2006 Industry Reports: Manufacturing
Factories dig niches to divert job runoff
TREND: Manufacturing employment statewide has declined from about 820,000 in 1995 to about 570,000 in October.
OUTLOOK: More job losses, but the worst may be over. Efficient niche manufacturers in old-line industries such as textiles will survive.
Among North Carolina manufacturers, one topic dominates most discussions: globalization. Textile makers seem obsessed with it, and many other Tar Heel manufacturers are at least wary of foreign competition, especially from the surging Chinese economy. “Everything is China,” N.C. State University economics professor Michael Walden says. “China is getting into virtually anything that can be manufactured.”
Textile and apparel makers have been hit hard by cheap Chinese imports for years, and the siege continued last year. Trade barriers to Chinese goods fell at the start of 2005, which led to even more imports and a new round of plant closings in North Carolina and elsewhere in the U.S. From January to July, for example, imports of Chinese polyester fabric rose 1,034% from the same period in 2004, according to the Washington-based American Manufacturing Trade Association Coalition. Imports of Chinese wool suits increased 890%. Meanwhile, 31 U.S. textile plants closed, and the state’s long manufacturing decline continued. In the first 10 months of 2005, the state lost more than 10,000 manufacturing jobs.
The federal government provided some relief in November. It capped growth in Chinese apparel imports at 10% for 2006, 12.5% for 2007 and 15% for 2008. Growth in textile imports will be limited to 12.5% in 2006 and 2007 and 16% in 2008. Jim Chesnutt, CEO of Washington-based National Spinning and chairman of the National Council of Textile Organizations, lauded the agreement but warned that China remains a long-term threat partly because it subsidizes its textile and apparel industries. Tar Heel companies have responded by downsizing and shifting production to lower-wage countries. From 2000 to 2004, textile and apparel employment in the state shrank 41% to about 100,000. Greensboro-based apparel maker VF had 75,000 employees in 2000 — 38,500 foreign and 36,500 domestic. By the end of 2004, it had 53,300 employees — only 17,500 in the U.S. It plans to shut a jeans plant in Wilson by June, axing 445 jobs, and transfer some of the work to Costa Rica and Honduras.
Greensboro-based International Textile Group, a holding company that owns several old-line Tar Heel companies such as Burlington Industries, Cone Mills and Guilford Mills, is following suit. Guilford Mills said in April that it would cut 230 jobs at plants in Fuquay-Varina and Greensboro. In November, Cone said it would close its denim operation in Rutherford County, eliminating 225 jobs. It’s building a factory in China.
A manufacturer that is adding domestic jobs is Greensboro-based hosiery maker Kayser-Roth, which said in July that it would spend $7 million to expand its Burlington operations, creating 180 jobs. It has thrived by using high-tech equipment to offer quick turnaround at competitive prices for intimate apparel and legwear.
Kayser-Roth is a glimpse into North Carolina’s future, says James Bell, president of the North Carolina Manufacturers Association. Clothing makers that are technically savvy and focused on niches will survive but provide only a fraction of the jobs that the industry once did. “The companies that are still in existence in that industry probably have a fairly optimistic future,” Bell says. “If they lasted this long, they are probably in niche markets.”
Furniture companies also have been hit hard by rising Chinese imports, particularly of wood furniture. In September, Bassett, Va.-based Bassett Furniture Industries said it would close a factory that makes wood bedroom furniture in Mount Airy, cutting 300 jobs. Among the other furniture layoffs announced in 2005: Lenoir-based Bernhardt Furniture cut more than 250 jobs and halted production at a Lenoir factory; Thomasville Furniture Industries cut 710 jobs in North Carolina; and Hooker Furniture of Martinsville, Va., closed its Pleasant Garden wood-furniture factory, eliminating more than 200 jobs. State officials had hoped for help from the automotive industry. But it faces problems,too. Citing slow demand, Portland, Ore.-based Freightliner said in August that it would cut 260 jobs at its Mount Holly truck factory.
Tony Copeland, the state’s assistant secretary of commerce for business, industry and international trade, says more job losses are likely. But the worst might be over, and some jobs are being replaced. One of the state’s biggest recent catches: a Dell computer-assembly plant that opened in Winston-Salem in October. It’s expected to create up to 1,500 jobs within five years.