Moving furniture

Bruce Cochrane resurrected his family business because he believes manufacturing will come back from China.
By Vikki Broughton Hodges

Bruce Cochrane sits in his father’s former office, surrounded by photos documenting his family’s history. His great-great-grandfather turned wood into church pews. His great-grandfather opened a factory in Lincolnton that made fireplace mantels before focusing on oak and pine dining-room sets. By the late 1930s, it employed 50. When his father, Theo, became president around 1960, he introduced pieces crafted from cherry and the popular Threshers collection. In 1982, when the new factory opened, Cochrane Furniture Co.’s workforce topped 1,000. “It is not just about making fine furniture,” his dad would say. “It is about the good people that make the fine furniture.”

The family sold the business in 1996 to West Lafayette, Ind.-based Chromcraft Revington Inc., which over the next decade cut back the Lincolnton workforce as it moved jobs to China, joining droves of furniture makers chasing cheap labor. Between 2001 and 2005, the U.S. industry lost 230 plants and 55,800 jobs, according to The Furniture Wars: How America Lost a Fifty Billion Dollar Industry by Michael K. Dugan, a business professor at Lenoir-Rhyne University in Hickory and former president of High Point-based Henredon Furniture Industries Inc. Lincolnton became a victim of that exodus. Twelve years after it bought Cochrane Furniture — the same year Theo Cochrane died — Chromcraft Revington laid off the remaining workforce, shuttered the plant and sold off the machinery.

Bruce Cochrane, the company’s president when it was sold, became a consultant, helping manufacturers source products in China and Vietnam. “It was almost like a drug. Everybody wanted to be a part of it. It was a crazy time in the furniture business. We lost a $50 billion industry in a short period of time.” But by December 2010, he saw the landscape start to reverse. As China’s economy expanded, the demand for workers increased. So did wages, from 30-to-50 cents an hour to almost $3.60 an hour. Months-long delivery times and rising shipping rates chipped away at shrinking margins. The focus on cheap labor overlooked the cost of inventory, quality and service. These changes have led companies to question the benefits of offshoring and explore what’s called “reshoring.” The Boston Consulting Group projects seven industries, including furniture, will start bringing jobs back from China by 2015. U.S. companies are looking at ways to replace 20% of their overseas manufacturing workforce between 2012 and 2014, according to The Hackett Group, a Miami-based consultancy.

In January, Cochrane, 60, reopened his family’s former 300,000-square-foot factory under the mantle of a new outfit, Lincolnton Furniture Co., which makes cherry, oak and maple pieces. In its case, another business buzzword applies — “insourcing” — since the fledgling company is, in effect, creating jobs rather than bringing them back. Either way, it’s based on the belief that a turnaround in domestic furniture manufacturing is real, if limited. The company debuted its line at the High Point Market in October 2011 and has roughly 100 dealers. The plant, which he is leasing, began production this year. “Sales have been very, very good — robust, even,” Cochrane says. He expects to post nearly $10 million of retail sales this year.

But Cochrane and Lincolnton Furniture are far from home free. Some suggest insourcing and reshoring are blips, not trends. North Carolina’s furniture industry thrived because it offered cheaper labor than Northern states, but Asian countries — if not China, then others — will continue to undercut it. “We’re all proud of what Bruce has done at Lincolnton,” says industry analyst Jerry Epperson, managing director of Mann, Armistead & Epperson Ltd., a Richmond, Va.-based investment banking and advisory firm. “But I don’t expect to see a lot of wood-furniture production coming back here.”

In January, the president invited Cochrane to the White House to participate in a forum on insourcing. In his State of the Union address a few weeks later, Barack Obama outlined a proposal to give tax breaks to companies that create manufacturing jobs in the U.S. That won’t be especially helpful, Cochrane says. “Startups need capital, not tax breaks.” He would know. Needing about $5 million to upfit the factory, buy equipment and train employees, he was turned down by several large banks. Finally, he got financing from hometown Carolina Trust Bank, whose president had worked summers in the plant as a teenager.

Because Chromcraft Revington had sold the equipment, Cochrane had to start with a mostly clean slate. He purchased a few pieces of used stuff, but all-purpose routers that do the work of 25 machines — that sand, drill and saw — are essential to efficiency. Giving a visitor a tour of the factory, he pops into an engineer’s office where 3-D modeling software programs machines on the floor. Lincolnton’s success will depend on the increased production this technology enables. “You know, a lot people think manufacturing has gone and it’s never coming back. But in the U.S. we’re producing 21/2 times more than what we did in 1970 in constant dollars. But we are doing it with fewer people.” He thought he would need to hire 250 to reach the production he now expects to achieve with slightly more than half that. The company plans to have 130 on its payroll by the end of the year.

About 1,400 applied for jobs, many of them former employees. Joe Rudisill, plant manager for 33 years, is back. Pat Hendrick is purchasing manager, a title she held for a quarter-century before the plant closed. Karen Padgett, human-resources manager for 35 years, has her old job. “Leaving there, it was like a death in the family,” she says. She always felt empty driving past the shuttered factory. When Cochrane called her about coming back, she thought he was kidding until he explained why Lincolnton could compete with imports. “I didn’t even hesitate,” she says. “I believe more of it is coming back.” About half those hired are former Cochrane Furniture employees. “Some hadn’t worked in a while and had lost their confidence,” Cochrane says. “It really was very sentimental to start manufacturing again and be able to bring people back.”

Though most are experienced furniture workers, there have been problems filling orders, especially in assembly and finishing, as the company hires and trains. The water-based finishing system is new to old hands, who used petrochemical finishes that emitted volatile organic compounds into the air. “We’re green — this is the third generation of finishing technology,” Cochrane says. “As we say on our Facebook page, we have a neutral carbon footprint. Consumers care about those things now.” He’s leaning on point-of-production marketing, contending that consumers respond to “made in America,” not only out of patriotism but for the perceived value of quality construction, such as the cabinet joinery used in making upper-middle-priced solid oak, cherry and maple bedroom and dining-room furniture. “I think people respond to made in America more so than ever before. I also think people are starting to realize that made in America means jobs in America.” He even believes that, someday, Lincolnton Furniture will export products to Asia. “I sure do. The Chinese really love American-made products.”

Recent numbers support his confidence. Furniture imports fell last year for the first time since the early 1990s, Epperson says. That goes for both casegoods — wood — and upholstered furniture. Domestic casegoods shipments increased 2.5%, while imports slipped 2.2%; domestic upholstery, up 4.8%, and imports, down 2.6%. However, that trend didn’t extend into the first quarter of this year. “Those kind of gains are just not sustainable over time. I think 2011 was more of an adjustment than a long-term change.” The bottom line is that nearly 70% of casegoods and 38% of upholstery sold in America last year were imported.

“Furniture is always going to migrate where the cheaper labor is,” Epperson adds, noting that the industry began relocating from the North — primarily Massachusetts, New York and Michigan — to Virginia and North Carolina around the turn of the 20th century for that very reason. Even now, as labor costs have increased in China, some of the industry has migrated to Vietnam, Indonesia and Malaysia. As for made-in-America marketing, most furniture stores in the U.S. don’t promote where products are made because it can be a double-edged sword. “Sometimes that makes the consumer feel guilty if they don’t want the American-made product because it’s the wrong design, color or size. … Studies say over and over again consumers want to buy American — unless it costs more.”

There are successful examples of reshoring. Stanley Furniture Co., based in High Point and Stanleytown, Va., recently recalled production of baby cribs from China to its last remaining domestic factory in Robbinsville due to consumer-safety concerns. That plant has made its Young America line for years, but all other production was sent overseas. Galax, Va.-based Vaughan-Bassett Furniture Co. will invest $8 million to restart production at a factory closed in 2006. At the High Point Market in April, American Drew Inc., a subsidiary of High Point-based La-z-boy Chair Co., announced it would make solid-wood bedroom collections in partnership with Kincaid Furniture Co., its sister company, in Hudson. But in the last couple of months, three small U.S. solid-wood manufacturers have suspended operations, citing a lack of operating capital. Epperson is more hopeful about upholstery than wood because it’s not as capital intensive and doesn’t have as many environmental regulations.

But Dugan, the executive turned business professor, is cautiously optimistic about casegoods. “I think we could see some manufacturing come back, but it’s not going to look like it used to, and it’s not going to happen overnight.” Once factories are closed, equipment is sold and environmental permits expire, “it’s hard to put it back together again.” Still, he thinks Lincolnton Furniture’s business model may work because Asian manufacturers can’t produce solid-wood furniture as well or as cheaply as domestic manufacturers can because lumber has to be imported from the U.S. “That is in their favor. There’s a distinct market for that.”

Both Epperson and Dugan agree that Cochrane would do well to study the playbook of Hickory Chair Furniture Co., about 20 miles down the road from Lincolnton, which employs more than 500 people. “We’ve posted 50 jobs in the last 60 days,” President Jay Reardon says. Only about a tenth of its line is imported — primarily highly carved pieces and metal components — because the company has focused on its workforce. In the late 1990s, it developed a program modeled on Toyota’s kaizen system. The Japanese automaker’s philosophy calls for continuous manufacturing improvement through a reduction of waste on the factory floor and less emphasis on top-down management. This allows Hickory Chair to be more flexible, making furniture in small batches that can be easily customized. That’s a strong selling point to high-end consumers and interior designers. Though it does update its equipment, it doesn’t focus on technology. “You can speed up a bad process, but sometimes you need to challenge the process itself,” Reardon says. “Our efficiencies have not been so much because of technical solutions as a cultural shift.”

He admires Cochrane for investing in a startup and hopes to see more domestic production as the cost gap of importing narrows. More than anything, he thinks Lincolnton Furniture needs to live by Theo Cochrane’s creed — “It is not just about making fine furniture. It is about the good people that make the fine furniture” — which his son admits he failed to do while helping companies move their workforce offshore. But now he’s ready to add another picture to the wall of his father’s office. He just wishes his dad were there to see it.