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Proudly driving U.S. sock makers out of business

Los Angeles businessman Steve Rochman is doing everything he can to create jobs, even if most of those jobs are in China.

Rochman, 43, is an outsourcer. His company, Revotech, helps small and medium-size U.S. businesses reduce production costs by shipping work abroad.

To do that, Rochman has partners in Taiwan who establish links with mainland Chinese factories. Widgets that might have cost a few bucks to manufacture in the U.S. can be produced for a fraction of that amount by low-cost Chinese workers.

“Bringing the cost down is not a bad thing,” Rochman told me as we sat in his office on the 27th floor of a downtown high-rise. “You go to Wal-Mart and buy three pairs of socks for $7 instead of $30. That’s not a bad thing.”

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Unfortunately, U.S. sock makers get driven out of business by cheap Chinese imports.

“Yes,” Rochman agreed. “But now Wal-Mart is selling more socks. They’ll need people to sell them.”

To succeed as an outsourcer, you need to be good at rationalizing things.

Rochman defends himself by saying that he’s in the business of fostering innovation and entrepreneurialism, not driving jobs overseas -- even though for every one administrative job he helps create in the U.S., he acknowledges that two or three manufacturing jobs may be created in China.

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Rochman also likes to use the cheap-socks analogy to illustrate that even when manufacturing jobs head elsewhere, increased demand for cheap goods creates a need for more salespeople in U.S. stores.

That would be nice if it were true. But I suspect the 7,000 people fired recently by Macy’s or the 7,000 people sacked by Home Depot would offer a somewhat different perspective on job opportunities in the retail sector as profit margins shrink.

They’d probably say that guys like Rochman are the devil.

“I’m not the devil,” Rochman countered. “If it weren’t for me, small businesses wouldn’t have a chance to compete.”

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Most big companies already outsource their manufacturing abroad, he said.

“That’s the devil,” Rochman insisted. “The devil is already out there. I just help people compete with the devil.”

According to the AFL-CIO, more than 3 million U.S. manufacturing jobs have been lost since 1998, although it’s unknown how many of these jobs disappeared because production was shifted overseas and how many just faded away because of tough economic times.

Rochman comes across as a nice enough fellow. He told me he used to work as an accountant for a variety of companies. He got caught up in the dot-com boom when that was a going concern -- and found himself suddenly unemployed when it wasn’t.

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He had his eureka moment on outsourcing while attending an electronics show in Anaheim in 2002. He met businesspeople with ideas for various gizmos who were having a tough time finding overseas manufacturers who could meet high-quality standards.

Rochman already had some contacts in Asia and said he realized that his background in accounting might be a plus in serving as a bridge between U.S. companies and Chinese manufacturers.

So Revotech was born.

Rochman said he now has about half a dozen clients, mostly in Southern California, using Revotech as a conduit to farm out production of a variety of products.

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A company called Rhyme University in Long Beach provides materials for preschool and kindergarten graduation ceremonies.

An American flag and the words “Made in the USA” adorn Rhyme University’s website. The company makes its caps and gowns locally.

But it also contracts with Revotech for production of gold-colored medallions and rings in China.

“Could we do that in the States?” asked Jason Hilbert, Rhyme University’s vice president. “I’m sure somebody could do it. But it would be more expensive.”

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Rochman estimated that each medallion could cost as much as $2.50 to produce domestically. He said he found a factory in China that could make them for pennies apiece.

“Critics say that if it wasn’t for me, somebody here in the States would be making these,” Rochman said, holding up a medallion. “No. They’d be too expensive.”

Thanks to outsourcing, in other words, little kids throughout the nation can enjoy medallions and rings with their graduations.

I’m not naive. I accept that a global economy means work will invariably seek out the lowest-paid workforce.

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Is this a good thing? Probably not, especially for a country like ours that prides itself on treating workers with a modicum of fairness and dignity (although it doesn’t always).

Speaking with Rochman, I couldn’t help but feel that, in his own small way, he’s hastening the decline of U.S. manufacturing and making things that much tougher for U.S. workers.

Rochman bristled at the suggestion.

“No,” he said. “I allow Americans in small businesses to keep their jobs. I’m helping people.”

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He returned to the cheap-socks analogy.

“Until people say they’re going to pay $30 for socks made in Torrance, I’m not part of the problem. I’m part of the solution.”

Rochman considered for a moment.

“Once people start paying $30 for socks,” he said, “I’m out of business.”

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David Lazarus’ column runs Wednesdays and Sundays. Send your tips or feedback to david.lazarus@latimes.com.


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