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Colleges keep running up the score on coaches’ pay

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Sports- July 2006

Colleges keep running up the score on coaches’ pay
By Chris Roush

When Terry Holland coached basketball at the University of Virginia from 1974 to 1990, he ran a summer camp and started a television show to make a little money on the side. He also negotiated a team shoe contract — a small one, he says — to pay for things he thought his program needed. Even with the extras, Holland estimates his annual compensation at Virginia hovered around $170,000.

Times have changed. Athletic-department budgets are bigger, and so are coaches’ salaries. Holland sits on the other side of the negotiating table now as East Carolina University’s athletic director. Basketball and football coaches at major colleges often receive compensation packages valued in the high six figures or more.

In May, N.C. State hired Sidney Lowe to replace Herb Sendek as its basketball coach. Sendek made about $900,000 a year and led the Wolfpack to a school-best five consecutive appearances in the National Collegiate Athletic Association tournament. He left for Arizona State University because of a perceived lack of fan support — and for $400,000 more a year. Lowe, a former Wolfpack player with no college coaching experience and a dismal 79-228 record as a head coach in the National Basketball Association, accepted the job for total compensation of about $900,000, the same as Sendek.

Although published reports stated that two earlier candidates rejected offers of as much as $2 million, Athletic Director Lee Fowler says he had hoped to find a coach for about $800,000 to $1.2 million. Still, Fowler sees an end to the rapid escalation. “It will slow down. I’m not saying that the guy who wins a national championship will [see his pay] slow down, but all athletic departments are getting to the point where they are maximizing revenue and ticket prices.”

Even at $900,000 — more than double what Erskine Bowles makes as president of the UNC system and nearly three times the salary of N.C. State Chancellor James Oblinger — the school isn’t paying top dollar. At UNC Chapel Hill, Roy Williams has a pay package near $1.6 million. Duke’s Mike Krzyzewski makes about $1.5 million. Wake Forest’s Skip Prosser makes $1 million.

Coaches’ salaries are rising because of the huge revenue streams they generate for universities and the goodwill they engender with alumni and fans — potential donors to their schools. That’s where Sendek fell short, in part because the Wolfpack rarely beat Carolina or Duke. Lowe excites N.C. State followers because of his link to the Wolfpack’s most-recent glory days, when he was a starter on the 1983 NCAA championship team coached by Jim Valvano.

Count Fritz Polite as one who thinks coach pay has gotten out of hand. He is associate director of the Institute for Diversity & Ethics in Sport at the University of Central Florida’s DeVos Sport Business Management Program. “We’re developing and creating a culture where everything is being jacked up. It’s so competitive because big-time college sports is a lucrative business. It’s really about the money. Even though the player is the product, the coach is the driver, and that’s what drives the salaries.”

Nevertheless, Thom Park, a Tallahassee, Fla.-based agent for coaches and a former athletic director at Liberty University, says coaches aren’t always driven by pay. Lowe was “thrilled to go back to his alma mater,” he says. “Most coaches think like that. The money is taken care of by the process.”

In 1995, the process made former Florida football coach Steve Spurrier the first college coach to reach $1 million annually. He’s now paid $1.5 million at South Carolina. Texas football coach Mack Brown, previously at UNC Chapel Hill, gets about $2.6 million annually, roughly equivalent to Oklahoma coach Bob Stoops, his biggest rival.

Most of the compensation comes from perks such as country-club memberships, shoe contracts, television-show deals and annuities or other contracts funded by booster clubs. Holland defends the practice. “We all spend a lot of time and money marketing our coach as the best, so if we do not pay him as if we believe our own words, then we are wasting our marketing effort.”

In December 2004, Holland hired football coach Skip Holtz, who receives a $150,000 base salary but makes $240,000 more for his TV and radio shows. Holtz will receive a $25,000 bonus if his team goes to a bowl game. In March 2005, Holland hired basketball coach Ricky Stokes, who played for him at Virginia. Stokes also got a $150,000 base salary but only makes $40,000 for his TV and radio shows. The pay that Holtz and Stokes receive for the TV and radio shows increases by $25,000 each season. Both make other money from camps, speaking engagements and other sources.

But Holland, whose salary is $282,000, worries that a coach’s passion could change from keeping score to how much he is making. “And once a person has been bought in any profession, they are always for sale to a higher bidder,” Holland says. “It is not a solid foundation on which to build a long-term program.”

Carolina athletic director Dick Baddour used the lure of more money three years ago when he hired a basketball coach to replace Matt Doherty. However, Baddour argues that Williams’ hiring also resulted from the former Kansas coach’s desire to return to his alma mater. Williams’ package includes a $260,000 base salary and $347,300 from his TV show, as well as $3.9 million over five years from the Ram’s Club booster group. At Kansas, his base salary was $129,380. Doherty made a base salary of $150,000. “It’s just like what you would find in corporate America,” Baddour says. “The marketplace drives what the amounts are and what schools are willing to pay.”

Williams also benefits from a Nike shoe contract and the summer basketball camp that he runs on campus. Even Baddour admits that there’s status in having a highly paid coach. “What you want to do, even in the case of Roy, is pay him what the top-level coaches in the country are getting.”

But with the money comes pressure. Polite notes the multimillion-dollar payouts when a football team plays in a major bowl game or a basketball team advances in the NCAA tournament. “If this much money is being generated through economic impact and merchandise sales, the coach becomes very important. Who is going to drive this big moneymaking machine? If the coach doesn’t drive it correctly, then they’re going to be blamed, and a new driver will be found.” And that new driver likely will want more money than the last one.

CEO wants Krispy Kreme to make lots more dough

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People – July 2006

CEO wants Krispy Kreme to make lots more dough
by Chris Richter

Winston-Salem-based Krispy Kreme Doughnuts Inc. once was a Wall Street wonder. Its glazed doughnuts, each packing 200 calories and 12 grams of fat, still are the undoing of dieters. But investors have been turning up their noses at its stock.

That doesn’t faze Daryl Brewster, 49, named president and CEO in March. “The opportunity was to run a company that was characterized by a great brand, which Krispy Kreme clearly is, great products, which Krispy Kreme clearly has, and great people, yet that had some real challenges.”

His goal is to restore the company’s reputation, tarnished by accounting irregularities, overzealous domestic expansion and questionable acquisitions and franchise buybacks. The company avoided losing its position on the New York Stock Exchange by filing its annual report for the fiscal year ended Jan. 30, 2005, just two days before the April 30 deadline. It lost $198.3 million on revenue of $707.8 million; the previous year, it had $48.5 million profit and $649.3 million revenue. Krispy Kreme must issue its report for the fiscal year that ended Jan. 29 by July 31.

Brewster has helped revive other beleaguered food brands, including Planters nuts. “[It] was a business that really struggled in the mid-1990s, when everybody was concerned about fat. Planters equaled nuts equaled fat equaled bad.” The company brought back the monocle-wearing Mr. Peanut and paid for research into the health benefits of nuts. Planters was a great brand, he says, but it wasn’t in sync with consumers. “Obviously, there are certain parallels to North Carolina-based doughnut companies.”

A Westfield, N.J., native, Brewster earned a bachelor’s in economics in 1978 from the University of Virginia. After getting an MBA in 1982 from UNC Chapel Hill, he was assistant brand manager for Jell-O, which General Foods owned. He also worked for Campbell Soup and Nabisco before going to Kraft, where he became president of its $6 billion North American snack and cereal division in 2003.

Brewster is enthusiastic about expanding outside the U.S. The company awarded development rights to Americana Group, a Kuwaiti company that plans to open about 100 stores in the next five years in markets such as Egypt, Saudi Arabia, the United Arab Emirates and Kuwait. “[Most] of the world is outside this country, and we think this represents an opportunity for us. What we have seen and confirmed in recent trips is that the Krispy Kreme brand and the product really do travel.”

VF’s new president expands wardrobe

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People – June 2006

VF’s new president expands wardrobe
By Chris Richter

Greensboro-based VF Corp. looks different from when Eric Wiseman joined the apparel giant in 1995. Long known for its jeans and intimate apparel, it now also outfits skateboarders with studded belts, preppies with polo shirts and students with backpacks.

Analysts have credited Wiseman, 50, as the force behind acquisitions that have transformed VF. Though jeanswear and lingerie still account for more than half its revenue, VF since 2000 has purchased such higher-end lines as Nautica and The North Face, termed “lifestyle brands” because people identify with them. “We didn’t have a brand that could reach those consumers,” says Wiseman, who was named president and chief operating officer in March.

After graduating from Wake Forest University in 1977 with a bachelor’s in business, the Malvern, Pa., native decided to find a job in North Carolina. “When you do that, you certainly look in the apparel and textile industry,” he says. He landed at Greensboro-based hosiery maker Kayser-Roth. Within a year, he moved to Winston-Salem-based Hanes, staying after Chicago-based Consolidated Foods — which would change its name to Sara Lee in 1985 — bought it in 1979. Along the way, he earned an MBA from Wake Forest.

His first job at VF was executive vice president of its JanSport brand. As vice president and chairman of VF’s sportswear group, he led the company’s purchase of Nautica in 2003. The following year, VF bought Vans, which makes apparel for skateboarders. Last year, it acquired Reef Holdings, which makes surfer apparel, and Holoubek, which manufactures Harley-Davidson’s line of clothing. More acquisitions are likely. Wiseman, who was executive vice president of global brands before his promotion, also is adding 400 stores to the 525 that VF owns. Those stores generated about 12% of revenue in 2005 and help sell discontinued and out-of-season goods.

VF is the nation’s second-largest apparel company, behind only Nike. Employing more than 52,000 worldwide, it had $6.5 billion revenue last year. As the company’s second-in-command, Wiseman is a logical candidate to succeed CEO Mackey McDonald, who is 59. But he deflects questions about the top job. “What happens down the road will happen down the road.”

Town makes sure its boat slips stick

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Tar Heel Tattler – June 2006

Town makes sure its boat slips stick
By Arthur O. Murray

“I think it’s highway robbery.” That’s Topsail Beach Mayor Butch Parrish’s opinion of municipalities using eminent domain — forcing property owners to sell land to the government — for private projects. But he has no qualms about using it to prevent his town’s loss of a vital privately owned amenity.

In May, town commissioners condemned Bush Marina and adjacent property owned by William Lee on the barrier island’s sound side. If Lee had sold the property for development, the town would have lost its only boat ramp, a big negative for tourism in a coastal community. Topsail Beach plans to operate the marina.

The land, which Lee bought two years ago for $800,000, is four lots totaling about 32,000 square feet. His Raleigh lawyer, Kieran Shanahan, says other potential buyers offered Lee, a Johnston County tobacco farmer, more than twice the town’s best cash offer of $2 million.

Things grew complicated when the town botched its first chance to buy the marina. Last year, Lee signed a contract to sell it for $2 million, but the town couldn’t close by the Nov. 4 date in the contract.

Parrish says the town missed the date because it was waiting for state grants that would have covered $500,000 of the purchase. “The lead time was three months. We had these grants approved but couldn’t close on the property until we had the contracts in hand.” They didn’t come until late 2005.

Both sides sued, but the town wanted to make sure the boat access stayed open, so it pursued eminent domain. Under state law, Topsail Beach could take title to the property after the May vote but was committed to paying Lee the “fair-market value” set by a jury.

Determining that would have made for an interesting case. Shanahan says the original contract set the value at $4.2 million but stipulated that the town would pay Lee $2 million and give him credit for a $2.2 million donation. The donation, Shanahan says, would have provided Lee a tax break.

But a jury won’t decide the property’s value. Days after the eminent-domain vote, the two sides settled to abide by the contract.

The town hopes to open the ramp for public use for the summer tourist season. “It’s most appropriate for a municipality to be able to use eminent domain,” Parrish says. Shanahan, who was on the Raleigh City Council from 1995 to 2003 but never had to vote on an eminent-domain case, disagrees. “I couldn’t think of a more clear case of government abuse.”

State pays a high price for low minimum wage

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Economic Outlook – June 2006

State pays a high price for low minimum wage

State Treasurer Richard Moore wants the General Assembly to increase the minimum wage in North Carolina to $6.15 an hour. It would be the first time since 1973 — and only the second time in history — that the state’s minimum wage exceeded the federal one. Both are now $5.15. Though minimum-wage law is administered by the Department of Labor, he has been beating the drums for an increase as he talks with legislators, business leaders, civic groups and others.

BNC: The legislature couldn’t pass an increase last session. Why push it again?

Moore: It is a pro-family, pro-business, pro-North Carolina policy that makes good sense. When you adjust the current minimum wage for the rise in prices since the last wage increase in 1997, it’s actually worth less than it was before 1997. When you look at a longer time horizon, the minimum wage is at its second-lowest point in the last 50 years. While the cost of just about everything has been going up, the real value of the minimum wage has actually gone down to historic lows.

What good will it do?

It will pay minimum-wage workers an extra $173 each month, before taxes. That is money a worker can spend in our local businesses, save for the future or use to feed and clothe his family. That makes it less likely that taxpayers will have to pick up the tab for health-care bills, for food assistance and for other kinds of public assistance.

Who will be helped most?

It would benefit more than 100,000 North Carolina workers. More than half of them are over the age of 25, and three-quarters are over the age of 20. Almost a third of minimum-wage workers in our state are full-time employees. It also will help thousands of teenagers and college students. One of the most troubling statistics I’ve heard recently is that more students drop out of college because of financial reasons than because of grades. So it won’t hurt to put more money in the pockets of our students.

How will it help businesses?

The current minimum wage may put businesses that pay a better wage at a competitive disadvantage. I have talked with many business owners and managers about this. Not only were they shocked to find out that the minimum wage was so low, but they said that they pay well above it. However, if your competition pays the minimum, their employees are almost forced to use public programs paid for by your tax dollars to get by. In effect, you end up subsidizing your competitor’s business.

Without productivity gains, won’t a higher minimum wage shrink employment?

Study after study has shown that in the periods after a minimum-wage increase, the labor market shows few, if any, negative effects. In fact, some studies have even shown that the labor market improves for low-income workers. This is because businesses actually start to do better when consumers have more money in their pockets. Lee Scott, the CEO of Wal-Mart, has supported raising the national minimum wage for exactly this reason.

Won’t it make North Carolina less competitive in luring jobs from other states and keeping the jobs that are here?

North Carolina will remain competitive in attracting and retaining good jobs by educating the workers to fill those jobs, by investing in the industries of the future and by maintaining the quality of life and culture that businesses look for. That’s why we must remain focused on improving education in our state — from pre-kindergarten to the graduate level.

Why not let Congress handle it?

It does not seem likely that it’s going to pass. Besides, should we really wait for Congress and Washington to do what’s right? In areas from education to predatory lending practices, this state has not hesitated to move ahead of the country to expand opportunity for our people when we saw the need.

Why have you jumped into the fray?

The costs of health care, gasoline and housing are increasing rapidly, creating a crushing burden for North Carolina’s low-income families. When the door to advancement and opportunity is closed, we all suffer and it can have a huge impact on the bottom line. Also, our state’s public purse, which I am directly responsible for, is only as strong as the private purses that fund it. Anyone operating on $5.15 an hour just can’t make it.

Are you positioning yourself to run for governor?

I am advocating for an increase in the minimum wage because it is the right thing to do — for our state, our economy and our families. This is something that I think we can get done in this legislative session. I am working hard to make sure that happens.

She believes her software can size up manufacturing

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People – June 2006

She believes her software can size up manufacturing
by Chris Richter

Ping Fu thinks a lot about your shoes. As president and CEO of Geomagic Inc., a Research Triangle Park software developer, she sees a future when manufacturers will turn out goods customized for each buyer. Your shoes will be made to fit the contours of your feet. Your jeans, that of your seat. “Mass customization is all about combining the customized part of craftsmanship with the efficiency of mass production.”

The business she and her husband started 10 years ago specializes in digital shape sampling and processing. Using an optical scanner, Geomagic’s software creates exact three-dimensional images of objects. Automotive, aerospace and plastics companies already rely on it for customization as well as quality control and modeling.

Fu, 48, grew up in China during the Cultural Revolution. Separated from her parents by Maoist Red Guards, she didn’t attend school from age 7 to 18. While studying literature at the university in Suzhou, she spent two years investigating the killing of baby girls, a practice that resulted from her nation’s one-child-per-family policy. Chinese newspapers published stories based on her research in 1981. When they appeared in the foreign press, it caused an international uproar.

Having embarrassed Beijing, Fu landed in a prison cell for three days. It was a problem the government couldn’t solve by executing her. “If they killed a reporter who did a report on human rights and called for the [end of the killing] of baby girls, how would that seem to the international media?” So China kicked her out, exiling her to the United States.

Sent to the University of New Mexico to study languages, she later moved to the West Coast and earned a bachelor’s in computer science in 1986 from the University of California, San Diego. While in graduate school at the University of Illinois, she worked on visualization and graphics at its National Center for Supercomputing Applications. She was involved with Terminator 2: Judgment Day, which revolutionized computer graphics in movies.

Fu and husband Herbert Edelsbrunner, a computer-science professor at Illinois, were intrigued by how digital shape sampling and processing might transform manufacturing. They started Geomagic 10 years ago with $500,000 from her brother-in-law and moved it to RTP three years later when Duke University hired Edelsbrunner.

The company nearly failed. The management team brought in to run it had no experience with startups, she says, and spent too much. When she took over as CEO in 2000, there were 50 employees. Within three months, there were 23. Two years later, Geomagic was profitable. It now has about 100 employees and $15 million annual revenue.

Fu is convinced manufacturing will evolve. “The same product running down an assembly line is no longer innovation. But each customized product running down an assembly line is innovation. There’s no reason shoes coming down the assembly line have to be the same.”

Road rage

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Road rage
By Ed Martin

I grew up on wheels. My family has a picture of me steering a big John Deere tractor when I was 4. Now, even though I’m old enough to know better, I still get excited about road trips. I plug in a vintage Creedence Clearwater Revival CD — Big wheel keep on turnin’ / Proud Mary keep on burnin’ / Rollin’, rollin’ — and crank up the bass. Reporting takes me from one end of the state to the other. Over and over.

But the fun is fading. Traffic is strangling this state, and not even money — North Carolina is spending $2.7 billion on highways this fiscal year — seems to help. Efforts to fix problems often seem to make them worse. Every business ought to be up in arms, if not over the safety and health of employees, then the bottom line.

I pondered this a few days ago as I sat like a fume-flummoxed lemming in a 15-mile-long traffic jam on Interstate 85 just north of Concord. I had crawled through Charlotte’s morning traffic and reached what I thought was the open road — Big wheel keep on turnin’ — when a solid wall of brake lights loomed ahead. Two 18-wheelers had wrecked in a construction zone near Salisbury. I inched ahead — two miles in 30 minutes — made it to an exit, swung southeast, then north on N.C. 49. More than three hours later, I completed my 118-mile trip to Gibsonville, near Burlington. That’s nowhere near my record. A couple of years ago, it took me nearly five hours to get the 143 miles to Raleigh. Major accidents cut my average speed to about 30 mph. And the problem isn’t confined to the interstates.

The most obvious reason employers ought to be concerned — outraged — is lost productivity. A Texas research institute calculated that Triangle drivers spend the equivalent of three workdays a year sitting in traffic jams. By 2020, they’ll spend a third of their time on the road stuck in traffic. Predictions are equally dire for Charlotte — and not so hot for the Triad. Travel is a crapshoot, so I leave for appointments ridiculously early; I had given myself three hours to reach Gibsonville. For early appointments, I go the night before, wasting time and money on a motel room.

More highways might help. I-73 and 74 are inching north to south through the state, but new roads are no panacea. Case in point: Traffic nearly shut down the first link of Charlotte’s new 61-mile beltway the day it opened. There’s a clamor to add more lanes to sections as soon as they open. North Carolina, which once called itself the Good Roads State, has become the Bad Driving State. We might have to accept that travel today is often as slow as when cars sported tail fins. But maybe we can try some common sense. There’s no reason thousands of motorists can’t be warned off when construction or accidents shut down interstates. Or that more work be done at night and off-peak hours. Or that better traffic engineering tactics be employed.

Most of all, though, maybe we need to get tough with what we’ve got. Highways are meant to move vehicles. But developers have more sway over when and where roads are built and the number of exits they have than transportation planners do. For example: the proposed I-3 cutting through the Smoky Mountains. It’s time we go back to building roads for cars and trucks. Otherwise, travel in North Carolina is going to keep rolling downhill. Rollin’, rollin’.

N.C. office supplies are cheaper by the doesn’t

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Tar Heel Tattler – June 2006

N.C. office supplies are cheaper by the doesn’t
By Frank Maley

Chances are, when you need paper clips, you have two concerns: price and speed. Lots of vendors carry them, so you want the one that will get them to you cheapest and quickest.

That’s not necessarily what the state got when it signed a contract in November with Office Depot to provide basic office supplies for the next three years, with options for three more. The state agreed to pay $18.2 million a year, about $37,000 more than it would have paid Corporate Express Office Products, part of Dutch giant Buhrmann. Instead of next-day delivery, Corporate Express says, the state settled for second-day delivery.

How? The contract award was based on a point system developed by the state and Accenture Ltd., a New York-based management and technology consultant that, during the past three years, has done $30 million of work for Delray Beach, Fla.-based Office Depot. The work wasn’t related to the state contract but wasn’t disclosed until administrative hearings this year. Hampton Dellinger, a lawyer for Corporate Express, wants the state to give the contract to his client.

An administrative judge agrees the decision should be reversed. In a transcript, Judge Beecher Gray says he saw no wrongful collusion but found an appearance of impropriety. He says the state’s scoring system doesn’t work as it should.

Too much weight was given, for example, to having stores where employees could dash for supplies. But there wasn’t enough evidence that employees wanted that option nor that it was better than the next-day delivery offered by Corporate Express, Gray says. The state loosened a requirement for next-day delivery after Office Depot said it couldn’t meet it, Dellinger says.

The state says it has always considered factors other than price, but that didn’t sway Gray. The state, he says, should take the low bid unless there’s evidence that a higher bidder is the best option. “In this case, it’s just not here.”

Secretary of Administration Britt Cobb will review Gray’s decision. Cobb’s decision can be appealed to Superior Court. Sen. David Hoyle, a Gastonia Democrat and vice chairman of the Senate Commerce Committee, says the state’s reliance on a consultant with an apparent conflict of interest “doesn’t pass the smell test.”

Leaving lost wages

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Leaving lost wages

With furniture manufacturing moving overseas, Las Vegas bets on winning the world’s biggest market — High Point’s.
by Edward Martin

The cool quiet of the marble stairway to the Radio Building’s mezzanine contrasts with the carnival atmosphere outside on Main Street. A performer on stilts sidesteps a woman leading a pig. It wears a vest advertising a furniture maker. High Point, banners on lampposts proclaim, welcomes Sri Lanka, Netherlands Antilles, Haiti. Men and women in suits scurry by, clutching order books and chattering in foreign tongues.

The nine-story Radio Building is old, built in 1922 as headquarters of Commercial National Bank, its mahogany trim and other features restored to past grandeur. High Point’s furniture market is even older, dating to 1909. Like almost every inch of available space downtown, the mezzanine doubles as a furniture showroom this week. Nearby stand the 13-floor International Home Furnishings Center, with 3.5 million square feet — 80 acres, the size of a small farm — and the Showplace convention center, smaller but striking with its arches and wavelike roofline.

Market officials estimate that 80% to 90% of downtown buildings — 188 of them, big and small, new and old, with tax value totaling nearly $700 million — are part of the show. Twice a year, it brings to town more people, from across America and 110 foreign lands, than live here. It’s the world’s largest furniture marketplace, where manufacturers introduce their lines and buyers for retailers place their orders — the spring show for what will be in stores this fall and the fall show for next spring — and no event in North Carolina equals its economic impact, boosters say. The furniture shows are here because this is where the industry was centered. Once.

Now, the High Point market’s future is in jeopardy. Las Vegas, 2,000 miles distant and light years away culturally, has set its sights on attracting the tens of thousands who swarm to each High Point show by building a new home for the market and leveraging its advantages in entertainment, accommodations, restaurants and glamour. With furniture manufacturing spreading around the globe, going to Las Vegas can make as much sense to buyers as a trip to High Point.

This morning at the end of April, a man and woman are talking in the Radio Building mezzanine. Liz Zimmermann is vice president of sales of Presidential Seating, a Commerce, Calif., chair maker. She lowers her voice, as if confiding a secret. “Las Vegas will eventually be the only one. It won’t happen overnight. It’ll be gradual. A lot of the big guys — the North Carolina manufacturers — aren’t going to go quite yet. But it’ll happen eventually.”

Talk like that is everywhere this market, heard on buses, in restaurants, over cocktails: Can tradition and grit stand up to location and glitz? “Las Vegas is for people who mix entertainment with business,” says Paul Toms, chairman and CEO of Martinsville, Va.-based Hooker Furniture. He’s also chairman of the International Home Furnishings Market Authority, which organizes the High Point shows. “Most people here aren’t interested in anything but a good meal and going to bed after putting in 12 hours a day at the market.”

Las Vegas might be the Entertainment Capital of the World, but it’s not the Furniture Capital of the World. It has 120,000 hotel rooms, but it doesn’t have an 80-year-old, four-story building in the shape of an ornate chest of drawers, complete with handles. It has a mammoth airport served by all major airlines, but the only furniture distinctly associated with Las Vegas heretofore has been topped with green felt. “We’re the largest furniture marketplace in the world, and the High Point brand is our strength,” says Brian Casey, a Chicago trade-show expert who became the Market Authority’s new president in March.

Without the market, downtown High Point would be a veritable ghost town. “Most everything is somehow connected to the market,” says Tammy Nagem, vice president of operations of the Market Authority, created in 2001 to promote the shows and manage their daunting logistics. Losing the market, she says, is “a thought I don’t even want to entertain.”

What happens in Vegas, the ads say, stays in Vegas. A lot of people are praying that it won’t be the International Home Furnishings Market.

On April 28, the spring market’s opening day, David Palmer glides up and down showroom escalators and squeezes into the shuttle buses that whisk buyers around town. He shows more than a casual interest in his surroundings. Palmer is general manager of the World Market Center in Las Vegas. Like many connected with it, he soft-pedals the threat to High Point. “Gosh, we’re the Little League compared to the World Series.”

That’s not what the statistics say. Palmer is overseeing construction of a futuristic-looking, eight-building complex that will total about 12 million square feet of furniture showroom space, approximately what High Point has. The cost, borne by private investors, will exceed $1 billion — at the current pace, by a lot. Two buildings, with about 2.5 million square feet leased by exhibitors, are complete. Ground will be broken for a third this fall, and he expects all eight will be done by 2015.

The first two Vegas markets, last July and in February, each attracted about 1,200 exhibitors, nearly half High Point’s total, as well as about 50,000 buyers and sellers, half the 97-year-old market’s draw this spring. Analysts say the premiere Vegas shows, in effect, finished off a declining, 90-year-old home-furnishings market in San Francisco. So much for tradition.

“Vegas is clearly a competitor already,” says Ray Allori, marketing manager of Lane Home Furnishings, part of St. Louis-based Furniture Brands International, the largest U.S. manufacturer. As he guides buyers through Lane’s more than 100,000 square feet of exhibit space in High Point, a group of Chinese manufacturers — they build much of Lane’s furniture — watch the reactions to their work. Lane, founded in Altavista, Va., in 1912, showed furniture at Las Vegas’ first two shows. “We were so concerned that it was going to be just a play land that we offered a promotion to buyers for placing orders. We were surprised to find that buyers wrote more actual orders than they do here.”

Another big manufacturer, Lenoir-based Broyhill Furniture Industries — also part of Furniture Brands — exhibited at Vegas and plans to expand its 20,000-square-foot presence there. Though it has 130,000 square feet in High Point, orders in Las Vegas compared favorably. “We’ve got our feet in both camps,” President Harvey Dondero says. “We’re hedging our bets for now.”

Lane and Broyhill, which traces its roots to 1905, are among many brands that grew up with what grew out of High Point. In 1889, 30 years after the town was chartered, High Point Furniture Manufacturing turned out its first piece, an oak office desk. A lumber salesmen and two merchants each had invested their $3,000 life savings, betting on its location in the middle of the state’s hardwood forests, amid masses of rural people desperate for work, and transportation. The town was the highest point, hence its name, on the North Carolina Railroad, which linked it to the nation’s major markets.

Photo by Steve Exum

Along the railroad and its feeder lines, factories sprang up. By the time the first market was staged in 1909, High Point was the center of an industry that stretched from Asheville to Durham. Its core — Furniture Alley — ran through the foothills from Hickory to the Blue Ridge in Virginia. “It occurred to manufacturers that instead of loading their products on wagons and taking them around to retail stores, it would be easier to bring the buyers here,” says Judy Mendenhall, a former mayor who retired in March as president of the Market Authority.

As workers mastered their craft, North Carolina won a reputation for quality furniture, and the industry came to dominate the economies of many communities. In nearby Thomasville, a 30-foot-tall reproduction of a Duncan Phyfe dining chair stands downtown. Thomasville Furniture was founded there in 1904. But since the 1980s, furniture manufacturing has plummeted in North Carolina. Employment peaked at about 90,000; today, it’s around 50,000. Time was, about 60% of the nation’s furniture was made within 200 miles of High Point; now 43% of what’s sold in the U.S. is imported. Nearly half of that comes from China.

High Point and Furniture Alley towns have managed to hang on to much of the design, marketing and administration. But manufacturing has nosedived, especially since 2000. Case goods — wood furniture, the bread and butter of the Tar Heel industry — have been hit hardest. In Davidson County, just south of High Point, about 9,000 furniture jobs have disappeared since 1992. The reason is simple: too much global capacity, too much cheap labor overseas. In fact, in the Internet era with manufacturing gone global, some question the need for a market. That’s an idea that Dondero, Broyhill’s president, derides. “It’s the most effective selling dollar you’ll ever spend. No dealer in America is going to buy a couch without sitting on it.”

But as Asian imports increase, the site of the showroom where they do that sitting might shift. At the spring show, rumors fly. One is that the market will move not to Las Vegas but even closer to the new center of production. As he drives a shuttle bus ferrying buyers from outlying parking lots to downtown showrooms, Stuart Crawford wonders. The retired president of Crawford Furniture, a Jamestown, N.Y.-based manufacturer, he moved to High Point to stay in touch with the industry. His company first exhibited here exactly 50 years ago.

“Beijing,” he says. It’s the host of the 2008 Olympics. “I wouldn’t be surprised if the market doesn’t move to some of that space. By then, China will have control of about all the wood products.” Dondero and others doubt buyers would make such a long trip. A more likely scenario: Las Vegas becomes a West Coast market, capitalizing on its proximity to Asian manufacturers. That would weaken but not doom the High Point market.

As the spring show winds to a close the first week of May, there’s news to digest. Using a new registration system to obtain the first accurate count of attendees, organizers are surprised when it tops 100,000. Their previous best estimate: 70,000 to 80,000. But two announcements sober some of those still here on the final day. One is that Lacquer Craft Manufacturing, which owns Universal Furniture in High Point and Legacy Classic in Burlington, is buying Craftmaster Furniture in Taylorsville; Lacquer Craft is a Chinese company. The other: Furniture Brands is closing the last Thomasville Furniture plant still open in Thomasville. About 280 jobs will vanish.

With billions of dollars on the table, neither side can blink. Vegas holds a strong hand but it must pay off. The two completed buildings left developers with $500 million debt. High Point’s investment is spread among many owners; the largest building, the International Home Furnishings Center, is owned by Bassett, Va.-based Bassett Furniture, Philadelphia-based Lincoln Financial Group and the family foundation of Randall Terry, late owner of the local newspaper.

But High Point’s stake is more than just real estate. A study last year by UNC Greensboro economist Andrew Brod estimates that the market pumps more than $1.2 billion into North Carolina’s economy and is directly responsible for 14,000 jobs statewide. These are not just stilt-walkers distributing advertising pamphlets but designers, carpenters, electricians and others who work behind the scenes year-round.

As the spring show unfolds, preparation for the fall show goes on. LeAnna Graves, advertising director of Lenoir-based Bernhardt Furniture, slips into a curtained section of the company’s exhibition space. In the showroom behind her, a group from the Dominican Republic — one in 10 buyers at the market is from another country — makes notes on Bernhardt’s Tuscan Villa line. She walks through rooms where drywall dust covers bare floors as new walls and mantelpieces take shape. “This will all be for our Martha Stewart collection this fall,” she says.

On the market’s second night, hundreds gather under a tent in the plaza in front of the International Home Furnishings Center to hear a Charlotte funk-rock band. Inside, under bright lights in closed-off showrooms, photographers from studios that specialize in furniture — 11 of them have at least 100,000 square feet each somewhere in High Point — snap late into the night. One is The Alderman Co., founded in 1896 as a portrait photographer. It employs about 100 in its 250,000-square-foot studio. “The market has evolved, and we’ve evolved with it,” President Jeff Williams says. “One of our top-10 clients is headquartered in Vietnam.”

For all its economic impact, the market has a relatively low profile in the rest of the state, even though it spills out of High Point, which has only about 1,000 hotel and motel rooms. There are some 15,000 in the vicinity, and buyers take those and others as far away as Durham and Charlotte. Closed to the public, the market is open only to manufacturers, distributors, wholesale buyers and industry insiders. “Sure,” says analyst Jerry Epperson, managing director of Richmond, Va., investment-banking firm Mann, Armistead and Epperson, “some always want to go the girlie bars or whatever in a place like Las Vegas, but this is the professional market.”

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While the market is popular with manufacturers, it is less so with buyers. “We’ve been addressing problems such as perceived price gouging by hotels and the lack of entertainment,” says Toms, the Market Authority chairman. Epperson adds: “In past years I was paying $360 a night to stay in the Raddison downtown here. In between markets, I’ve stayed there for $90 a night. In Vegas, if anything, they have group rates for the market and you pay less.”

Many High Point officials deny they’re concerned about losing the market. But they have made a massive effort to burnish the city’s image and fix flaws. Jawboning this year persuaded some hotels to lower rates — Epperson’s bill at the Radisson dropped to less than $300 a night — and the Market Authority rolled out free entertainment that included three-time Grammy winner Bruce Hornsby. But the biggest improvement was in transportation, moving buyers through the congested streets to showrooms scattered throughout downtown.

From predawn to twilight, fleets of buses and vans shuttle buyers from the state’s three major and some smaller airports and ferry those who have driven to the market from park-and-ride lots in suburban shopping centers. The renewed emphasis began in 2002, not coincidentally the year that plans for the Vegas market were announced. The Market Authority will spend about $1 million this year on transportation. Overall, it has a $3.2 million annual budget, which comes from the state, High Point, other Triad cities and a showroom-license tax on manufacturers.

Boosters also are promoting the market as the lower-cost alternative. Tom Lindh, president and CEO of the International Home Furnishings Center, says exhibitors pay an average $12 to $13 a square foot in High Point, compared with up to $40 in Las Vegas. Officials there won’t comment. Ultimately, Lindh and others concede, the hand they hold won’t decide where the market will wind up: That’s up to the buyers. “The strengths of High Point are the weaknesses of Las Vegas,” he says, “and the other way around.”

In the Radio Building mezzanine, those who will decide browse Presidential Seating’s showroom. The past keeps its hand on the present here. The bank is long gone, but a radio station from which the building takes its name has had its studio on the top floor since the 1940s. In a sixth-floor office that would be at home in the business world of the 1920s, Candace Lambeth, president of the family company that has owned the building since 1947, waits and watches. “There is something about the furniture industry that is special,” she says. “I don’t have a dog in this fight, but I know how much it means to the area. I think it’ll stay. I hope it will.”

When it comes to furniture, she says, High Point has the history. Time will tell whether Las Vegas has the future.

Lax attitude won’t nuke Duke’s repute

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Tar Heel Tattler – June 2006

Lax attitude won’t nuke Duke’s repute
Chris Roush

It’s too early to tell if the Duke University lacrosse players accused of raping a stripper will have any impact on donations to the school, student applications, faculty recruitment and the like. But some experts think the economic effects of the incident may not last long.

Although sports scandals have damaged the reputations of some colleges, the negative results have been usually short-lived. “The Duke lacrosse team has badly hurt the image of the university,” says Richard Lapchick, chair of the University of Central Florida’s DeVos Sport Business Management Program. “However, once the case is settled, I do not believe there will be a long-term impact on enrollment and donations.”

Lapchick says that even spectacular sports successes rarely help colleges with recruiting and fund-raising over the long haul. “Many thought Doug Flutie’s Hail Mary pass was a boon for both, but no sports incident has had that positive sustained effect. The same is likely to be true here on the negative side. Duke’s brand has been built over too long a period of time. Temporary hurt, yes. Long-term, no.”

Duke is a significant factor in North Carolina’s economy. With a work force of 36,000, including hospital operations, it is the state’s third-largest private employer, behind Wal-Mart and Food Lion. Its annual budget is about $3 billion.

Major financial donors may need special attention from the university. They will want to make sure their money is well managed, not spent on cleaning up problems, says Raymond Sauer, a Clemson University sports economist. “If donors are assured that this is not a reflection of management, they shouldn’t take a big hit.”

Thus far, the university has kept thousands of alumni informed about the case with straightforward e-mail updates. In addition, Duke has asked alumni to urge high school students they know who have been admitted for next fall to accept the university’s offers. Carol Cookerly, a 1978 Duke graduate who owns an Atlanta-based public-relations company, thinks that the university has done well with the communications aspect of the crisis. “The tone has been right. It has expressed the university’s concern to do the right thing.”

But even the best of intentions are not always enough to avoid some unwelcome public-relations developments. Since the story broke into the news in late March, sales of Duke lacrosse shirts by the school have more than tripled.