Tupelo fights to keep furniture king

Federal Reserve Bank of St. Louis - Regional Economist, Jul 2001 by Greene, Stephen

Mickey Holliman doesn't mince words when discussing the current state of his industry.

"I've been in the furniture business for 41 years, and I have never witnessed conditions as difficult as they are today," says the chairman of Furniture Brands International Inc.

Such a pronouncement is not encouraging news in Tupelo, Miss. Besides being the birthplace of the king of rock 'n' roll, Tupelo is king of the upholstered furniture industry. Within a 50-mile radius, more upholstered furniture is produced here than anywhere else in the world, according to local officials. About 6,700 people in Lee County work in the furniture industry, accounting for 34 percent of all manufacturing jobs. More than 100 furniture companies exist in northeastern Mississippi, but that figure has been slowly dropping in recent years.

Most of the furniture sector's woes have affected case goods (wooden products) rather than the upholstery side because the former can be produced more cheaply in foreign countries. As a result, the Tupelo area so far has been nicked, but not crippled, by the industry's downturn. Tupelo's unemployment rate is still about half that of the entire state. But enough red flags exist for one industry analyst, Stephen East of A.G. Edwards, to warn: Any area that depends on furniture for its employment base better start working hard to get something else. The reality is that it's just not a business that makes sense in our high-labor-rate country."

The Impact of Imports

In a cutthroat business climate, more and more furniture companies are taking advantage of cheaper offshore labor in order to survive. The consequence has been domestic downsizing. Even St. Louis-based Furniture Brands, one of the largest manufacturers of residential furniture in the United States with sales of $2.1 billion last year, has been affected. It has announced that it will close five facilities, resulting in the loss of 1,200 jobs.

"Those numbers are going to grow before the year is over," Holliman says. "They probably will be substantially higher than that."

The closures affect some of the company's case goods plants in North Carolina and Virginia that produce the Thomasville and Broyhill brands. Lane Furniture Industries Inc., a subsidiary of Furniture Brands, is headquartered in Tupelo. In northeastern Mississippi, Lane produces furniture in four plants, three of which are in Lee County. The company is the largest manufacturer in the region with about 4,000 workers making recliners, stationary leather furniture and motion furniture (love seats or sofas with ends that recline).

Holliman, a Mississippi native who still lives in Tupelo, says he expects Furniture Brands' sales from imports to rise from 10 percent last year to as high as 30 percent over the next five years. He adds, however, that the company's Tupelo operations are the strongest in the company because upholstered furniture does not yet face a direct overseas threat. One reason is that foreign workers typically don't have the training to build the motion mechanisms. In addition, upholstered products, unlike case goods, cannot be flatpacked, a process that makes shipping from foreign markets more economical.

But the buffer Tupelo enjoys may be starting to ebb. Last year, Lane began to import leather covers from the Far East, mainly China. Although Holliman does not expect employment levels in Tupelo to be affected over the next three or four years, he adds, "Longer term, I think there's an excellent chance that we'll see payrolls even in this area be affected." Despite this warning, Holliman says that over the next six months, Lane will gain 150 new jobs in Tupelo because of a recent consolidation within the company.

Companies like Lane aren't as vulnerable to the offshore wage gap as smaller ones, says David Rumbarger, president and CEO of the Community Development Foundation in Tupelo.

"The ones that face the greatest threats are the mom and pop operations," Rumbarger says. "Furniture manufacturers that can diversify themselves and that have state-of-the-art processing facilities have been able to produce at a higher rate and a higher margin in order to compete."

For more than 50 years, the foundation has been working to promote economic development in the area, resulting in Lee becoming the leading manufacturing county in the state. Through a new fiveyear initiative called Future Focus, the foundation is attempting to further expand the job base, as East recommends. The campaign seeks to raise $1.6 million to recruit companies and industries, retain and expand existing businesses, develop the areas technology capabilities and provide more education and training for workers.

Luring new industry is even more critical in adjoining counties like Pontotoc and Chickasaw, where furniture makes up more than 70 percent of all manufacturing jobs. Incidents like the recent temporary closure of Kensington Furniture, which idled more than 500 employees in Pontotoc and Itawamba counties, have a more severe effect where furniture manufacturing is so concentrated.