Typewriter Wars Test the Definition of U.S. Goods : Manufacturing: Domestic content is an issue in Smith Corona and Brother’s battle to be the ‘more American’ firm.
Nearly 20 years of U.S.-Japan typewriter wars reached a head several weeks ago when America’s biggest seller of consumer typewriters, Connecticut-based Smith Corona, announced that it was moving its last American factory to Mexico.
Smith Corona complained that it was driven out of the United States by unfair competition from Japan-based Brother Industries, which had been found guilty by the U.S. government of dumping products at below “fair value.”
Meantime, Brother pointed the finger at Smith Corona, accusing it of dumping its Singapore-made typewriters at unfairly low prices in the U.S. market--while Brother was keeping people at work in Tennessee assembling its machines.
Which is the real American manufacturer? The answer isn’t simple and may teach Los Angeles, which recently passed a “Buy American” charter amendment, how hard it is to determine what a local product is, and how hard it is to define and protect local interests.
Though foreign-owned, Brother assembles typewriters in Tennessee, largely from imported parts. Smith Corona, half-owned by a British firm, makes typewriters in Singapore and New York.
For years, both companies have been fighting each other in Washington as well as on retailers’ shelves, each trying to prove to the International Trade Commission that it is the “more American” company.
For the people of Bartlett, Tenn., Brother is American enough. They saw employment at its typewriter assembly plant grow from zero in 1986 to 650 today. The company is planning a plant expansion this year.
G. Lee Thompson, chairman of rival Smith Corona, which will take some 4,000 jobs from Cortland, N.Y., when it completes its move to Mexico, derides the Brother jobs as “mere assembly” at a “phantom factory” because the majority of parts are imported. That doesn’t seem to bother most of the folks in Bartlett.
“These are jobs we very much need. What we’re looking for is for people to be employed and not on welfare and contributing to the economy,” says Charles Goforth, director of planning in Bartlett, where Brother is the largest employer.
The Brother jobs start at just $7 an hour, perhaps half what International Harvester and Firestone used to pay in the area--but those plants are long gone.
Tennessee has in some ways been one of the greatest beneficiaries of U.S.-Japan trade skirmishes. When the United States imposed punitive duties on Japanese products or negotiated limits on the number of cars imported from Japan, Japanese companies got around the constraints by building plants in America. Tennessee aggressively recruited Japanese companies, and ended up with 20,000 new jobs.
The idea behind Los Angeles’ “Buy American” push is the same--attracting out-of-state, out-of-city and even out-of-country investment by giving preferences in purchasing to companies that build, or just keep, factories in the area. Councilman Zev Yaroslavsky pushed for, and Los Angeles voters approved, Charter Amendment G, which lays the groundwork for local-procurement and domestic-content ordinances.
Charter Amendment G waives the requirement that the city grant contracts to the lowest bidder and makes it possible to give preferences based on domestic content--the proportion of a product that is made in the United States.
But the ordinance to execute that preference has yet to be written, and promises to be unbelievably complicated.
Will Los Angeles give preference to a Smith Corona typewriter built in Mexico with parts from New York and Singapore, or to a Brother typewriter built in Bartlett with parts from Malaysia and Tennessee? Who will pay for the bureaucrats to track the country of origin of each chip, screw, spring and key?
The amendment also provides for preferences based on local--Los Angeles and California--production. Already, a City Council panel voted to pay up to 10% more for a garbage can contract if the manufacturer promises to build a production facility in South Los Angeles. The plan is being reviewed by lawyers.
Katharine Macdonald, spokeswoman for Yaroslavsky, figures that the city’s leverage should work like this: When General Motors says it plans to close its Van Nuys plant, as it did last year, “We’ll say to GM, fine, we’ll go to Ford (for our purchases) because they have a plant in L.A.”
She intended the example as a theoretical one, given that Ford has no plant in the area. But the recent experience of the Los Angeles County Transportation Commission shows that the theory of buying American is often easier than the practice.
After the county canceled a $122-million contract with Sumitomo Corp. of Japan because some elected officials complained about giving the contract to a foreign-owned bidder, transit officials said they would require the bidder to make the cars domestically and to do a certain amount of the work in California.
After concluding that the local-jobs provision might discourage bids, officials dropped that requirement. Now, with bidding opened to manufacturing facilities anywhere in the United States for the first 15 cars of the 100-car line, transit officials have found no company willing to make such a small order.
As a result, the $800-million line could lie unused after completion for three years until the larger order of cars arrives as expected in 1997.
Richard Moore, director of purchasing at the Department of Water and Power, which will be required to follow local-content ordinances, says it may be difficult to determine how American, or Californian, are the turbines and transformers the DWP buys. “We buy a lot from international companies . . . General Electric, Asea Brown Boveri, Westinghouse. What may be a problem is determining domestic content,” he says.
“We’ll do our best to implement what voters want,” Moore says. But “I’m not sure they understood the consequences of this.”
One consequence of the battle between Brother and Smith Corona has been lower prices for consumers, who have seen the price of an electric typewriter drop from about $199 10 years ago to $159 in 1987 and $99 or lower today, according to market analyst Roger Lanctot, who works as a consultant to AT&T; and Brother, among other clients.
The losers are clearly the people in upstate New York, where Smith Corona was a major employer. By the end of next year they will have seen nearly 4,000 jobs disappear as Smith Corona continues to move its production overseas.
Whether Smith Corona or Brother came out ahead in the end is unclear. Smith Corona’s market share in home typewriters has slipped from 70% five years ago to 47% today, while Brother’s rose from 18% to 33%, according to market analyst Roger Lanctot. But while Brother’s profits have been dropping for the past three years, including 40% last year, Smith Corona’s profits have begun to recover after several years of decline and rose 13% last year.
