Fort payne, Ala. This Appalachian town declared itself the Sock Capital of the World for good reason. It began making stockings in 1907...
FORT PAYNE, Ala.
This Appalachian town declared itself the Sock Capital of the World for good reason.
It began making stockings in 1907 and once boasted of producing 1 of every 8 pairs worn on the planet.
The cushion-sole sock was invented here. Local sock makers are models of U.S. manufacturing, working hard, sharing resources, shaving expenses, investing in technology.
The Robin-Lynn Mills factory, for instance, owns some of the finest equipment in the business, electronic knitting machines from Italy that set the company back more than $25,000 apiece and can spin out a sock in 75 seconds, with the toe seam automatically sewn.
But Robin-Lynn, whose employees typically earn about $10 an hour, didn’t turn a profit last year.
On the other hand, Three Star Socks in Datang, China, made about $500,000 using knitting machines worth $1,000 each and paying its workers an average of 60 to 70 cents an hour plus room and board.
But this familiar story of an enormous difference in costs is only part of the tale of two sock makers and their two towns.
China’s advantages in the global marketplace are moving well beyond cheap equipment, material and labor. The country also exploits something called clustering in a way the United States can’t match.
The clusters are one reason China’s shipments of socks to the United States have soared from 6 million pairs in 2000 to 670 million pairs last year.
One-stop production centersDrawing on its vast population and mix of free-market and central-command economic policies, China has created giant industrial districts in distinctive entrepreneurial enclaves such as Datang.
Each was built to specialize in making just one thing, including some of the most pedestrian of goods: cigarette lighters, badges, neckties, fasteners.
Industrial clusters are like one-stop production centers, achieving economies of scale and driving savings and innovation by geographically bunching suppliers, manufacturers and contractors.
U.S. sock producers, pummeled by imports from China and elsewhere, saw their share of the U.S. hosiery market fall from 69 percent in 2000 to 44 percent in 2003, according to the latest industry data.
Prodded by persistent lobbying from U.S. textile makers, the Bush administration late last year imposed limits on Chinese socks.
The limits, which will remain in force until October, are intended to stave off surges in imports resulting from the expiration at the start of this year of global-textile quotas that had allocated market shares in the U.S. clothing market to various foreign countries.
But the limits haven’t slowed the juggernaut.
Chinese imports of socks, as well as other apparel, have jumped in the first quarter, triggering renewed calls in Washington, D.C., for limits on more Chinese products.
“We’re just trying to pay the bills right now,” said Dale Jackson Jr., general manager of Robin-Lynn Mills, which has shed nearly one-third of its workers in the past two years and has begun to send packaging work offshore.
Even that may not be enough.
Unless something dramatically changes, Jackson said, “there’s no possible way for us to compete.”
The good, old daysThrough 2000, as China was on the rise as an apparel manufacturer, Fort Payne hosiery makers largely flourished, aided by continued innovation and automation.
Jackson started at Robin-Lynn in 1988 making $4.15 an hour.
By the 1990s, 1 of every 3 jobs in the Fort Payne area was related to socks.
He recalled the decade as filled with company-sponsored outings to amusement parks and boat rides on the Tennessee River, regular pay increases, cookouts and deep-sea fishing trips for supervisors.
He moved into management in a few years and received hefty raises, allowing him to build a comfortable house on five acres of woods.
Now, at 39, he earns about $100,000 a year.
“There was an overall feeling of prosperity and the comfort of a good opportunity for anyone who chose to work in hosiery,” Jackson said.
In 1999, Robin-Lynn shipped 30 million pairs of socks and its sales topped $24 million.
It would turn out to be the company’s best year.
As U.S. retailers and their buyers searched for bargains, moving from higher-wage places such as South Korea and Taiwan to Pakistan and China, they squeezed profit margins tighter and tighter.
Similar, yet differentIn 2004, Robin-Lynn manufactured about as many socks as in 1999 but generated just $12 million in sales.
There are many similarities. Three Star, which produced about 20 million pairs of socks last year, has 160 employees and 170 knitting machines.
Robin-Lynn has 170 employees and 150 machines.
Neither company produces its own label.
Both fill orders for larger hosiery manufacturers or intermediaries.
Both make cushion socks that sell at stores such as Wal-Mart for $3.76 for five pairs. Of course, there are big differences, too.
Most of Three Star’s machines, made in China, are so antiquated that they run on pulleys and require workers to constantly clean up lint formed during knitting.
It takes Three Star three times as long as Robin-Lynn Mills to crank out the same sock — and without the toe seamed. That requires an extra step: a seamstress manually closes the toe.
But at the end of the day, Three Star produces and ships cushion socks at a cost of 27 cents a pair. Robin-Lynn’s cost: 41 cents.
“Of course I want to buy high-tech equipment and the best machines,” Zhong said. “But so far, it’s enough.”
The power of clusteringZhong’s cost advantage, of course, is largely generated by cheap labor.
That is what people in the business in Fort Payne complain about.
They also say China’s undervalued currency gives manufacturers there an unfair advantage in that they can sell their exports cheaply overseas.
But what gives Zhong and others like him a real edge — an edge even other low-wage countries such as Pakistan can’t equal — are the benefits of clustering.
Although manufacturing clusters aren’t new, with Italy especially known for them, the Chinese have taken the concept to a new scale.
In the Datang area, more than 10,000 households in 120 villages make their living off socks, according to researchers at Beijing University.
Last year, Datang made 9 billion pairs of socks, while Fort Payne made fewer than 1 billion.
Datang’s myriad sock-related businesses include about 1,000 textile-material processors, 400 yarn dealers, 300 sewing firms, 100 pressing operations, 300 packagers and 100 forwarders.
Thousands of sewing shops, with an average of eight knitting machines each, produce socks for local, national and global markets.
If one of Jackson’s Italian-made knitting machines breaks down, he sometimes has to wait two months for delivery of parts.
If one of Zhong’s machines goes on the fritz, he calls one of more than 60 merchants on Xingfang Street a half-mile away that deal in used knitting equipment and parts.
The local government sponsors Datang’s annual international sock fair, which draws tens of thousands of buyers.
What’s more, subsidies for electricity and natural gas support many mom-and-pop mills operating in sheds and living rooms.
And hosiery businesses have received discounts of 50 percent or more on land purchases for new buildings, as well as tax abatements for creating jobs.
Three Star’s Zhong was 15 when he first tried his hand at his mother’s hand-grinding sock machine, working 10 hours straight to make 20 pairs, for which he earned $2.40 — four times the daily pay of a farmer at the time.
Now he lives in a three-story house with Greek columns and a gold eagle at the top.
Zhong built the house five years ago behind his 2-year-old factory and next to a gray, century-old concrete hovel where he was born and grew up without electricity.
He and his wife send their two children to a private boarding school in the nearby city of Zhuji, and Zhong makes no bones about what he wants out of life.
“Making money is my main priority,” he said.
Little loyalty leftIn Fort Payne, clustering isn’t exactly unheard of.
There are scores of sock manufacturers, finishers, distributors and wholesalers in town.
But it never had the scale or depth of specialization as in Datang.
Nor the kind of support from private investors or public sources.
Today, local government does what it can to support its most important industry.
“The city is subsidizing sewer rates a little,” said Mayor Bill Jordan, noting that waste-water costs for the hosiery industry haven’t gone up in years. “We’re limited in what we can do. Our hands are tied.”
At Robin-Lynn, 70 people lost their jobs two years ago, and everyone on the payroll, from the chairman on down, suffered a 10 percent pay cut.
Jackson has started shopping for raw materials in Pakistan.
The general manager used to buy yarn from mills in nearby North Carolina, but even after adding in transportation expenses, the Pakistani yarn still costs 35 percent less.
Jackson hated cutting out his longtime Southern vendors.
Many have gone under in recent years.
But nothing, Jackson said, is sacred anymore.
“We’ll change vendors for anything. Yarn, supplies, light bulbs, it doesn’t matter,” he said.
“The old loyalty where your buddy sold you the light bulb, that’s gone.”