Fostering Goodwill With Jobs

CAMDEN, S.C. —  This sleepy town of quaint colonial homes and Revolutionary War battle sites is an unlikely champion for China.

It’s the oldest inland city in South Carolina, a state devastated by competition from low-cost Chinese textiles. The state’s most powerful politicians, including the late Republican Sen. Strom Thurmond, led the fight to keep out cheap goods from China and other countries.

But Camden, population 6,700, is also the home of the first U.S. refrigerator factory for China’s Haier Group, a fast-growing appliance maker known as the General Electric of China.

The plant’s 225 jobs, with promises of more, explain why people here view China with greater enthusiasm than do those in Washington, where a rising trade deficit and a Chinese bid to buy El Segundo-based oil company Unocal Corp. have sparked concerns that China is bent on supplanting America economically and politically.

After some initial missteps, Haier has earned a reputation here as a good employer whose workers make a decent living.

“Our relationship with Haier has been a very positive thing,” said Steve Kelly, chairman of the Kershaw County Council. “It’s helped our community.”

“I’m very, very impressed that they’re here,” said James Bennett, 62, owner of a tiny downtown barbershop, of the 5-year-old, $40-million Haier complex. “Hopefully, they won’t just pick up and leave.”

Indeed, analysts say, Chinese companies flush with cash and eager to get a foothold in the U.S. are primed to build or buy U.S. factories and companies. China’s July 21 revaluation of its currency, the yuan, is expected to accelerate that trend by making American assets relatively cheaper for Chinese buyers. Their additional investments in America offer the potential to save or create thousands of jobs -- building goodwill in the process.

In Minnesota, an investment by a Chinese company in a shuttered iron mine resurrected 400 jobs, winning praise from residents and politicians.

The positive feelings here toward Haier and the Chinese also illustrate a significant transformation underway in the Deep South. Although this state is often portrayed as a protectionist enclave, South Carolina has quietly transformed itself into one of the country’s most international regions. Aside from Hawaii, South Carolina has the highest percentage of foreign investment per capita. Nearly one-third of Camden’s manufacturers, including several textile plants, are owned by foreigners.

“You’ve got people who are 50 years old and plus, who still have kids in school and still have car payments,” said Camden Mayor Mary Clark. “Are they bitter about their jobs going to China? You bet they are. But if that Chinese company moved into town, they’d be tickled pink to work for them.”

To be sure, emotions still run high here in textile country, as was evidenced by the fierce battle over the proposed Central American Free Trade Agreement, which critics said would lead to further losses of textile jobs. Southern politicians, like their constituents, were divided over that trade pact, which the House voted Wednesday to ratify.

Camden, like many small Southern towns, could easily have become a victim of its textile past. After surviving the Revolutionary and Civil wars, the town became a center for steeplechase racing and polo. Textile factories migrated from the North, attracted by the low wages.

But under pressure to cut costs, textile companies such as Dupont, the town’s leading employer, began shedding jobs by the hundreds, pushing the unemployment rate above 8%. Many of those jobs moved to cheaper foreign producers, particularly after the passage of the North American Free Trade Agreement in 1994.

In the 1990s, the town found its savior in an unlikely place. Japanese automakers -- faced with the threat of tariffs by the U.S. and armed with a strengthening yen -- began setting up auto plants in the South. The Europeans followed. Camden and other small towns benefited from the spillover, as foreign auto parts suppliers gravitated to the region, attracted by cheap operating costs, low wages and nonunionized workers.

“We had the politicians tell us, ‘If you lose the textile mills, you’ve lost South Carolina,’ ” said Samuel Small, of First Palmetto Savings Bank. “But the politicians were holding us back.”

South Carolina Gov. Mark Sanford, an outspoken proponent of free trade, not only doesn’t want to hold the state back -- he has turned political tensions surrounding China’s trade practices to the state’s advantage.

During a trip to China last fall, the Republican governor told Chinese officials that the best way to defuse the growing animosity in Washington was to increase their purchases of Southern products and create jobs in South Carolina, which has the nation’s fourth-highest unemployment rate.

At least three Chinese trade delegations have since visited the state.

“You can go to make an investment in Nebraska, but you really don’t pick up a whole lot of political currency in that equation,” Sanford said. “If you go to the epicenter, where the jobs have been lost -- and we indeed have been the epicenter -- it allows people in public policy to offer a counterpoint to those who want to raise the walls.”

South Carolina wasn’t originally on Haier’s radar. In 1998, China’s Communist leaders, vying for a coveted membership in the powerful World Trade Organization, were encouraging their biggest firms to go global. Zhang Ruimin, the executive who turned struggling state-owned Haier into one of China’s leading appliance makers, had his sights set on the U.S. market.

Ronald Vergnolle, a young lawyer from nearby Greenville, S.C., was hired by Haier to evaluate several possible sites for a U.S. factory. At a cocktail party in Camden, his wife’s hometown, Vergnolle mentioned his assignment to Charlie Nash, an insurance executive and old family friend. Within days, Nash and others put together an incentive package that included a $370,000 tax break on a 110-acre site owned by the county.

Haier could make its refrigerators in China and ship them across the Pacific for less than the cost of producing them in even the cheapest U.S. location, Vergnolle said. But, he said, the chief purpose of the U.S. factory was to boost China’s image on the global stage. Though Haier has built just one factory, and operates a distribution facility in a nearby town, it has talked about building as many as five factories in Camden that would produce a wide range of appliances.

“The Haier plant is in Camden to give the Chinese government a showpiece to demonstrate to the world that they can compete in a capitalist environment,” Vergnolle said. “Money is not necessarily a motivating factor.”

Prior to Haier’s arrival, racial issues in this predominantly white community were viewed through a black-white prism. Camden had little exposure to Chinese people, aside from a couple of restaurant owners.

On April 5, 2001, in the midst of a tense standoff between the U.S. and China over a downed spy plane, Haier Chairman Zhang arrived in Camden for a grand-opening celebration. Mayor Clark presented him with a gold key to the city and a copy of the Haier Boulevard street sign, which is now in the company museum in China.

Since that event, Haier has operated below the radar, according to locals. When Haier’s Chinese managers first moved to Camden, they rented a house across the highway from the plant and were rarely seen in town. Haier has contributed appliances to fundraising events, but its executives haven’t joined community groups or charitable organizations.

Surprisingly little anti-Chinese sentiment has surfaced, according to locals. Early on, someone called conservative commentator Rush Limbaugh and complained that the Chinese flag was flying higher than the American flag outside the Haier factory. “Of course, it wasn’t,” said the mayor.

Not that Haier’s foray into America was problem-free.

Like other foreign firms, Haier had a steep learning curve, faced with U.S. building codes and environmental regulations, labor laws and local customs, such as the high rate of absenteeism on the first day of deer hunting season. But the most serious issue for the Chinese managers was managing a diverse, independent American work force, Camden officials said.

Haier’s chief executive was well-known in China for promoting a more Western-style of management in which workers were held responsible for their output and rewarded accordingly. At Haier’s main factory in Qingdao, a daily tally was kept of each employee’s mistakes, and the worst offenders were forced to repent, according to media reports.

Nelson Lindsay, Kershaw County’s director of economic development, said the company’s Chinese managers quickly discovered that their American workers would quit rather than be publicly humiliated. The situation improved dramatically after Haier brought in American managers. Haier no longer has any Chinese executives, and only a few Chinese technicians, at the Camden facility, according to Lindsay and others.

Officials at Haier America’s headquarters in New York and at its Camden factory, refused interview requests for this article.

From the outside, there’s little that sets Haier’s Camden factory apart from its U.S. neighbors. The lobby is decorated with the Haier name, and beneath it, in pink Chinese characters, is the slogan “Everlasting Sincere Heart.” The showroom, which highlights the factory’s progress from producing small, dorm-style refrigerators to large, stainless steel models, features inspirational writings in Chinese and English.

Steven Lee, pastor of the Mount Olive Baptist Church, one of 95 churches in Kershaw County, said he had never met any of Haier’s Chinese staff. Several employees attend his church, which is directly across the highway from the plant, and he has heard some grumbling about unscheduled layoffs.

But he said most Camden residents seemed pleased to have another large employer, regardless of its nationality. With starting wages of about $11 an hour -- about average for manufacturing jobs in town -- Haier employees can live comfortably in a town where a new three-bedroom home can be purchased for less than $150,000.

That doesn’t mean that Lee, and others in Camden, don’t have complaints about China. Lee said he didn’t like China’s harsh treatment of Christians and was appalled by reports that some Chinese factories might be using slave labor to produce goods. But he doesn’t hold those things against Haier, which he considers a good neighbor.

“I hear more complaints about Dupont than Haier,” he said, referring to the region’s biggest textile facility, which is now owned by Invista.

Other Chinese forays into the U.S. economy have followed a similar pattern. Until the latest bids, the Chinese have avoided making the high-profile purchases that triggered resentment against Japan two decades ago, such as Sony Corp.’s 1989 purchase of Columbia Pictures.

When Laiwu Steel Group became part owner of a bankrupt mining firm in Minnesota, the Chinese company turned over management of the mine to Cleveland Cliffs, its American partner. That investment, which resulted in the saving of 400 jobs, has been supported by local officials and the steelworkers union.

Jobs are the trump card. Though textile factories continue to disappear, Camden officials have watched their unemployment rate creep downward. Two years ago, Target opened an $85-million distribution center, employing 600 people. Hengst GmbH & Co., a German auto filter manufacturer, is investing $12 million in a factory that will employ 60 people.

Haier’s recent bid for Maytag Corp., based in Newton, Iowa, had raised questions about whether the Chinese company would revise its plans to expand in Camden. But Haier withdrew the Maytag bid July 19.

Steve Kelly, the Kershaw County Council chairman, said Haier officials discussed possible expansion of the Camden facility at a recent dinner.

“They’re positioning themselves to move forward,” Kelly said. “We want Haier America not to be here for just two or three years. We want Haier America to go on and on.”