One Plant Shuttered, One Saved; Local Economy Makes Winning Argument - And Response

  • Saturday, January 10, 2015
  • David Tulis
Dayton’s Goodman Daikin manufacturing plant in Dayton, Tenn., is being closed by its Japanese owners.
Dayton’s Goodman Daikin manufacturing plant in Dayton, Tenn., is being closed by its Japanese owners.
photo by WDEF News 12,wdef.com

Allan Jones of Cleveland earns millions in a payday loan business that gives him enough capital to rescue a sinking clothing maker in his hometown. His recent buyout of Hardwick Clothes is a picture of how local economy works as a rescuing and salvific idea. 

Local economy in Bradley County or any other part of the world favors near over far, small over big, personal over corporate, simple over complex and physical over abstract. Before we look at Mr. Jones’ buyout of Hardwick, let’s argue for local economy in the negative — by seeing how national economy works. Let’s fly west over the Tennessee countryside to the neighboring of Dayton, in Rhea County. 

This pleasant college town is home to a plant owned by Goodman Daikin Industries, a Japan-based manufacturer of air conditioning units. Today Dayton is mourning that Goodman is closing its plant where as many as 600 people work. Suffering the same blow in a Jan. 6 announcement is a larger Goodman Daikin factory in Fayetteville, Tenn., west of Chattanooga just north of the Alabama border. Altogether, nearly 2,000 souls rely on paychecks from the two HVAC plants. Goodman was founded in Texas in 1982 and was sold for F$3.7 billion to Osaka-based Daikin Industries Ltd. in 2012. 

George Thacker, the Rhea County executive, and chamber of commerce officials are grievously disappointed as are hundreds of family members. But before anyone sheds tears, it’s important to see that plant closures are often essential. The marketplace is controlled by focus on one’s customer and rational self-interest. Owners and managers are tasked with making their business sustainable, and the key measure of that is profit. The heartlessness of closing a factory and throwing people out of work in pursuit of profit is only apparent. No one runs a plant to provide jobs. Owners serve the profit of customers first, owners and shareholders second, and workers lastly. 

Goodman’s Tennessee plants lack capacity for production of newer cooling system models. “We are physically out of space in our manufacturing facilities,” spokesman Rex Anderson of Goodman tells TV12, “and the new facility will give us more efficiencies we can pass on to our customers; we will have a single facility instead of multiple facilities.” The new HVAC models must be built because they are as much as 34 percent more efficient than conventional American systems, according to a 2012 U.S. department of energy study. “Variable refrigerant volume” units are well below 10 percent of the U.S. market, but Daikin’s CEO, Takeshi Ebisu, says intense advertising will increase demand among price-conscious Americans. 

The local economy alternative 

Local economy highly esteems local ownership over foreign and local profit making over remote. In contrast, national economy implies foreign ownership of local assets, export of profits to faraway stockholders or owners, and subsistence gains in local economy through wages, and a little local purchasing, tax revenue generation and the occasional check for a local charity. 

Orientals in the land of the rising sum make decisions affecting Tennesseans without clingy or sentimental reference to local loyalties and interests. Plant closings are cool, impersonal, totally rational, without insular or provincial identification. 

Provincial thinking is only half submerged in Allan Jones’ buyout of the dying Chadwick Clothes. Mr. Jones writes a check for F$1.9 million, money he’d earned with his profitable Check Into Cash business. He engages aggressive executives such as Bruce Bellusci, puts in another F$1 million to upgrade machinery, employs 250 people while the company is still losing money. The company filed for bankruptcy when it realized it was being smothered by retirement fund promises it couldn’t keep, and Mr. Jones is buying it at a bargain price. 

Mr. Jones isn’t buying Chadwick as a mercy to local people, or a kindness to the blue-collar folks who go to his church or frequent the same supermarket. It’s driven by a sense of the marketplace and the likelihood of making money. 

But one cannot discount the local and personal connections that give him optimism that the revival of stylish blazers will be profitable. A newspaper account refers to “his beloved Cleveland” and says, “[h]e plugs away, believing that the spirit of the Hardwick name, its employees — this town — will prove him right.” It quotes Mr. Jones as saying, “There’s something about Cleveland that I believe in.” 

‘Economic development’ comes up short 

The reigning paradigm among municipal governments and chambers of commerce is the ‘economic development’ model that favors big business and government intervention on its behalf. Rather than promote local business and local entrepreneurship, trade groups favor TINA, the “There Is No Alternative” concept. 

Meaning, if we don’t lure big companies to come into our industrial park and “provide jobs,” our town will suffer and we will be poor and miserable and won’t be able to increase the tax base. There is no alternative than to import companies that export profit, leaving the town with residual wages and a loss to that town of some measure of sustainability. 

The Goodman Daikin closures in Dayton and Fayetteville are a picture of national economy at work. Mr. Jones’ buyout of Hardwick is a picture of local economy at work. Lococentrism and free market ideas might be a better way, long term, in which to think about making our hometowns more prosperous. 

We don’t have to be millionaires to take part. Let’s invest in ourselves.

— David Tulis is host of Nooganomics.com, 1 to 3 p.m. weekdays at Hot News Talk Radio 1240 910 and 1190 AM, covering local economy and free markets in Chattanooga and beyond.

Sources: Alex Green, “The Hardwick revival,” Chattanooga Times Free Press, Jan. 4, 2015
Alex Green, “Goodman jobs going south[;] Texas-based company moving nearly 2,000 Tennessee jobs out of state,” Chattanooga Times Free Press, Jan. 8, 2015
Lucy Berry, “Fayetteville still in shock about Goodman plant closure after Texas consolidation news,” Al.com, Jan. 8, 2015
Takishi Mochizuki and Eric Pfanner, “Japan’s Daikin to Build $410 Million Air-Conditioner Factory Near Houston[;] Manufacturer Claims More Efficient Units But Installation Costs May Be Barrier,” Wall Street Journal, Jan. 6, 2015.
Greg LeRoy, The Great American Jobs Scam[;] Corporate Tax Dodging and the Myth of Job Creation (San Francisco: Berret-Koehler Publishers Inc., 2005), 290 pp 

* * * 

 I'm glad the employees of Hardwick Clothes got to keep their jobs but you may not want to pat anyone on the back just yet. The city of Cleveland and the mayor have applied for a $1.975 million state grant for Hardwick Clothes through the State Economic and Community Development’s “Fast Track” grant program which is basically what was paid for Hardwick Clothes as you pointed out. If approved taxpayers will have refunded the purchase price. If I am going to be a stakeholder (owner) I would like to share in profits as does the buyer instead of the residual effects of jobs either retained or created. 

The Banner article mentions the number of new jobs that are expected to be created so you might also want to keep an eye open for a PILOT Agreement request in the future, and quite frankly why shouldn't Hardwick Clothes ask for a PILOT Agreement if they could save over $53,000 a year in property taxes.  It would be foolish not to. 

Even in this deal there was government intervention on the behalf of business. 

Mike Lynn

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