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

by Macy, Beth

  18

  The Dalian Dance Card

  I heard it was the arrogance of the Chinese that really got John Bassett going. He was in China with ’em and they were braggin’ about how they were gonna take over the whole industry.

  —DELANO THOMASSON, COLLINSVILLE FURNITURE MART OWNER

  Years earlier, on a buying trip to Hong Kong, back when the company was still importing 8 to 10 percent of its goods, Wyatt arrived at his hotel late one night, and when he awoke the next morning, there were twenty phone messages waiting for him from importers and agents who’d been tipped off by people at airport customs and were eager to show him around. Those were the dance-card days of the late 1990s, back when American companies were racing to nab OEM contracts with factories in Asia. Those who couldn’t risked becoming wallflowers in globalization’s dance.

  “The saying was ‘The dance card’s filling up,’ ” Wyatt’s brother, Doug, told me. “If you didn’t sign up with a factory quick, you’d get left out.”

  By 2002, the dance cards were starting to get tee-totally full, as they say in Galax. Especially the ones in Guangdong, the southern coastal province that was fast becoming China’s factory hub. As one executive noted at the fall High Point Market, “I’ve seen most of the people in this room over in Asia more than here.”

  If the factory the Americans visited was large, it usually had English-speaking salespeople on-site. If it was Taiwanese owned (and most were), the owners/managers were bilingual and well-versed in doing business with Americans—or at least savvy enough to steer the Virginians and North Carolinians to restaurants that served easily palatable spaghetti Bolognese. “I ate spaghetti all over China because I figure they’ve been making noodles for two thousand years,” Wyatt said.

  Furniture imports from China had jumped 121 percent from 2000 to 2002, now capturing as much as 50 percent of the U.S. market in some areas. By 2003, seventy-three thousand jobs had already evaporated from furniture and fixture factories in the United States. Twenty of those shuttered factories were owned by Furniture Brands, the industry giant whose CEO, Mickey Holliman, told Furniture/Today that domestic manufacturing was now reserved solely for companies that were “standing on principle.”

  Tilting at windmills, people in the industry called it.

  John Bassett dispatched his Dalian delegation to help him figure out just how far he was willing to tilt into globalization’s windmill. Soon, some of his oldest industry friends would be calling him a protectionist.

  “Bless him, there goes Don Quixote,” they chortled behind his back.

  In the spring of 2002, a few months before Wyatt and Rose left for their first trip to Dalian, Wyatt and his dad looked all 334 of the workers at their Atkins plant in the eye and told them they were sorry, but the layoffs hadn’t been enough to stem the bleeding. They were closing the factory for good. Virginia House was supposed to have been the Cadillac line of their business, a factory that specialized in high-end solid wood furniture. “The trouble was, solids lost their panache as the imports came in,” sales manager Bob Merriman said. “People just didn’t wanna pay for it, and the young people coming along liked the Restoration Hardware look better; they didn’t care whether it was solid or not.”

  Looking back, JBIII said, buying Virginia House was probably his biggest strategic mistake. “I don’t know, maybe it was hubris,” he said. In this battle, the Chinese clearly had him beat.

  A thirteen-hour plane ride away, in Shanghai, Larry Moh and his son, Michael, were about to announce their own entrée into the higher-end furniture scene. Larry Moh had promised not to compete in the industry for the ten years following his sale of Universal to Masco in 1989, and now he was back, his entrepreneurialism unfettered by contractual restraints.

  He’d spent the past decade developing a fiberboard-and-laminate flooring-supply business, called Plantation Timber Products, based in the southwestern Chinese province of Sichuan, a place even remoter than Dalian. “Labor was less of a factor with this one, which was all about being where the trees were,” Michael Moh said in a Skype interview from Shanghai. In the small city of Leshan, the Mohs had provided work for five hundred rural peasants and rare cash for wood for five hundred thousand subsistence farmers, he added.

  In the interim, Larry Moh had also made a bundle off a considerable heap of AOL stock. As Tothill, his old supplier buddy, recalled, “He liked to make risky investments, and he was very good at picking them out. He was highly intelligent but also a very emotional man.”

  In 2002, the Mohs flew a hundred American retailers to Shanghai for the opening of their brand-new Fine Furniture Design and Marketing, a high-end furniture-making and -selling enterprise based in Shanghai with American headquarters in High Point; additional operations across the Middle East, Russia, Australia, and Korea; and forty-five retail stores in China. Having opened just two months before Larry Moh’s death from lung cancer at the age of seventy-six, FFDM became the furniture legend’s coup de grâce to American competitors like Virginia House. It was also his parting shot to the American furniture makers, who had long dismissed the quality of Chinese imports with the adage “You show me a horse but you deliver a donkey.”

  Larry Moh had insisted on going out first class, with a plant that boasted 2.5 million square feet and a one-and-a-half-mile-long finishing line. He’d wanted the world to know that China was finished being the poster child for cheap labor, his son said. He did it by educating his factory workers to focus on quality, not just quantity, and this time the furniture would sell solely under his company’s logo, not OEM-style for Bernhardt, Lexington, or some other American brand. Moh had already intuited that labor rates would increase as the country began making products not just for export but also for its own growing consumer class.

  His forecast, as usual, was right. By 2012, FFDM was paying its workers the equivalent of four hundred dollars a month, plus pension and benefits—a tripling of pay in just ten years. “We’re constantly evaluating our future,” Michael Moh told me in late 2012. “We could move again, absolutely. That’s the global phenomenon we’re in. As costs go up, you go, ‘Where are you going next?’ ”

  Dalian is a seaside city in China’s remote northeastern corner, where the Yellow and Bo Hai Seas meet. Once the country’s largest trade port, the city was designated a Special Economic Zone in 1984, with the goal of putting people to work. Much of the ensuing industrialization was spurred by Mayor Bo Xilai, who would go on to govern the entire Liaoning Province and, as his stature in the Communist Party grew, become the head of China’s Commerce Ministry.

  Bo drove the transformation of Dalian, turning it from a drab port city into a showcase of China’s rapid economic growth. Before the 2012 political scandal that rocked Beijing and made international news, he was best known for banning motorcycles in Dalian and turning traffic circles into large, lush parks by planting expensive imported grasses. He transformed the city into a hub of machine manufacturing, petrochemicals, oil refining, and electronics long before the corruption scandal that ended with his wife in jail for murder and his own incarceration for bribery, embezzlement, and abuse of power.

  During the initial fact-finding mission to Dalian in 2002, Wyatt and Rose were in Bo’s territory, and the Bo-led growth was still in its early stages. The factories they toured looked like something out of Galax, Virginia, circa 1930. They were poorly equipped and inefficiently laid out—one was four stories high and looked like a very old Hampton Inn. “You could tell these factories had been there long before anybody was exporting to the U.S.,” Wyatt said. “And now they wanted to get in on it, like the people in the south of China.”

  They hired a driver and spent the first two days touring five plants, acting like gracious potential buyers while all along scanning each assembly line for the Louis Philippe. Every night, when Wyatt phoned his dad at 9:30 (9:30 a.m. in Virginia) to report that he still hadn’t located the dresser, the response was always the same: keep looking.

  Rose
stayed busy on the phone, calling supplier friends in the finishing industry. One friend referred her to another, who happened to supply a factory called Dalian Huafeng Furniture Company. It was deep in the Liaoning Province, an hour northeast of Dalian in the town of Zhuanghe—fewer than a hundred miles from the North Korean border. Huafeng translates to “bright prosperity,” Rose knew. Based on what her friend told her, this could be the one.

  When they arrived in the small city of Zhuanghe, they found it to be filthy, full of dirt roads and gray cinder-block buildings. For almost two decades, Dalian Huafeng had been making furniture for the Chinese market and exporting to Japan. Its flagship factory was housed in a three-story cinder-block building that employed eight hundred people, Rose said. Not all the workers were squatting near the ground to work on the furniture, as many did in southern China. But some were, as a new conveyor system was only partially built.

  NO SPIT! ordered a sign on the stairwell. The building was unheated, and outside, the brisk September winds moaned.

  “The people worked slowly—probably because they were so cold,” Rose said. “They were like soldiers. No one smiled. The whole place, it was like there was no life in it.”

  Then Wyatt and Rose spotted a logo on a box in the shipping department that matched the logo on the back of the mystery dresser. Their eyes grew wide, and they looked at each other knowingly but didn’t say a word. This was definitely it.

  Later, when Wyatt ventured that it didn’t look like the factory had enough room to expand fully into the American market, the sales manager suggested they get back in the car for part two of the tour. She had something to show them on the outskirts of Zhuanghe.

  Turned out the company was building an entire factory complex dedicated to the American furniture market. Tucked away in the middle of nowhere and surrounded by fields, Rose recalled, “It seemed hidden away like a secret.”

  For now, the enterprise was dwarfed by a giant billboard promoting the complex that owner He YunFeng intended to build on the site: six different factories, all dedicated to making bedroom furniture for Americans, with a giant warehouse in the middle. They would be modern factories with the same kind of German- and Italian-made equipment John Bassett had installed back in Galax. The billboard stood near the entranceway to the hundred-acre building site, and fanning out from the new construction debris sat neatly stacked piles of timber, some twenty feet tall.

  The lumber came from Russia, the sales manager explained. She made no mention of how the wood was logged—by a Russian Mafia–controlled company that was later implicated in an environmental corruption scandal. In 2007, Walmart was criticized for selling baby cribs that had been made from lumber taken from protected Siberian tiger habitats and produced at Dalian Huafeng, according to the nonprofit Environmental Investigation Agency. (Several months later, Walmart announced it would investigate its suppliers more rigorously and joined the Global Forest & Trade Network.)

  Dalian Huafeng would be happy to make samples for Vaughan-Bassett, she told them as they toured the premises and learned more about the company’s plan.

  Months earlier, there had been a grand-opening ceremony to unveil the plans for what owner He YunFeng was calling the American Furniture Industrial Park. Rose read about the event in newspaper clippings, featuring photos of He YunFeng with Bo Xilai, then the governor of Liaoning. He YunFeng predicted it would “force American domestic furniture manufacturers to close their doors,” as he told the government-controlled newspaper the Liaoning Daily. The complex would hold twenty-two thousand employees operating thirty different finishing lines with the capacity to ship five thousand containers a month.

  Most of the Zhuanghe workers were young men in their twenties, many of them migrants who’d been bused in from northern and western China. They wore uniforms and lived in dormitories that typically housed ten people to a room. They were paid 20 percent less than those working in southern China, where in 2002, workers earned a hundred dollars a month, including meals and housing (compared to the approximately two thousand dollars a month it took to keep an American furniture worker employed).

  “If you believed their billboard, they were gonna be the biggest thing in bedroom anywhere,” Wyatt said. “The question was, was this what I call a giant-billboard expansion?” He’d seen several promotions like this before in southern China, and when he returned to the sites the following year, the grass was a foot taller and the billboards crumbling. “On one hand, a billboard’s a billboard; how seriously do you take it?

  “On the other, between their square footage and all that lumber we saw, if these guys had the financing, they were gonna be the most formidable guys ever.”

  Dalian Huafeng planned to ship one hundred thousand bedroom suites to the United States every month, more than the top four or five U.S. producers combined. The company had piles of lumber sitting nearby to prove it. In the local press, He YunFeng said he’d begun modestly with just ten employees in 1984 but now planned to become “the No. 1 furniture maker in the world.” The government would help turn Dalian Huafeng into a furniture-making “superpower,” Bo Xilai told a reporter, by helping to zuodazuoqiang—“make it powerfully strong.”

  The moment Wyatt described the project to his father on the phone, John Bassett wanted to see the place for himself. To stretch out this snake, he needed a meeting with He YunFeng.

  It was turning into a devil of a year. Profits were tanking, and with the Virginia House closing—which set the company back nearly four million dollars—morale was low at Vaughan-Bassett’s remaining three plants. Raises were frozen. In two years, the company’s sales, production, and employment had all dropped 20 percent.

  John Bassett saw the stack of TAA application papers on his desk, each representing one of his displaced workers, and he knew: It was going to take some new ideas and new energy to pull the company out of the morass it was sinking into. Something fun.

  Fun, as in a new furniture line named after the biggest celebrity in American history. Fun, as in a blue suede sofa with fringe.

  Fun, as in a recliner with room for a six-pack in the chair arm.

  Fun, as in an April 2002 furniture market introduction featuring Burnin’ Love mirrors, a Love Me Tender bed, and an armoire with Elvis Presley’s signature in frosted glass on the door.

  Why not? Lexington had Bob Timberlake, the artist who’d helped it design one of the bestselling collections in industry history. Hooker had Faith Popcorn, the author and consumer-trend forecaster. And Bernhardt had Martha Stewart—before she lied to federal government investigators.

  John Bassett was already casting about for a celebrity license to call his own when his son Doug returned from a sales event in Tupelo, Mississippi, and announced that he’d been late getting there because it was the anniversary of Elvis Presley’s death. Not only could he not get a hotel room in Memphis, but there was not a single rental car available to get him to Tupelo.

  “Dad, they’ve shut down the whole city,” Doug said.

  And so the 2002 Vaughan-Bassett showroom at High Point was transformed into a miniature version of Graceland, with Elvis on the karaoke machine, rhinestone-studded outfits pinned to the walls, and employees wearing tinted aviator-style sunglasses (painted gold, with a line of holes running down each earpiece—and made in China, of course).

  The glasses were such a hot item that when one middle-aged woman stepped onto an elevator and saw a salesman wearing a pair, she ripped them from his face. “I’m sorry, but I just have to have these!” she said, then bolted before the elevator doors closed. The company ran tapes of the King’s concerts on a large-screen television, and more than a few women stood transfixed before it, some with tears streaming down their faces.

  It was a beautiful, although unprofitable, distraction. Newspapers from Memphis to Germany covered the premiere of Vaughan-Bassett’s Elvis Presley line of furniture. ABC let John talk about it on Good Morning America. And John Bassett says he’ll never forget the sight of fifty-y
ear-old women “bawling like they were fifteen-year-old girls!”

  But Elvis people tended to buy Elvis records, key chains, watches, and bobbleheads. Not twelve-hundred-dollar suites of Elvis furniture. “It was like being next to a pot of gold, but you couldn’t figure out how to get your hand in the pot,” JBIII said. The line became the Edsel of the industry.

  A regional sales manager phoned in from Elvis Week, a Memphis event the factory had sent him to following the line’s premiere. “Bob, people who live in mobile homes are not gonna buy the suites,” he said. At the end of the season, the collection was reduced to closeout status, with four-hundred-fifty-dollar beds retailing for two hundred dollars. As one retailer friend told Merriman, “I wouldn’t give you fifty for it!”

  It was a fabulous public relations success, as it introduced Vaughan-Bassett’s furniture to stores that had never heard of the company. But the business took a one-million-dollar loss on the enterprise, a clunker that John Bassett came to call his glorious failure. “It was so bad, you almost had to stand back and admire it,” he said. “What we learned was, Elvis people are fun, but they don’t have a lot of money for furniture.”

  Even with her legal jam on the horizon, Martha might have been the more prudent choice.

  Cardboard cutouts of Elvis still dot the landscape of the Vaughan-Bassett offices, not far from the last Hunka Hunka Burnin’ Love mirror—gilt-framed and heart-shaped—which hangs above the office coffeemaker, around the corner from the decoupaged Elvis clock.

  If JBIII was going to keep his business vibrant, he needed a better idea, a bolder move. Recycled celebrities, cost-cutting, and factory-tweaking—that had all been tried. What had never occurred to John, a lifelong Republican, was turning to the government for help.

  Nobody remembers who at the American Furniture Manufacturers Association first came up with the idea. Some say it was Paul Toms, the chairman of Hooker Furniture. Others say it was Paul Broyhill, the retired magnate who’d run Broyhill Furniture before he sold it to Interco in 1980. (It’s now part of Furniture Brands International.)