July 17, 2007    Volume 14, No. 13

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America's Oldest Industry Is On Brink Of Extinction



BY RICHARD McCORMACK
richard@manufacturingnews.com


The once healthy U.S. glassware industry, America's oldest industrial sector, is down to one remaining company. All of the major companies are either out of business or in bankruptcy, due to unfair foreign competition, according to John Meier, CEO of Libbey Glass Inc. of Toledo, Ohio, the last remaining U.S. maker of tumblers, stemware, mugs and household glass. The industry started shortly after the creation of the Jamestown Colony in Virginia in 1607.

Libbey, the world's second largest glassware manufacturer, has stayed in business by opening plants in Mexico, China, Netherlands and Portugal, in addition to plants in Ohio, Louisiana, New York and Wisconsin. But the company is facing "enormous challenges from companies often supported by their governments," says Meier.

"During my career with Libbey, which now spans 37 years, every major domestic competitor that I have faced is either out of business, in Chapter 11 or up for sale," he told a recent hearing of the House Ways and Means Committee. Corning Consumer Products, now called World Kitchen, has gone through Chapter 11; Oneida is in Chapter 11; Anchor Hocking is in Chapter 11; Wheaton Glass has gone through Chapter 7 "shut down and gone," says Meier. Federal Glass is in Chapter 7, "shut down and gone." And Indiana Glass is up for sale. "Talk about an industry facing a challenge," he says.

The problem facing the industry is simple: unfair trade -- not the ideology of free trade "but the reality of trade," says Meier. "The reality of trade today is far different than that described by the theorists. Comparative advantage may exist for basic commodities, but in today's world where transportation speeds products to marketplaces all over the globe, where capital flows freely to the place where it can gain the highest return, where technology can be applied in virtually any environment, competition is not governed by theories in textbooks, but by profits and national interests."

The U.S. glassware industry is being inundated by imports. In 1996, imports from China and Turkey accounted for 12 percent of the U.S. market, but by 2006, that number had risen to 53 percent of the U.S. market. During that time, Turkey's average annual growth rate was 28 percent, and China's was 23 percent.

Libbey is determined to compete. The company invested $183 million in capital upgrades between 2002 and 2006, or 7.7 percent of total sales. But those investments may be for naught, given that the United States government is allowing foreign governments "to get away with subsidizing their producers and not enforcing their laws while turning to the remaining producers in the United States and saying: 'We need to make it easier for more imports to flood our markets,' " says Meier. "Effectively, many of us would tell you we have an eight-lane highway coming into Peoria, only to face a dirt road back to Rio, Jakarta or Istanbul."

Unfair foreign trade subsidies are documented every year in the United States Trade Representative's annual "National Trade Estimate Report" and by other government agencies. Yet the U.S. government is not doing much about them.

Meier says his company can compete with companies with dramatically lower labor rates. "But the question of the enforcement of labor rights is not a theoretical or esoteric issue to producers like Libbey. I want other countries to enforce their laws across-the-board, and it has an impact on their cost structure and their ability to compete here and around the world." Those countries are providing their producers with subsidies for energy, natural gas and other inputs, allowing massive intellectual property rights violations, and rebating value-added taxes at the border on their exports and applying value-added taxes on imports.

"We've always been an advocate of free trade -- in theory," says Meier. "Unfortunately, in reality, it just doesn't exist...And in the face of this, I have seen U.S.-taxpayer resources offered to help enhance the competitive posture of my competitors."

Capital and technology can move freely around the globe. American workers are able to move within the United States, but they can't move to China. The trade policies of the United States are causing "major disruptions in peoples' lives and in their communities," says Meier. "Unfortunately, the free trade theorists treat people simply as assets just like any other input in the production process. I don't view my workers that way. Every job matters. Every business leader faces the challenge of balancing his requirements, and in the face of these challenges I have shut factories in Canada, California and now Mexico. I do not relish those decisions, and I don't buy the approach that training and adjustment are the answer for those affected in the USA. Yes, those issues are part of the equation, but all too often, they are the primary approach offered by those who refuse to deal with the reality of today's global trading system and the tough competition we face.

"I have workers who hope to be able to keep their jobs and work a lifetime in Libbey's facilities. They work hard and play by the rules. They deserve my support as well as that of their government. Every three years, we sign a contract with our union. Among the topics covered have been pensions. It is a pension that gives them a set dollar amount based on each year of service. Our ability to maintain this feature in the face of already fierce import competition is problematic. And if they lose their job, they may jeopardize their dream of a safe and secure retirement. All too often, the job they may have to go to pays less and may have fewer if any, benefits. Their pensions are cut drastically, and their retirement, as they planned it, is gone forever. It is easy to say get rid of pensions or cut wages 30 percent to 40 percent, but reality isn't that simple. Of course, as the CEO I have to bargain for a contract that treats my workers fairly, but that will allow the company to survive and prosper. All we ask is for trade policies that permit us to go forward and do that hard bargaining. We can find a way. But trade politics that further open the floodgates take the equation out of our hands and dooms many companies and industries with the stroke of a pen. I find that unacceptable.

"Our first priority should be a trade policy that creates growth, jobs and equity. Leading with transition assistance sends the strong message that our policies are heading in the wrong direction. It sends a message that we are effectively ready to abandon companies and industries on a wholesale level. A part of the package, yes. A lead feature, hardly.

"Like many other businessmen and women around the country, I have faith in the ingenuity and productivity of the people in my company. They make great products, but they do not leap tall buildings in a single bound; they do not run faster than a speeding bullet. They are not Superman. Idealism has its place; but so does reality. I simply want them to have a fair chance to compete. The American Dream should be available to anyone who works hard and plays by the rules. We need a trading system that respects and rewards hard work, and insures our ability to fight a fair fight. Not one that ties our hands behind our backs, while blindly worshipping at the alter of free trade. Thank you."



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