Keeping afloat in the import flood

Nation's Business, Sept, 1985 by Henry Eason

Asian household appliances are pouring into the United States, but foreign manufacturers have failed in repeated attempts to displace the might American vacuum cleaner. Hoover Company vacuums are still No. 1. The North Canton, Ohio, firm and its domestic competitors have kept imports below 3 percent of market share.

"Our philosophy is never to leave a blank spot in the market," says Hoover Chairman Merle Rawson. Foreign firms usually penetrate American markets, he explains, by introducing goods at the low end of a product line or by offering top-end items with superior technology.

Invasions of inexpensive hand-held vacuums and streamlined "stick" floor sweepers were foiled when Hoover matched them in price and simplicity. Later this year, it will open a Mexican assembly plant whose lower labor costs will enable Hoover to nullify imports' cost advantages well into the future.

And an ongoing Hoover research and development program turns out increasingly sophisticated floor cleaners like the Dimension 1000--which, company ads boast, "thinks for itself." Thanks to microprocessing, the cleaner, when set on automatic, adjusts to any kind of sweeping job.

"We've stayed on the leading edge of technology," says Rawson, "both from a product and manufacturing standpoint. Ours is a thoroughly integrated plant. We make 90 to 95 percent of everything that goes into our products right here in North Canton."

All across industrial America, sand-bag brigades are trying to dike domestic markets against the flood of foreign wares. The trade deficit in manufactured goods rose from $38.2 billion in 1983 to a breathtaking $88.7 billion last year. The 1985 shortfall is expected to be higher still.

Though many companies are pleading for protective relief, firms in even some of the hardest-hit industries are successfully meeting the import challenge. They have been doing so despite the boost the high dollar has given imports and in the face of trade barriers that deny them foreign markets.

Such firms have in common a dedication to productivity--enhanced usually by automation--and a belief that there will always be a market for the better mousetrap.

In 1982, Hoover installed at its Ohio plant a system that combines computer aided design and computer aided manufacturing to craft parts faster and more accurately. This CAD/CAM output is harnessed directly to assembly lines.

Hoover, is No. 1 not only in the United States but in many other countries. The company has been a multinational since 1919. Last year 56 percent of its $683 million in sales were abroad. Sales are growing, but, says Rawson, the strong dollar and import pressures have stretched profit margins tight. Keeping ahead will be a constant challenge, with the rapid spread of technology and entry into the market of sleeping giants like China. His formula: more automation and long-range planning.

American industries, warns American Productivity Center Chairman Jackson Grayson, Jr., are in a "fight for survival with some very determined international competitors."

The center is a Houston-based non-profit research institute serving business and labor. Says Grayson: "Some companies are meeting [the import] challenge--and will survive. They are important models for other American companies that have yet to make the commitment to innovation and quality required by the international marketplace. Innovation--from both labor and management--not protection, is the answer."

Nucor Corporation, headquartered in Charlotte, N.C., demonstrates that even steel companies can operate in the black, if they are innovative. Profits at Nucor, a leader in production of steel joists, rose 1,250 percent in a 13-year period during which its payroll grew only 240 percent.

President Kenneth Iverson says that "for the last decade, our price leaving our mills has equaled the price of foreign steel, dockside"--an enviable record in his import-battered industry.

At Nucor's plants, nonunion workers win extra compensation according to formulas based on increased productivity.

"Also, we built our steel mills in 1969 and 1970 using the newest technology," says Iverson. Nucor operates with a skeletal managerial crew. "There are 16 people in our corporate office," Iverson says. "Our employe cost is $60 per $300 ton of steel, compared with a $140 cost for larger companies."

High quality will also keep manufacturers ahead of foreign competition. Asian manufacturers have successfully copied and even improved on many American products, but not on Steinway & Sons' grand pianos.

Steinway President Lloyd Meyer proudly recalls that at a recent international competition 35 of the 37 Asian contestants performed on Steinway grands. Last year more than 75 percent of grand pianos and about 30 percent of uprights sold in this country were made by European or Asian manufacturers.

Though imports are cutting deeply into other American manufacturers' sales, they are not hurting Steinway. The Long Island, N.Y., company keeps selling its handcrafted pianos because, Meyer says, they're the best.