South Shaken as ‘Rust Belt’ Disease Hits Manufacturing Plants : Low-cost area thought it was immune to economic trends. Now, it’s losing jobs to even cheaper producers overseas.

It was a sale that many in this blue-collar city thought they would never see: Health-tex, the venerable children’s apparel maker, was closing its Gadsden plant. Everything was on the auction block--sewing machines, mannequins, time clocks, even the cavernous yellow brick building itself.

An auctioneer’s cry sent a symbolic shiver throughout a region that long considered itself immune to economic trends that have ravaged and reshaped other parts of the country. “Rust Belt” disease has hit the South.

In areas of the Northeast and Midwest, heavy manufacturing industries fell on hard times at least a decade ago. There, employees who once made cars or steel were forced to try their hands at making hamburgers or learning to program computers.

Now, manufacturing is declining in the South as well, the misery intensified by a recession that has driven retail sales and employment down, home foreclosures and welfare applications up. In addition, Southern farmers are still struggling with last year’s whipsaw experience of spring floods and summer drought.

Even Atlanta, where the prospect of the 1996 Summer Olympics has buoyed hopes for financial gain, has problems. BellSouth recently announced that it wants to cut 3,000 management jobs through early retirement. Delta Air Lines lost $154 million last year. Shopping malls that used to have wall-to-wall customers now struggle to keep stores open.

There is irony in the plight of the South, especially in its apparel and other textile-related industries:

For years, the region lured manufacturers away from the North and Midwest with low taxes, cheap labor and a pro-business political system. Now, like the rest of the country, it is losing manufacturing jobs to foreign competitors that offer many of the same inducements. And the protectionist barriers the industry long counted on to shield it from foreign competition have been eroded by the intensifying U.S. commitment to free trade.

“Some of the region’s advantages have diminished during the past decade,” the Federal Reserve Bank of Atlanta observed in a recent report, “and increasingly the Southeast is becoming subject to the same general influences as the nation.”

Textile Troubles

Nowhere does that come into focus better than in the South’s textile and apparel industries.

U.S. Labor Department statistics show that 689,000 of the nation’s 1.7 million textile and apparel employees were in four Southeastern states--Alabama, Georgia, South Carolina and North Carolina--as of last November.

And more than 465,000 jobs were lost in the two industries during the 1980s, according to James Morrissey of the American Textile Manufacturers Institute. He blames both automation and foreign competition.

“The industry is in a state of flux, and imports are pushing things,” said Carl Priestland, chief economist at the American Apparel Manufacturers Assn. in Arlington, Va.

He said that, during the 1980s, imports--chiefly from the Philippines, China, Taiwan, Korea and Hong Kong--rose from about 30% of the U.S. market to 50%, the current level.

For years, workers in the South’s apparel and textile industries felt immune from dislocation.

“I thought there would always be clothing plants,” said Rebecca Garner, 50, who worked at Health-tex for 16 years, earned $7.25 an hour when laid off last August and is studying clerical work.

“Everybody has to wear clothes. We kept hoping and hoping somebody would buy the plant, but, when it came down to that final day, it was like the roof caved in.”

Often, both husbands and wives found themselves out of work.

The Gadsden plant, which recently had employed 600 people, cut its payroll to the few workers overseeing the shutdown and the transfer of the embroidery operation to another factory. At its zenith, Health-tex had 14 plants, employing 9,200 people. Now, about 2,500 work at five locations.

Accelerating Decline

For Gadsden, a town of 47,000 about 60 miles northeast of Birmingham, the Health-tex closing is an especially tough blow to absorb. The Goodyear Rubber Co. plant, which now employs 2,300 workers, has laid off 1,000 in the last year and a half--mostly because the bias-ply tires it produced were run out of the market by radials. Another major employer, Gulf States Inc., a steelmaker, also has laid off workers. The unemployment rate here was 9.5% last year.

Gadsden has fancied itself an industrial oasis in a historically agricultural region, but the town is struggling because its manufacturing base rests so heavily on three industries vulnerable to foreign competition.

A walk among the sewing machines at Health-tex told its own story. So many machines not made in America--Juki and Brother from Japan, Rimoldi from Italy, Pfaff from Germany.

Larry Downey of Piedmont, Ala., runs a small firm that makes aprons for fast-food businesses. He had come to the auction seeking supplies. Looking out over the sea of equipment, he said, with a sweeping gesture: “There’s not a sewing machine made in the United States any more. Basically, the United States developed the technology, but Japan can make it cheaper. That tells us where we’re going.”

At Health-tex headquarters in New York, Eric Margolin, vice president and general counsel, said a number of factors contributed to his company’s economic decline, but he was particularly bitter about cheap imports. “Anybody with a garage and a sewing machine is a competitor,” he said.

Nevertheless, town boosters remain confident that big employers will move here, attracted to the area by its relatively low cost of living. The average cost of a three-bedroom, two-bath home, with garage, on a three-quarter-acre lot, he said, is $75,000, with property taxes of about $250 a year.

Retraining

As Health-tex closed its Gadsden plant, a few miles away several dozen of its former employees and those of another closed apparel manufacturer, Gadsden Sportswear, were poring over textbooks and pecking at typewriters as they began classes that they hoped would retrain them for work in other fields--health care, child care, clerical work.

Using a $500,000 federal grant, the East Alabama Skills Center is trying to prepare the laid-off apparel workers for new jobs. Martha Webster, coordinator at the center, said, “It’s rewarding when you help someone get back on their feet. Maybe not to where they were, but to where they can at least survive.”

Ominously, however, the health care, clerical and child care classes are taught at the Briarmeade Village shopping center in five spaces that belonged to failed businesses.

In the clerical class, Patricia Teague, an ex-embroidery machine operator who worked at Health-tex for 16 years and earned $7.28 an hour, now draws $150 a week in unemployment compensation. She wants a job running hospital computers, she said.

Cappy Naler, who worked at Gadsden Sportswear for four years, sewing women’s pants and shorts for $5.03 an hour before she was laid off the day before last Thanksgiving, said she enrolled in the class because, “I had to grab the opportunity when I could.”

The trainees, of course, will be graduated into an uncertain economy.

“Retraining is good if jobs are available,” said Steve Massingill, an economics professor at Gadsden State Community College, “but, if you’re not creating jobs, people can’t get them.”

That has been the Catch-22 for many in the economic shifts that have hit other U.S. manufacturing centers.

Dislocated employees have been left behind, unable to find new jobs, even with new skills.

For the longer term, William Tumlin, director of the skills center, envisions a future in which youngsters excel in mathematics and science and new companies come South as “good corporate citizens” looking for more than low taxes and plentiful cheap labor.

“This town is getting awakened in a hurry,” he said. “It’ll take a while, but we’ll have a brand new South.”

Researcher Edith Stanley contributed to this story.

JOBS IN THE SOUTH Nonagricultural employment Manufacturing employment 1980: 22.4% ‘82: 22.5% ‘84: 21.2% ‘86: 20.1% ‘88: 20.0% ‘90: 18.4% Source: Bureau of Labor Statistics