Industry Profile

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North Carolina's 100 largest manufacturing employers

Manufacturing Evolves Into a High-Tech Business

Below: Workers assembly personal computers at IBM's RTP facility

By Barlow Herget

As North Carolina's manufacturing sector clanks and strains toward a successful transition from lower-skilled jobs in traditional industries to higher-skilled work typically in technology-related fields, one can only conclude that this is not our fathers' economy anymore.

Even as the overall number of factory jobs in the state continues declining, thousands of new, hybrid jobs are being created in fields that hardly existed here a few years ago. Today, computer scientist is number one on the state's “Fastest Growing Jobs” list. Number three is computer engineer and number four is systems analyst.

A decade of unparalleled prosperity has both aided and abetted the transformation of North Carolina's economy. “In general, we're in the midst of the longest economic boom in our state's history,” declares state Secretary of Commerce Rick Carlisle. Unemployment rates here throughout the decade generally have been below the national average, which itself is better than what once was considered full employment.

And like the nation at large, North Carolina's overall economic profile shows a steady shift from manufacturing to service industries. Virtually all the U.S. jobs lost in the production and distribution of goods between 1969 and 1995 have been replaced by jobs in offices, according to “The New Economy Index: Understanding America's Economic Transformation” published by the Progressive Policy Institute of Washington. And managerial and professional jobs have grown significantly, from 22 percent of the total employment in 1979 to almost 29 percent today.

From 1994 to 1997, total manufacturing employment in North Carolina fell by 25,000 jobs, or 2.9 percent. However, this decline was more than accounted for by textiles alone, which fell by 27,200 jobs, or 13.3 percent, over this time period. Similarly, apparel employment fell by 17,200 jobs, or 25 percent, and tobacco manufacturing employment decreased by 1,100 jobs, or 6.5 percent

Carlisle, regarded as one of the state's premier and practical policy wonks, sees North Carolina's manufacturing future in hopeful but cautionary hues. “The forces of technology and globalization are driving all manufacturing toward more capital-intensive and less labor-intensive technologies. These changes are creating new opportunities, but also creating major job losses in many of our state's traditional industries,” he says.

But he warns, “These changes are especially noteworthy in North Carolina's rural areas, and, as state leaders, we have a responsibility to find creative ways to help (rural areas) handle this transition successfully.”

An illustration of this transition was recorded earlier this year when six textile companies in Rutherford County alone announced that they would downsize or close operations, affecting about 2,200 employees. About the same time, Lucent Technologies (formerly Bell Labs) announced that it would create 500 jobs in a new, 120,000-square-foot research facility at N.C. State University's Centennial Campus, which already is home to 3,200 jobs. The researchers will be engaged in optical networking technology which Lucent's Gerry Butters described as “important to the 21st century as electricity was to the 20th century.” Less than five miles away in Cary, Lucent is building another multi-storied office building that will employ advanced software programmers, adding to the current 2,200 Lucent workers in North Carolina.

Those two announcements also show that the state's economic transition is geographical as well as technological. The small town of Spindale, for example, is home to three of the textile plants noted above; by contrast, NCSU's Centennial Campus is two miles from the state Capitol. Campus developers expect the job count there will be up to 6,000 in less than two years and 35,000 at build-out.

This movement from traditional, labor intensive jobs in apparel, textiles, furniture and tobacco at factories in rural areas to new products produced at high-tech plants near the urban areas can be tracked in the state's employment figures. A report prepared by Jonathan Morgan of the state Commerce Department for the N.C. Rural Prosperity Task Force, which is chaired by Erskine Bowles, showed that between 1977 and 1997 the state lost almost 82,000 jobs in textiles alone.

In a more detailed examination, Morgan showed that manufacturing employment in the decade between 1987 and 1997 had declined in traditional industries as follows: Tobacco goods down 32.6 percent, textiles down 21.5 percent, apparel down 38.2 percent, and furniture down 14.2 percent.

The manufacturing industries that showed job growth included: Transportation equipment up 47.2 percent; fabricated metal up 31.9 percent, machinery up 22.6 percent, and electronic equipment up 10.5 percent.

The figures show an overall decline of 1.7 percent in manufacturing jobs during the period. The state still remains among the top manufacturing areas in the country, ranking fifth as a percent of total non-farm employment. But that's compared to No. 1 in the nation in manufacturing jobs in 1977.

Most of the lost manufacturing jobs have been in Cherokee, Macon and Jackson counties in the west and in Columbus, Onslow, Duplin, Lenoir, Pitt and Martin counties in the east, according to Morgan's study.

In the rural east, this trend undoubtedly will be accelerated by Hurricane Floyd's unprecedented destruction. The state Department of Agriculture has estimated that as many as 7,000 farms in the east have been destroyed. There has been no similar number computed for lost manufacturing jobs as a result of the hurricane, but as Billy Ray Hall, president of the Rural Economic Development Center, commented, “It's about as bad as you can get for eastern North Carolina. What personally worries me — whether people lose faith. When you have been hit again and again.”

Another change of the state's manufacturing status is the ongoing modernization of existing operations. While Americans have always been noted for their productivity, the foreign competition of the 1970s and 1980s pushed American management to find more efficient manufacturing processes. The computer and telecommunication innovations of the past 30 years have allowed managers to find new and better ways to make their products. North Carolina abounds in examples of such characteristic American enterprise.

Barry Eveland, IBM senior state executive for North Carolina who is based in the Research Triangle Park, describes what his company has done to stay competitive: “IBM in the Research Triangle has invested substantially in logistics management and manufacturing technology, and that's a key reason we were able to cut $100 million out of our supply chain costs in the last year.” The company streamlined the manufacturing process, for example, by inviting its business partners to “co-locate” in the manufacturing facility which cut precious days off the delivery cycle. IBM also converted from a line-based manufacturing environment to a faster, cell-based model, and, of course, it developed new software tools to improve the process. In addition to the bottom line results, IBM also won the 1999 Franz Edelman Award for “Achievement in Operations Research and Management Sciences.”

The Gates Rubber Co. in Ashe County is another example of an established manufacturer that changed its operation dramatically to meet market demands. The plant opened in 1978 and employed about 320 people in the 150,000-square-feet facility to fabricate curved hoses for the automotive industry. A few years ago the company switched its product line to rubber engine belts and invested $32 million to automate its manufacturing process. The company now employs 165 people who had to be completely retrained to operate the new robotic machinery.

“We compete with a lot of domestic and foreign countries such as Germany and Japan,” says Bob Steffes, plant manager and a 30-year veteran in manufacturing. “We worked through Wilkes Community College, and our people had a lot of training and study. They went from learning about pneumatics and hydraulics to a lot of robotics. The jobs are certainly at a different level of skill.” In reflecting on his years in manufacturing, Steffes observes, “Before, half of the people in the office didn't have a computer, and today, even people on the manufacturing floor have computers. It takes a lot less people, but they're more productive. Today, manufacturing is a constant learning process.”

Scott Ralls, director of economic development for the state's community college system, confirms the demand for such retraining. “We're always attracting new industry that needs training, but many people are coming out of existing manufacturing. There were about 23,000 trained for new jobs last year.” The state's community colleges ranked number one in the nation in 1998 in worker training, according to the state Department of Commerce.

Automation has been the savior of some of the state's traditional manufacturers, too. North Carolina featured on its November 1998 cover Unifi Inc., one of the state's largest textile companies. CEO Allen Mebane IV explained in the article what robots and computer-controlled processing and computer-aided design have done for his company:

“In 1968, with wages and fringe benefits at $2.25 an hour, it cost us 14 cents a pound (per yard for production). Today, in Yadkinville, with labor at $16 an hour, it costs us 4.3 cents a pound. Thanks to technology, we have taken the cost of labor out of making the product.”

There is another change in the manufacturing dynamic. As the state enters the 21st century, North Carolina finally has broken out of the status of an “in-country colony.” The Civil War drained the South of much of its capital, and well into the 20th century, Southern states including North Carolina saw “economic development” as attracting the new facilities of manufacturers and industries based elsewhere. This policy, nicknamed the “great buffalo hunt” by industry hunters, continues today, but North Carolina increasingly has become a home for entrepreneurial development and companies that start and stay here.

Fifteen years ago, for example, a cursory examination of the Raleigh Yellow Pages yielded a single column of companies listed under “Computers-Software & Services.” In the 1999 edition of the book, there are 2 1/2 pages of listings and 26 pages of computer related businesses. Two of the state's newest, home-grown billionaires named by Forbes Magazine, Jim Goodnight and John Sall, are founders of the software company, SAS Institute, which is headquartered in Cary on a verdant campus of contemporary office buildings. It is no smoke stack factory, but it is one of the world's leading makers of a knowledge industry product—computer software.

Nearby in the Triad is RF Micro Devices in Greensboro. The company is an example not only of the type of new manufacturing jobs in North Carolina, but also how the entrepreneurial spirit takes root here and flourishes. The men who started the company, Powell Seymour and Bill Pratt, came to the state with another high tech company. When the company turned down their idea for microchips, rather than leave they stayed in Greensboro and used their knowledge of the industry to gather investment capital. In 1991, they launched RF Micro Devices, which designs and fabricates microchips for the wireless communication industry. Today, the company's stock is traded on the NASDAQ, it has a plant worth over $70 million, and its headcount approaches 1,000. Its customers include Motorola, Nokia, Lucent Technologies, Samsung and Mitsubishi.

Allison Rankin, the new associate dean of continuing education at Cape Fear Community College in Wilmington, notes another change in manufacturers in her area. “Contract work,” she says. The trend of “outsourcing” functions in the manufacturing process extends beyond jobs such as security, landscaping and food service to include assembly work itself and in-plant equipment maintenance.

“There are two industrial maintenance organizations, The Mundy Companies and Fluor Daniel, that do contract work for large, heavy manufacturing companies. These jobs used to be part of the manufacturing operation,” Rankin observes. Similarly, biotech companies and pharmaceutical manufacturers have spun off some of their research functions, giving rise to contract research companies such as Pharmaceutical Product Development Inc. (PPD) and Applied Analytical Industries (AAI) in Wilmington and the Triangle's Quintiles, one of the state's 10 largest public companies.

These trends all underscore the changing nature of manufacturing. Ralls of the Community College System puts it in perspective: “We'll have a smaller percentage of our workforce in manufacturing, and they will be people with better skills earning better salaries. While we had a record number of layoffs last year, we had a record for new investment, too.”

Leslie Boney, the Department of Commerce staff director for the Rural Prosperity Task Force, agrees. “The big three trends in manufacturing,” he finds, “are the shift from labor-intensive operations to capital-intensive manufacturing; the companies that are growing are not what we've traditionally had in North Carolina; and the continuing transition of agriculture to manufacturing and from manufacturing to service and trades.”

Looking to the future, Secretary Carlisle warned in a recent speech to the Digital Economy Council of Advisors that “The wage gap between the skilled and the unskilled is growing and will continue to widen. The difference between the haves and havenots in the next century will be knowledge, technological savvy, and life-long learning opportunities.”

J. Barlow Herget is a Raleigh-based writer. He is a former member of the Raleigh City Council and a former special assistant to the secretary of Commerce in Gov. Jim Hunt's first administration.