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Vietnam Competes in US Furniture Market - 2004-01-01


In the past few years, many American furniture manufacturers have closed factories and laid off workers in an effort to reduce costs. They're trying to compete with overseas manufacturers who pay workers a much smaller salary and don't incur some of the expenses American companies pay to comply with government safety and environmental regulations. In this second of two reports, Larry Schooler looks at how Vietnam has emerged as an important U.S. trading partner, and player, in the battle for furniture profits.

Along the graveled roads in Binh Duong Province north of Ho Chi Minh City, furniture companies have sprung up almost overnight. The land is largely undeveloped. And the property is there for the taking. "I remember it was about $4 per square meter," said Lam Ga Sing and Kim Hsu, Taiwanese businessmen, when asked if they remember what it would have cost to buy the land.

"Very cheap!" they said.

Lam Ga Sing and Kim Hsu founded the Eastwood Furniture Company in Vietnam two years ago. The two men considered Vietnam a better pace to put a factory than China, fewer problems with government bureaucracy, they say, shorter waits for supplies and resources, and an abundant, very affordable labor force.

The quality of the product is high. But salaries aren't. Working eight hours a day, six days a week, plus overtime, an Eastwood employee who manually guides wood through a mechanical saw might only make $60 a month. American furniture workers can make that in a single day. But the low pay doesn't really matter to Ho Bun Dung.

"It's steady work," he says. "I get my salary on time every month, and the company is doing well."

Vietnam's stable and affordable workforce has also caught the attention of American furniture makers, like Alex Bernhardt. His North Carolina-based Bernhardt Furniture Company is now selling tables and chairs made by Eastwood.

"It's unfortunate for jobs in North Carolina because there's no question it has cost some employment in our state, with jobs in furniture being moved to Southeast Asia, but it is a way to give consumers a better value, and that's an inexorable tide that's not gonna change," he said.

But not all U.S. manufacturers fully agree with Alex Bernhardt.

Competition with Vietnam has prompted the Vaughn-Bassett Furniture Company to automate some of its factories and consider shifting some production overseas. However, CEO John Bassett says he doesn't intend to buy products from Asia that can be made just as well or better in the United States.

"There's a Pacific Ocean between us and Vietnam and China," said Mr. Bassett. "They're not going to suck water out of Pacific; they have got to float product across that ocean, takes six-eight weeks, by that time, we have met demand of customers, delivered, and we do it so much faster."

But American companies are feeling immense price pressure from countries like Vietnam, whose furniture exports to the United States have jumped some 640 percent in two years. Mr. Bassett says factory owners in Vietnam have clear advantages.

"They can avoid many of the things we have to comply with: EPA, Social Security, hospitalization, all the things we have to do and should do, they can avoid. And will that have an effect? Obviously it will have effect," he explained.

An American walking through a Vietnamese factory would recognize a difference in workplace standards. Vietnamese workers use very little of the protective gear found in most U.S. factories, like safety glasses, gloves, or hairnets. Restrooms near factory floors in Vietnam are often dirty or even unusable, and air conditioning is a rarity.

But furniture manufacturers in Vietnam realize they could lose out on U.S. contracts if they don't make life better for their workers. Many American companies fear consumer boycotts if word of poor factory conditions gets out.

"Good morning! How is everybody?" greets Doug Derouisseau several dozen factory workers and managers sit in a classroom listening to him in Ho Chi Minh City. They wear headphones to hear a Vietnamese translation.

Mr. Derouisseau is the director of training for Social Accountability International. The New York-based group tries to improve working conditions around the world by guiding factories through an internationally recognized certification process known as SA-8000. To earn the certification, factory owners must stop using child labor and forced labor, provide regular health and safety training for their workers, and allow the formation of unions. The process takes a long time and costs a lot of money, but Mr. Derouisseau tells them, it's worth it.

"This is not about forcing you to do anything," he says. "This is about sharing information with you to make you better, so that you're more productive, you're more competitive, and that you can make more money."

Vietnamese companies that are buying into the benefits of improved labor conditions want the world to know. Many prominently display their SA-8000 certifications so the public can see them. In doing so, they are sending a message that and international rulesand if they can keep wages they're willing to play by American low, they will be formidable competitors.

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