and mergers. He’s a spokesman for the Pittsburgh-based United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union — which has done some merging and consolidating of its own to keep abreast of its members’ employers.

“Most companies now aren’t local or even national,” he says. “Large multinational companies have no commitment to operate in any particular place. They simply follow the flight of capital and set up plants where the labor costs are lowest and there are the fewest environmental regulations.”

Wachovia economist Mark Vitner partly agrees. “Clearly it’s not a level playing field. That can be quite a shock. One of the leveling factors is that productivity is generally higher in North Carolina and the nation, but in exchange workers get higher wages. Now inexpensive communications technology is allowing production to move much more quickly to other parts of the world, which allows companies to afford more technology than in the past. So they’re competing not just on the basis of lower wages but new production facilities.”

The Charlotte economist adds, “All in all, 2005 was a pretty good year. We added about 80,000 jobs across the state, mostly high-paying. It was the lower-paying jobs that had the most trouble competing globally. The high-paying ones tend to be more capital intensive and are doing better.”

Vitner says he expects similar job gains in 2006, with growth in high-tech, transportation and distribution, trucking, warehousing and railroading. Few, though, expect Continental’s segment — automobile original-equipment and after-market products — to bounce back. Holcomb says recent cutbacks at Ford and General Motors and the bankruptcy of Troy, Mich.-based supplier Delphi look ominous. “It’s cheaper to produce a lot of these products overseas.”

That, of course, is a matter of dollars and cents. Luger says other losses are harder to measure. “One question I occasionally run into is not so much about capital as it is about the future of leadership in the state. Now companies are moving elsewhere and are more controlled from elsewhere. It’s going to require that we develop a new kind of leadership.”