Champion: a globalization story

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CHAMPION: a globalization story.
 
By Lorene Dumoulin
 
lorenedumoulin@hotmail.com
 
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The task force on Globalization is focusing on free trade issues along with the globalization of labor and production. We are particularly interested in understanding how these global economic and political changes have and will continue to affect the Rochester area. One general characteristic of change associated with recent economic globalization is the loss of local manufacturing jobs as corporations downsize, allocate work to smaller companies, and re-locate according to the various economic incentives. Here in the Rochester area, the history of the Champion clothing manufacturing company illustrates some of the problematic dynamics of how this is happening.
 
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The sale.
 
When Sara Lee acquired Champion in 1989 for $77 a share, corporate officials said that management, employees and property would remain the same. The $321 million deal meant that control of what was once a locally owned business now belonged to a $10 billion multinational with headquarters in Chicago. Sara Lee was very interested in targeting this garment industry and ‘branding it.’ Champion, a sportswear garment maker, was growing quickly and had sales of $218.8 million in 1988. Sara Lee was increasing sales as well: around $4 billion in five years. Most of Sara Lee’s revenue came from packaged foods and distribution, but Sara Lee’s manufacturing was diverse and also included brands in underwear such as Hanes knitwear and hosiery (Vellinga, 1989; Rumsey, 1989). Champion’s then president and CEO, Roger Holland, said “they understand brands and how to manage brands in the marketplace. That’s a major strength they’ll bring to this company” (Vellinga, 1989, p.1A). Champion was to become another major revenue avenue for it’s new owner.
 
Mass production of socks, sweatshirts, t-shirts, etc… with a main ingredient: a brand name – Champion, Hanes, L’eggs. Sara Lee sews on the label and works the name to sell the product.
 
What did Champion owners have to gain from selling to Sara Lee? Champion was essentially forced into considering other offers due to a hostile takeover initiated by Phonicam. Phonicam (Walsh, Greenwood and Co.) making up over 20% of shareholders offered to buy all stock at $55 a share. When Champion reached an agreement with Sara Lee, Champion’s stock rose 12.5 cents on an already record high share price to $75 a share (Vellinga, 1989).
 
The Road from Perry to Mexico.
 
Champion then passed into a new era that left decisions in the hands of executives far from Western New York who weren’t interested in Rochester or Perry. This story will end nine years later in Perry, N.Y. with a devastating loss of jobs and income comparable to a corporation like Kodak leaving Rochester.
 
NAFTA and beyond. Before the rest of the story, some background into political/economic happenings important to the future decisions Sara Lee would make. In 1998, Champion, owned by Sara Lee Corp., moved sewing operations from Perry, NY to Chihuahua, Mexico. Over the years, 575 Champion jobs have been relocated or cut in Perry and 345 of those losses occurred in 1998 (Livadas, 1998). Anne Humphrey, Perry town supervisor, said, “They told us they didn’t believe anything could be done. This was a business decision. I believe it’s more of a question of what labor costs are. It’s awfully hard to compete with Mexico” (Livadas, 1998, p.1A).
 
NAFTA has not been a job stimulus package as publicized by the Clinton administration and corporate America. The emphasis on job creation through increased exports covers an agenda: elimination of barriers to foreign investment and trade. Many of the Fortune 500 companies were directly involved in lobbying efforts to persuade Congress to vote for passage (Anderson, 2000). “Because of trade and investment liberalization (combined with improved communications and transportation technology), companies can set up plants or subsidiaries wherever the costs are lowest” (Anderson, 2000, p.28).
 
In January of 1997, Public Citizen’s Global Trade Watch published “NAFTA’s Broken Promises: Failure to Create U.S. Jobs.” In it you can learn about promises made and broken by companies in the National Association of Manufacturers (NAM). Promises included the creation of US jobs if Congress passed NAFTA. The report shows “NAFTA is not working. New U.S. jobs are not being created by NAFTA and NAFTA is causing major U.S. job loss… In three years, NAFTA has already cost more than 600,000 U.S. jobs.” You also learn about NAFTA TAA (a retraining and job loss assistance program for workers involved in the production of an actual product who loose jobs due to NAFTA trade). In this group, jobs lost increased by 480% due to a “shift in production to Mexico” ( 17). Who are the faces in NAFTA-TAA? Women, people of color, and rural communities make up the majority of losses. “The two industries with the most NAFTA-TAA layoffs are electronics and apparel. Women make up 40% of electronics workers and 71% of apparel workers. African Americans and Latinos make up slightly less than 20% of the U.S. workforce but they comprise nearly 40% of apparel workers. Only about 21% of the U.S. population is rural, but rural workers represent about 40% of U.S. workers certified for NAFTA-TAA” (Anderson, 2000, p.41).
 
The jobs relocated to Mexico from Perry, N.Y. are directly related to what NAFTA has to offer: gains for corporations at the expense of the people they employ, the environments they decimate, and the governments they are gaining power over in trade tribunals. Sara Lee and other corporations have created jobs in Mexico, “but real wages are actually worth less today than in the 1980’s. Between 1987 and 1998, the earning power of the minimum wage declined by seventy-two percent” (Anderson, 2000, p.47) Sara Lee has 7 Champion production sites in Mexico out of a total of 12 and 2 of the remaining 5 are in the U.S.: Hillsville, VA and Salem, NH (sweatshopwatch.org, 2000). Sara Lee’s maquilas are under watch by the Campaign for Labor Rights. In one maquila in the El Pedregal free trade zone, workers took up a legal matter concerning the correct amount of bonus they were to receive. “Sara Lee management responded by saying that they should be thankful that they have any job at all, and then fired them” (sweatshopwatch.org, 1998, chap. Stop the Christmas Firings!).
 
The decision to move headquarters.
 
Three and a half years passed after the purchase of Champion and Sara Lee kept promising it wouldn’t close plants and it does not anticipate moving because “this is where the people are” (Rumsey, 1990, back of sec.A) The reality is that people will need to move if they want to keep their jobs.
 
June 1992. The decision is being made somewhere else, not in Rochester. Suddenly talk of moving headquarters is made common knowledge. What happens when a major employer says they may move away from Rochester? Bob King, then Monroe County Executive, attempts to set up a meeting with Champion. Monroe County officials want to offer assistance to help build new offices and discuss other incentives to keep Champion from moving (Lively, July 14, 1992) . Rocco DiGiovanni says, “if there is any assistance we can offer to convince them to stay here in Monroe County we will. We hate to loose jobs and lose a company that the local community identifies with” (Sevante, June 24, 1992).
 
One month later the decision is announced. Champion headquarters will move to Winston-Salem, N.C. Apparently Winston-Salem still felt there was some need to convince Champion to move, even if Champion felt the move already made sense for coordinating projects with the other brands in the personal products division located there, as they claimed. “Winston-Salem Business Inc. put together incentives worth about $1 million to attract the jobs, which carry a payroll estimated at $13 million. The incentives include loan discounts worth up to $800,000. The city and county, which each stand to gain about $190,000 a year in additional sales taxes, will give $100,000 apiece” (Lively, July 15, 1992, p.8D)
 
Tax breaks 101
 
Corporations are getting ‘assistance’ in the United States. Government subsidies to business through industrial development associations (IDAs) use our taxes to provide what is termed ‘Corporate Welfare’. There is little evidence that these government led incentives for corporations work to strengthen the economy and increase jobs. In fact, tax payers have limited ability to access information regarding the work of IDAs and the impact, positive or negative. State governments compete against each other to attract and keep business through the use of IDA incentives and these incentives played a one million dollar part in the story of Champion headquarters moving to Forsyth county, N.C.
 
POWER
 
The story of Champion headquarters, manufacturing and distribution jobs leaving Rochester, Perry, and other local areas can shed some light on the impacts of new power structures set in place (ex. NAFTA, WTO) that corporations thrive on and have become the focus of intensifying protest. These new power structures protect and advance the interests of multinational and transnational corporations and are supported by most governments around the world (Anderson 2000). And why? Many leaders have come to believe in the ‘opportunities and benefits of the World Trade Organization rules-based system’ as heard in the Ministerial Trade Conference for Central Asian and Caucasus countries:
 
“Liberalization and the multilateral trading system works. Trade generates foreign exchange earnings and mobilizes domestic resources for economic growth. The system has proved its worth repeatedly. The last 50 years has seen unparalleled prosperity and growth and more has been done to address poverty in these last 50 years than in the previous 500. Of course, trade liberalization is just one ingredient in a cocktail of policies required or development… Trade liberalization must go hand-in-hand with other reforms” (Moore, 2002, 6).
 
The message is that the new system does work but can not function unless these countries agree to reforms that allow corporations greater access to land and labor resources and include public services undergoing privatization. Corporations sweep in, often without accountability for environmental and workers rights, and do so with laws that protect corporate assets, not citizens (Klein, 2002).
 
NEXT
 
Many have focused their energies on demanding accountability and transparency in government and corporations by revealing undemocratic practices in what is allegedly a system growing democracies and human rights through economic development. We are being asked to live under the terms of profit-oriented organizations, which are fast becoming the global law makers. Our ability to democratically control local fresh water, food production, and public services (a few examples) is being sold to corporations with no boundaries, no local investment, and much more power than ever before. What can be learned from the story? Will we continue to loose jobs? What does this mean for the future of Western NY?
 
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The case of Champion provides a concrete example of some of the “free market” dynamics and rule making institutions behind the momentous changes occurring today in the name of globalization. If you are interested in learning more about these kinds of global economic changes and their impact on the Rochester community, we invite you to contact the Task Force. We have identified useful reading materials, and we are considering organizing study groups, and group presentations/discussions around these issues. Contact Mike Baker at 461-5949.