In 1995, the town of Spindale didn’t know that it lay in the path of a storm. Snug in the hills of Rutherford County, N.C., Spindale basked in what locals call the isothermal belt, a region whose climate is tempered by mild air flowing down from the southeastern slopes of the Appalachian Mountains.

And for generations, the textile mills of Rutherford County had tempered the economic climate, as well. People worked their shifts and collected their paychecks believing that the mills would always be there — at the center of town, at the center of life. In 1995, Spindale was humming along like one of its namesake spinning machines. And Stonecutter, the biggest mill in town, was having its best year ever, with three shifts cranking out fabric twenty-four hours a day, seven days a week.

Then came a perfect storm, the economic equivalent of a monster hurricane fused with a vicious nor’easter. This storm was all business, and neither mountains nor companies would shelter the town.

Falling off a cliff

James Cowan walks through the cavernous spaces of Stonecutter mill. He knows his way, even in the dark. He is wearing a bow tie and seersucker pants. Stonecutter made seersucker fabric, and Cowan has always been partial to it. He leads through a two-story warehouse of huge, empty shelves. A skylight sends a shaft of dusty light straight down to the center of the aisle, as though to beam him away. “These shelves,” he says, “were filled with rolls of fabric, as high as a forklift could reach.” We move room to room, crossing polished maple flooring, enough for a conference of basketball courts. Overhead, heavy pipes snake along the ceiling. Once, they humidified the air to keep lint from the lungs.

Cowan stops in a room studded with yellow steel posts — the loom room. “Imagine,” he says, turning to sweep his hand across the empty space, “two hundred looms worth a hundred thousand dollars apiece working twenty-four hours a day, seven days a week. And imagine all of the people running those looms. It took seventy-five years for mills like this to accumulate all of that capital, all of that knowledge, all of that value. But it sure doesn’t take seventy-five years for it to go away.”

He climbs a dark staircase and opens the door to a training room where Stonecutter’s employees learned computerized systems for running the mill. For Cowan, Stonecutter’s CEO since 1989, this room represents a stronghold of Stonecutter’s values: invest in technology, invest in people, and change with the times. For decades, he says, that’s what the company did. It tracked the fashions of Europe and translated their expensive fabrics into affordable polyester and cotton. When the hippy look went mainstream, Stonecutter raced to market with tie-dyed cotton and peasant cloth, which was coarse enough only after the mill began adding floor sweepings into the mix. When John Travolta danced in Saturday Night Fever, he wore a dazzling white suit made of Arnel, a fabric Stonecutter was producing. Profits danced skyward on the sales of Arnel.

If there was a fad on Seventh Avenue in New York, we could hit it in days,” Cowan says. “We reacted so fast that people would come here to work in the morning not knowing what they would be making that day.”

By the mid-1990s, the company had become so fast and efficient that it was knocking out domestic competition. This should have boosted Stonecutter’s revenues, but it didn’t. Each time a competitor closed, Stonecutter’s orders remained about the same. By 1997, Cowan could read a nasty pattern in the numbers: while his company’s slice of the U.S. pie was growing, the pie itself had shrunk. In the winter of 1998, the normal seasonal pickup in orders didn’t materialize. By the spring of ‘99, the market stopped. Orders vanished. Zip, zero.

When you’re making nine hundred and fifty thousand yards of cloth a week, you don’t think you’ll fall off a cliff,” Cowan says. “But that’s what happened.”

He knew that at the end of 2004, tariffs and other protections for the U.S. textile industry were due to expire, releasing a flood of imports from China and from developing nations around the globe. “We could go to the bank and borrow money and start the death spiral,” Cowan says, “or we could walk away with our heads up. So that was our decision.”

In March of 1999, Stonecutter scaled back from seven days a week to five, laying off 100 of its 772 employees. It wasn’t enough. In one twenty-four-hour period in June, Cowan and his managers walked around to every shift and broke the news to workers in the Spindale plant: Stonecutter was closing its doors. The company would pay off its debts, unload a couple of spinning mills and the salable equipment, distribute more than $30 million to its employees from the company’s profit-sharing fund, and wish them all good luck.

Acres of bed sheets and towels

Patrick Conway, professor of economics, knows the story well. Across North Carolina, there are many dead mills, many sad stories. Conway and his colleagues, Alfred Field from economics and Robert Connolly of the Kenan-Flagler Business School, have been examining the North Carolina textiles industry, interviewing industry executives and analyzing trends. The picture that emerges is one of swift, wrenching change. There will be survivors, Conway says. But the old-style textile mill cranking out acres of towels or bed sheets is probably a thing of the past.

Some of the older mills like Stonecutter were set up to run large quantities of a basic product,” Conway says, “and those basic products are now coming from overseas.”

Stonecutter is neither the biggest nor the most dramatic textile-mill closing in North Carolina. That distinction belongs to Pillowtex Corporation, which declared bankruptcy for the third and final time in July of 2003, shutting down its sixteen plants, including a large operation in Kannapolis. The company laid off 7,650 workers, 4,800 of them in North Carolina. For Kannapolis and its neighboring communities, the closing was catastrophic. As of March 2004, only about five hundred of those laid-off workers had found work, and for-sale signs still stand in picket rows along the city’s streets.

But as notorious as the Pillowtex story has become, it is not the typical case, if we’re trying to understand what’s happening to North Carolina’s textile industry. Pillowtex piled up enormous debt when it acquired Fieldcrest-Cannon and then Leshner Corporation. So the company was vulnerable when the price of textiles fell in global markets and the U.S. economy hit the skids. Pillowtex couldn’t pay its bills.

Stonecutter was different. Except during the 1970s, when Stonecutter’s management borrowed heavily to buy out its original owners, the Tanner family, the company avoided risky ventures. And Stonecutter’s employees were not fighting management over labor-union elections, as the workers in Kannapolis had done. But despite its investment in technology and its speed to market, Stonecutter could not alter decades of history: it was most definitely a big mill turning out large quantities of cloth.

As James Cowan saw it, the market was no longer buying what his company was equipped to produce. “What happened to us is that the needles went to China,” he says. “With their labor costs so low, it became impractical for people to run sweat shops in New York, cutting and sewing. As long as the needles were in New York, we could deliver fabric to the cutters and sewers fast enough to compete. But when they left, that was the end.”

Who to blame

Not every mill is in Stonecutter’s fix, but many are, and it’s tempting to blame foreign countries. Mills in China, the Philippines, and developing nations around the globe produce goods at roughly half the cost of domestic mills, mainly because people in those countries work for less money than Americans do. Especially when money is tight, we Americans like to buy our towels and T-shirts on the cheap. And we don’t look too close at the label to see where that bargain was made.

The cumulative economic force of our individual buying decisions has been so relentless that the only thing standing between many U.S. textile mills and bankruptcy may be the import quotas of a 1995 international agreement on clothing and textiles. And those quotas are set to expire on December 31 of this year. For some of the textile-company executives Conway has interviewed, that date represents a kind of Armageddon. Without the quotas, they say, China and other powerhouse producers will accelerate exports of cheap textiles and apparel. And U.S. mills aren’t the only ones that will suffer. Conway’s colleague, Al Field, adds that developing nations with textile quotas may watch their markets vanish as the big mills in China take charge.

The politics of protecting U.S. industries from foreign competition are fraught with contradictions. In 2003, when the U.S. moved to stem imports of inexpensive brassieres, retailers and domestic manufacturers with foreign suppliers complained that the restrictions would cut consumer spending and do more harm than good. Some analysts point out that the textiles and apparel sector, which includes various interest groups and agendas, has lacked the unified political clout of industries such as steel. As a result, they say, the U.S. has tended to negotiate gradually less trade protection for textiles in exchange for more protection elsewhere.

The North Atlantic Free Trade Agreement (NAFTA) often gets the blame for the loss of U.S. textile jobs. But Robert Connolly, associate professor of international finance and economics, says that “NAFTA was nowhere near the disaster most folks think it was.” He points out that many domestic companies exploited NAFTA’s advantages, at first. “They could ship cut fabric offshore for sewing and bring it back as finished garments at a very advantageous tariff rate,” he says.

The arrangement was so lucrative that many firms, including Stonecutter, rushed to set up shop in Mexico, sometimes borrowing heavily to do so. It was that debt and declining returns on investment that exposed many firms to losses when the needles went to China.

When the apparel business moved to Asia, the foundation of the textile industry moved with it,” Connolly says. “That’s because the Asian producers could source the fabric locally, sew it into garments locally, and do all of this at such a low cost that they could pay U.S. tariffs and still beat the U.S. producers on price.” Connolly recalls a conversation with a CEO in Gastonia, N.C. who said that his company could run “lights out” — with computers and no human operators — and still not compete with Asian imports.

Scissor blades

However you sort the politics of this, the lower price of foreign goods is only one factor affecting North Carolina’s textile industry. Another sharp blade of what Conway calls the “scissor effect” has been the steady rise in U.S. labor costs. While wages in the textile industry grew at a lesser rate than those in other sectors of the economy, pay tended to track upward with inflation. Even as the industry was shrinking, employers competed for experienced workers with other mills because those workers had options.

To combat rising labor costs, textile mills did exactly what they’ve done for half a century: they adopted new technology. Over decades, the extensive hand work once required for sewing, and the manual labor involved in spinning, weaving, and knitting, steadily gave way to machines operated by people and then machines operated by computers. At each step the industry shed jobs. In fact, Conway found, to his surprise, that the U.S. textiles industry has been shedding jobs consistently since 1947. We didn’t notice the job loss because the industry overall was growing, and a person who lost his or her job in one factory generally could find one in another. For decades, the strategy of replacing people with technology worked just fine for textile mills and for the economy of North Carolina. Then it didn’t.

What happened? Conway’s research details a series of shock waves that struck in the 1990s. The first of these was a financial crisis in Mexico in late 1994 and 1995 and the sudden revaluation of the peso, which slashed the price of Mexican goods and favored Mexican producers. Just as U.S. companies were adjusting, often by jobbing out some of their production to plants in Mexico, a financial crisis in Asia in 1997 devalued currencies and sent prices tumbling for goods from Thailand, Korea, the Philippines, Indonesia, and Malaysia. Asian products flooded into U.S. department stores and discount outlets.

The executives I’ve interviewed invariably point to nineteen ninety-seven as the end of life as we know it,” Conway says. “This was an earth-shaking event.”

Recently, industry leaders have accused Asian nations of manipulating their currencies to invade U.S. markets. Connolly doesn’t buy it. “I see no evidence of currency manipulation,” he says. “Anybody who has a sense of history knows that this industry used to be in New England, and then it came here for lower input costs, and now it’s going somewhere else.”

Hanging by a thread

Even so, more of North Carolina’s failing textile mills and apparel makers might have survived if not for the recession that began in 2000. With less money in their pockets, Americans shopped for bargains. Companies reacted to this trend in various ways, but the net result was fewer jobs for U.S. workers. Levi Strauss and Company, Conway explains, shrank its business, eliminating lines that could not compete on price and retaining those, such as Levis blue jeans, which could compete on quality and the reputation of the brand. By contrast, the Greensboro-based VF Company, which makes Wrangler jeans and other apparel, shipped its manufacturing abroad.

The recession hit North Carolina especially hard. Just as the state’s traditional industries — textiles, tobacco, and furniture — were dropping jobs by the thousands, corporate losses, scandals, and a stock-market sell-off began capsizing the high-tech industries we’d counted on for a prosperous future: computers, telecommunications, and biotechnology. “Before the year two thousand, we were a state whose unemployment rate was below average,” Conway says. “Within a few months, that rate was above average.”

Laid-off workers were joining a very long queue at the unemployment office. Statewide, some one hundred thousand jobs were lost in the textile industry and seventy thousand in the apparel industry between 1997 and 2002. In Rutherford County alone, nineteen major textile layoffs since 1998 have dumped more than five thousand workers onto the unemployment rolls. And this time around, when workers lost their jobs, almost no one was hiring. Communities are showing the strain. In Rutherford County, for instance, illegal methamphetamine labs are springing up in rural areas. Retail businesses are posting new signs that say, “Sorry, no checks.” And there has been a rash of thefts, especially of lawn mowers and weed cutters.

The economy has improved recently in some areas of North Carolina, but the storm isn’t over, Conway says. He has developed a method for estimating the county-by-county risk of losing textile firms. Because modern firms tend to favor urban areas with an educated workforce, risk factors include, for example, the percentage of people who did not finish high school and the percentage of people living below the poverty line. From Conway’s analysis, it is clear that some of North Carolina’s remaining textile firms — old-style mills with low-skilled workers in rural areas — may be hanging by a thread.

So far, the big losers in this trend are towns like Spindale. “It’s especially painful for the small towns in rural areas,” Conway says, “because those are the areas where textiles and furniture traditionally have set up, and in many cases the town grew up around the mill. But the new enterprises that have come along may not want to set up in those same locations. That means the workers will face a tougher choice. They’re going to drive farther and work, perhaps, for less.”

Creative destruction

Are textiles and apparel industry in North Carolina a lost cause? No, Conway says. North Carolina still has almost as many textile plants as it did ten years ago (since 1975, the number has bounced up and down in the 1,000-to-1,200 range), and new textile plants continue to open. While the loss of protection would be a serious blow, Conway expects the state to retain a textiles industry. The survivors, he says, probably will be nimble, high-tech firms that can rapidly exploit niches in the marketplace for specialty products made to exacting specifications.

The new textile firm is not coming in with the same model as the old textile plant,” Conway says. “The old textile plant was designed to employ relatively low-skilled workers and to use them to turn out large quantities of a high-quality product, and it was very well designed for that. The machines and everything about it was set up in such a way that you could bring in people with less than a high-school education, and those people would get the hang of it very quickly. But there’s a whole different way of producing in the United States now, and it relies upon being able to produce small batches of textiles, to switch between products quickly, and to ensure tremendously high quality.”

As Conway sees it, this is inescapable economic reality, part of the “creative destruction” that has always characterized the world’s economy. Some industries decline and die while others rise to take their place. What’s new, he says, is that computers, high-speed communications, and the speed of trading goods around the globe have accelerated the pace, kicking creative destruction into overdrive.

But if you’re the one who lost a job — a job that fed your family — you may not be too keen on the concept of creative destruction. And you’re not impressed to learn that when tariffs and quotas are lifted you could save nine dollars on a thirty-nine-dollar cotton shirt. You can’t afford to buy food, much less a new shirt. You want your life back.

Conway is sympathetic, but he knows that most of those old-style mill jobs are gone forever. “There was a whole class of industries in North Carolina that relied on low-skilled labor,” he says. “So you could drop out of high school and still get a job in a factory somewhere. Now we can’t offer that option.”

Moving day

Outside, in the glare of a June afternoon, James Cowan moves a garden hose from one newly planted tree to another. He leaves the water trickling to soak the roots, then lugs a computer from the back of a truck into his new headquarters, a compact old building of time-softened brick. Cowan remains the CEO of Stonecutter, Inc., but he is not in the textiles business anymore. The company operates a chain of building-supply stores and a new industrial park. So today he is moving out of the modern corporate offices he occupied in the mill, setting up shop at 400 Spindale Street, in one of the oldest buildings in town.

Several generations ago, the captains of Spindale’s textile industry shared office space here, on the top floor, while a hive of commerce buzzed around the bank and telegraph office below. The building, Cowan says, accommodated a kind of gentleman’s club for men building fortunes as they also built a town. By many accounts, this gentleman’s club was patriarchal. Long-time residents say that employers “looked after” their workers, repairing their houses, investing in the town and its services. Labor unions never gained a foothold, locals say, because the companies “treated people right.”

Even so, the patriarchy of Spindale’s mill owners wasn’t always so benign. Old-timers tell stories about how, in the 1930s, armed thugs stood guard in some mills to ward off union organizers. And you can find, in aging newspapers, evidence that the club used its influence to discourage new industries that might have competed with textiles for labor. Spindale would be a mill town, pure and simple, and when those mills hit the skids, the town would have nowhere to turn.

But for several generations beginning in the 1920s, Spindale was an island of progress for dirt-poor farmers who had battled starvation, raising families in cramped log cabins in isolated mountain coves. A family coming down from the hills could live warm in a sawn-wood house with indoor plumbing, and the children could go to school. If you had a knack for running a loom or a spinning machine, you could put food on the table every single day. Families prized their mill jobs and handed them down like birthrights. “Children would bring a lunch pail to a man on his shift and run the loom while he ate,” Cowan says, “so the knowledge would pass from one generation to the next.”

Life revolved around the mill, around company picnics and baseball games between rival company teams. Even now, years after the closing, people in Spindale still reminisce about the mills. Once in a while, an old timer will reach into his pocket and pull out one of the thousands of silver dollars Stonecutter paid to its employees on the company’s silver anniversary in 1970.

Today, on moving day, Cowan stands under the stout pine beams that shoulder the load of the roof. He can tell you about the men who worked here — his father among them. Ivy Cowan began as a clerk in 1921, then rose to become the company’s CEO. When James Cowan opens an old pay ledger from the 1920s, he finds his father’s careful script. But James has in many ways fashioned himself into different kind of a business man, a man unlike his father and the other members of the Spindale gentleman’s club. Despite the countrified guise of his bow tie and seersucker suit, he is a decidedly modern CEO, with a degree in math from Carolina and management training from the Kenan-Flagler Business School. He is fluent on the topics of technology, politics, science, and global economics. But for all his progressive notions, he stands at the end of a line.

He is haunted, he admits, by the closing of Stonecutter mill, and what it has done to the town. He says it’s been tough to walk away from something he’d worked hard to build. But the decision, he says, was inevitable. “The reality is that goods will trade for what they’re worth, and they will move around the world. This is evolution, and there’s no way to stop it. No way at all.”

Neil Caudle was the editor of Endeavors for fifteen years.

Research by Conway, Connolly, and Field on the textile industry has been funded in part by the Alfred P. Sloan Foundation. Tim Barth, town manager of Spindale; Michael Gavin, managing editor of the Daily Courier in Forest City, N.C.; and Jim Stickford provided background information for this story.

Coming in the Winter 2004 issue of Endeavors: What is the future of North Carolina’s textile industry? What can be done to help workers, industries, and communities adapt to change?