Posted on 02/01/2005 1:20:31 PM PST by Willie Green
For education and discussion only. Not for commercial use.
Imports from China are hurting America's furniture manufacturing business, and among the casualties is the well known Pennsylvania House Furniture in Lewisburg, which like others is feeling the sting from China's lower production and labor costs.
U.S. manufacturers and commerce officials are concerned about the growing problem from China, where the Chinese can manufacture furniture and other goods for 30 percent to 50 percent of the cost in America.
Production labor workers in China are paid about $120 a month, and top level Chinese engineers average about $1,200 monthly-far below the pay rates in the United States.
Pennsylvania House, a member of the La-Z-Boy Inc. family of companies, Monroe, Mich., was established in the late 1800s as The Lewisburg Chair Co. and renamed Pennsylvania House in 1933. With its long history and customer base in mind, the current economic situation has especially become a worst case scenario. At press time, company treasurer Mark Stegeman said the Lewisburg plant was closing.
"We've had to close a lot of plants," Stegeman said. "We've closed 20 out of 23 plants because of the prices from China. Several thousand have been laid off. For our industry, it's been really difficult on the wood side, which includes bedroom and dining room furniture."
Stegeman said the company would love to continue manufacturing in Pennsylvania, but added that "it's impossible to compete today because of the China price." The International Trade Commission, he said, has imposed a duty but it's not high enough and doesn't make facilities competitive.
It was about four years ago when company officials first began to notice the impact of the China price, Stegeman said. "Since then they've gotten worse, and lowered the price more." With the huge Chinese work force, Stegeman said the only thing that will work is a protective tariff. "You can't find anyone in the United States working for the wages the Chinese work for," he said.
When it was clear what was happening with the China price, Stegeman said Pennsylvania House began to reduce capacity because of a decrease in sales and a realization that the company's product wasn't priced competitively relative to the Chinese pricing.
"Nothing worked," Stegeman said. "If you bring prices down you bleed financially. We reduced prices and that caused a bleed."
Like other U.S. companies in the same bind, Stegeman said he's not sure what the long term answer is, but the more automated a plant is, the more it would be the most competitive. For companies that produce with a lot of labor, Stegeman said it's a risk. High labor content to produce a unit, he said, makes it difficult to compete against the Chinese.
In Pennsylvania, there's deep concern about the China price. Stephen M. Schmerin, the state's secretary of labor and industry has called for federal intervention to deal with what he calls "unfair trade practices that are devastating the manufacturing sector."
Schmerin said late last year only the construction sector had grown every month. "By contrast, the manufacturing sector has lost jobs in 49 of the past 51 months," he said. "Manufacturers Pennsylvania House and
Armstrong World Industries recently announced furniture and flooring plant closings that will lay off more than 850 workers in Lancaster, Northumberland and Union counties."
The secretary was critical of U.S. Commerce Department action to reduce antidumping duties on imports of Chinese bedroom furniture. He said this "is a serious blow to furniture makers like Pennsylvania House."
Duties on imports, Schmerin said, would have helped "to level the playingfield. Instead, Commerce backed off from its position in June and days after the election announced a range of duties that are far below the industry's initial request."
The secretary called the layoffs at Pennsylvania House and Armstrong "clear indicators of a continuing decline in the state's manufacturing industry." He said U.S. manufacturing companies are investing in technology to compete better, but in some cases "their ultimate success or failure hinges of the willingness of the federal government to address unfair trade tariffs and barriers."
The problem is not new and is widespread in other industries as federal officials attempt to balance trade with other nations. Critics say the scales have tipped too far in favor of foreign producers.
Toward the end of this year the U.S. trade deficit surged to a record high of $55.5 billion as imports, including those from China, swelled to the highest levels ever recorded.
A recent special report in Business Week said "the three scariest words in U.S. industry are 'The China Price.'" The report said "Cut your price by at least 30 percent or lose your customers. A massive shift in economic power is on the way."
Dam Chinese.
I will never by Chinese furniture again. Did it once without knowing it (bought from a guy selling "his" possessions, only to find he was using his house as a showroom and a local wholesale firm as his warehouse). Crap is falling apart. Next, I'll save to pay double the cost of the Chinese crap and get ten times the quality. If there's any to be had in the US, that is.
I've always loved Thomasville furniture, BUT it was outreach for my budget. I love their stuff! They cater to families with over above middle and rich incomes...:(
I wonder why Stanley Furniture (STLY) and Hooker Furniture (HOFT) are doing so well.....doesn't seem to be hurting their sales.
Oops..Out of reach!
We just bought new living room furniture from a company based in Kansas. We shopped around pretty aggressively... the Chinese stuff was cheap & shoddy. There was no way we would have bought it.... we buy our non-upholstered furniture from a local outlet, also American made. It's there if you look hard enough....
Now can anyone explain why furniture makers in the U.S. are going out of business?
My brother bought A CHICOM bedroom set, paid $3000 for it. It is four years old and the finish is literally peeling off in spots and the draw hardware is falling apart. He is changing the hardware and refinishing it this month. It was chicom crud.
The finishes for instance, probably violate every EPA standard for volatility, toxicity and outgassing there is...
The same is probably true of exporting bugs and wood insects up the wazoo.
This may come as a surprise for anyone who has inadvertently bought some of the stuff.
Appearance wise they are marvelous, but when it comes to workmanship they will start falling apart from normal use in a very short time.
It's like the Japanese workmanship in the 50s.
He overpaid by about 50%.
He knows that now.
It's a plot to put Unpainted Arizona out of business.
I meant compared to what the Chinese stuff usually should sell for.
That's the difference between price and cost. If you buy quality, the initial price is higher, but the cost (i.e, replacement - and having it actually function and look good and provide an enjoyable experience while you're using it, etc. evens out over time.)
Look for Amish/Mennonite furniture I work for a store that's almost exclusively Amish built furniture - we have almost no imported pieces. Rock solid - gorgeous - and surprisingly contemporary styling - the Amish have become quite savvy businesspeople.
Just returned from Beijing where I designed and furnished an apartment overlooking a huge Olympic constuction site. I spent three days in the Design center, custom designing a truck load of cabinet work.10 days later I'm home and the furniture has been built, delivered and set up for about $5,000.US
I have over 30 years experience in the design and retailing of high end contemporary furniture. That same custom order in the US would have retailed in the US for about $35,000 delivered.
The wholesale cost would have been about $14,000 + Freight in & Freight Out.
While I did see Ikea type quality on display,edgebanding peeling off, that sort of thing... The quality I was able to obtain was of a high standard.
so what would you like to eliminate, the US wages, the environmental standards? both?
Well page 4 of Stanley's 2003 Annual Report says this:
Approximately 20% of the Company’s sales volume in 2003 came from products sourced from six countries with China representing the largest volume. Approximately 30% of 2004 sales is expected to come from sourced products.
I imagine Hooker Furniture must also be increasing the amount of imported crap they're selling.
Stegeman said the company would love to continue manufacturing in Pennsylvania, but added that "it's impossible to compete today because of the China price." The International Trade Commission, he said, has imposed a duty but it's not high enough and doesn't make facilities competitive.
Economic pincer movement. Not exactly related to the topics we usually discuss, but worth reading...
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