Remember Paris

When Emerson pulls out of this small southern town, it'll leave bitterness and broken promises behind. That's what happens when a marriage ends badly.

Oct 16, 2002 at 4:00 am
Many saw the silver-haired, square-jawed corporate executive as just another millionaire big shot -- the kind of guy who teed off at Augusta National, threw fundraisers for his pal, George Bush Sr., and lived a life light years removed from theirs.

In the eyes of his Paris, Tennessee, employees, Charles F. Knight was a remote boss, a name at the top of their company's organizational chart, a suit who threw people out of work.

On August 28, 1998, they saw a different Chuck Knight.

This Knight was shining.

He'd wrangled a deal to keep the factory open and, for the 300 workers who'd sweated for months about making house notes and car payments, worry turned into celebration.

Since the 1960s, the Paris factory produced Craftsman power and bench tools for Sears, Roebuck and Company, one of the nation's top retailers. But in 1997, Sears wanted better terms from Emerson; otherwise, it'd turn to cheaper foreign manufacturers and workers to produce its brand-name tools. The abrupt announcement appeared to signal the end of the line for the plant -- the second time in the '90s that closing seemed imminent.

But Knight and other top execs at the St. Louis-based industrial giant found a new partner in Home Depot, the Atlanta-based home-improvement powerhouse. Emerson proposed launching a new line of bench-top and stationary power tools exclusive to Home Depot. The new tools, similar to those made for Sears, would be sold under the Ridgid brand name. Home Depot jumped at the opportunity -- and soon, Ridgid tools were rolling off the same assembly lines where Craftsman products used to appear.

"One day we were running Sears Craftsman, the next day it was Ridgid," says Janice Chadwick, a longtime Emerson worker. "It was smooth, a pretty smooth turnover."

The reason things went smoothly, Sears alleges in a recent lawsuit, is that Emerson stole equipment, drawings and other intellectual property in order to do the Home Depot deal. Emerson denies the charge.

But back in August 1998, with the marriage off to a good start, Emerson and Home Depot organized a company picnic that was part celebration and part public-relations event.

Knight and other Emerson top brass from St. Louis showed up. So did Home Depot Chairman Bernard Marcus, who'd cancelled a scheduled appearance in Santiago, Chile, where the chain was opening its first international store. Home Depot employees from nearby Clarksville, Jackson and Nashville made the trip to Paris. Even Heather Heath, Miss Tennessee 1998, showed up to greet workers as a band from Nashville's Opryland performed.

"This is a great day for Emerson and for Paris," Knight told the crowd.

Amid chants and cheers, Knight praised his workers and their "commitment to high-quality production."

But it wasn't just Emerson's employees who were committed to their jobs. The town of 10,000 was also determined to keep the plant open. That's why, in 1992, after Emerson said it might have to close the plant and move the work to North Carolina, the community threw cash into the outstretched hands of what was, at the time, one of the nation's top-performing Fortune 500 companies.

And now the workers, politicians, executives and reporters gathered like the faithful at a tent revival.

Of course, the corporate tent was fancier than the ones Jesus uses.

"We never seen anything like it," Chadwick says. "Windows and air conditioning -- that was a big thing for us hillbillies."

Inside, the sweet smell of barbecue mingled with the perfume of small-town politics and power. The mayor of Paris and other small-town city officials rubbed shoulders with the corporate royalty, people who could buy up most of the county with their personal bank accounts.

The picnic, for the workers and their families, started at 11:30 a.m., cutting short the regular work shift by two hours.

Chadwick had been at the plant since before 5 a.m., the time when her shift officially started.

That morning, Chadwick, who was 54 at the time, was working on the Ridgid bench-saw motor line. The motors, made in Mexico and shipped to Tennessee, were stacked five layers high on a lift. Her job was to take the twenty-pound motor from the pile, put it on the conveyor, wire an on/off switch and put the assembled unit in a cardboard box. Before the picnic, Knight walked through the factory, but he didn't stop to chat with Chadwick, whose T-shirt and jeans were already moist with sweat.

The 640,000-square-foot factory doesn't have air conditioning, and in August, temperatures creep close to 100 degrees.

But a job in a hot factory was better than no job at all, so when her shift was over, Chadwick swept up and walked to the cool tent to celebrate the fact that she would continue working in the hot factory, hopefully until she turned 65.

"We thought Ridgid was going to be a big thing," she says.

She and the rest of Paris thought wrong.

Emerson's deal with Home Depot not only didn't save the Paris plant, it may end up costing the St. Louis company millions of dollars.

In a federal lawsuit filed in August, Sears alleges that Emerson pulled a fast one in order to do the deal with Home Depot. The lawsuit, which has received scant coverage in St. Louis, describes how Emerson allegedly conspired to defraud Sears, helping Home Depot quickly launch a line of "substantially similar" products to compete with the more-established Craftsman brand.

Emerson vigorously denies Sears' allegations and has filed a counter-claim; spokespersons for Home Depot, which isn't named in the Sears lawsuit, did not return calls.

In Paris, however, the corporate mudslinging doesn't mean much. Emerson and Home Depot, which four years ago were praised for preserving American jobs, have decided to move production of Ridgid products out of the U.S. to where people are willing to work for less.

Operations at Emerson's plant in Paris are winding down.

Employees and residents of the small southern town, who four years ago bought into Knight's pep talk, say they feel betrayed.

"They got up there and told a bunch of lies," says Pearl Webb, a recent retiree.

Paris is situated in a sparsely populated corner of Tennessee, just west of Kentucky Lake, where land is cheap and Baptist churches plentiful. Giant white crosses dot the landscape, billboards proudly proclaim "Jesus Saves."

Smooth, freshly paved two-lane highways carry commuters and logging trucks through a rolling countryside. In the morning, before the heat sets in, a thick mist hangs just above the lush, green grass and brilliant fields of yellow goldenrod. Kudzu, a fast-growing vine that blankets the South, is pervasive in these parts; folks in Henry County are accustomed to the creeping killer and pay it no mind.

But Paris is also more than scenic roads and Sunday prayer services.

It has a Super Wal-Mart, Goodies and Peebles. It has a 60-foot replica of the Eiffel Tower. And each year it has a fish fry. It's a tradition that draws close to 100,000 people. They gather in makeshift dining halls and consume 13,000 pounds of fried catfish. There are games and a parade that snakes past the courthouse and the monument to the soldiers of the Confederacy. Businesses and schools shut down for a Friday in April.

The community has also historically been a haven for manufacturers. With no state income tax, lax pollution laws and enforcement, cheap land, weak unions and a low cost of living, Tennessee was a popular place to a move a factory up until the 1990s.

Emerson was no exception.

"They came here for cheaper labor," Chadwick says. "That's why they left St. Louis and came here, for cheaper labor."

Chadwick's husband was hired as a factory hand in 1964, shortly after the plant first opened.

Four years after opening, Emerson and Sears struck their deal.

Emerson supplied the motors and labor; Sears supplied design drawings, the dies and the tooling -- equipment used to stamp out parts -- for products such as hand drills and bench saws. Sears claims that it spent about $35 million during the 30-year period on the dies, tooling and special machinery. After the tools rolled off the line, they were sent to Sears stores.

In 1973, Janice Chadwick joined her husband at the plant. She had moved to the Volunteer State from Collinsville, Illinois, married and settled down into the Southern worker's way of life.

In the summer, the plant operated from 5 a.m. to 1:30 p.m. The couple would be in their car by 3:30 a.m., making the dark 45-minute drive. Before starting their shifts, they'd buy breakfast -- typically, a sausage biscuit -- in the company cafeteria.

It was a good job -- and that was especially important after her husband died of a heart attack in 1982, making her the sole bread-winner in her family.

"They had a reputation in this area, you could be proud," Chadwick says. "They were about the best-paying plant in Paris."

So in 1992, when Emerson announced it would combine production at its plants in Paris and Murphy, North Carolina, and close one of the factories, employees weren't the only ones who worried.

Paris and Henry County officials mobilized to save nearly 300 jobs at the plant and put together a $1.2 million package of incentives in the form of grants and tax breaks. Taxpayers paid for a wastewater pre-treatment plant for Emerson, installed ventilation and air pollution controls, and installed a water recycling system for the die-casting operation. During the next ten years, if Emerson employed the same number of workers, the city agreed to pay for security lighting. And as an extra bonus, the local industrial bond board, the entity that owned the plant property, agreed not to charge the annual $10,000 lease fee. At the end of ten years, Emerson was also given an option to purchase the proprety.

The Henry County Executive, Henry Jackson, told the local newspaper, the Paris Post-Intelligencer, "We have every reason to believe the company will view this as a tremendous indication of community support."

Emerson's threat to close the Paris plant not only allowed the company to get government subsidies, it also strengthened its bargaining position with the International Association of Machinists, whose contract was set to expire. The Machinists weren't exactly a strong factor at the plant -- only about 55 percent of the plant's workforce paid dues (Tennessee is a Right to Work state), and wages were in line with the region's non-union plants. But faced with a possible closing, the union squeaked instead of roared and in March 1992, agreed to a five-year extension of its contract.

The most experienced workers would receive about $7.33 an hour base pay.

"Our people [are] trying to work with the company," a union spokesman told the Post-Intelligencer. "They want to keep Emerson in Paris."

Five days later, Emerson announced Paris had won out over the Murphy plant.

It'd taken $1.2 million and a wage freeze to save the factory. There were other sacrifices, too: The plant's cafeteria would eventually close -- instead of a hot sausage biscuit, employees had to settle for vending-machine donuts.

But Chadwick and her co-workers were still employed.

The reprieve would prove short-lived.

In 1997, Sears told Emerson that it was reevaluating the supplier relationship between the two companies. Sears wanted to cut costs and was looking for someone to make Craftsman products more cheaply. Sears says it invited Emerson to submit a new bid, but Emerson refused.

Sears was attempting to do to Emerson what Emerson had done to Paris.

But Chuck Knight wasn't just some elected official from small-town U.S.A., eager to keep business at any cost.

Emerson simply walked away from Sears' business, analysts who followed the St. Louis company said at the time.

On June 30, 1997, Sears formally told Emerson the contract, first signed in 1968, was ending.

According to factory workers in Paris, Emerson execs blamed Sears.

"They tried to turn us against Sears," Chadwick says.

After Sears announced the Craftsman deal was dead, Emerson scrambled to try to fill the crater that would be left when the last Craftsman tool came rolling off the line October 1, 1998.

Emerson also knew it needed to keep the plant open four more years to live up to its 1992 deal with Paris.

For workers, the issues were simple. They needed jobs to keep the roofs over their heads and food on their tables.

The city and county, already hit by other plant closings, needed the jobs for its citizens and tax revenue for its coffers. And suppliers -- other companies in Tennessee, Kentucky and nearby states -- also depended on the plant.

Emerson turned to Home Depot, a company that had been making overtures to the motor maker for some time.

"I've had conversations with Emerson for eight years to get them to make these tools for us, but they couldn't because of the loyalty to Sears," Bernard Marcus told the Atlanta Constitution at the '98 picnic.

With loyalty no longer in the picture, Emerson was free to hook up with a company that Wall Street recognized as a fast-rising star. The deal with Emerson gave Home Depot its first-ever line of power tools, letting it compete with Lowe's and Sears. With Ridgid, an Emerson brand name already well-known in the plumbing industry, Home Depot was also getting instant credibility with professionals and do-it-yourselfers.

Analysts applauded. They recognized that the deal might prove more profitable for Emerson than staying with Sears.

But Emerson still had to pay the costs of creating an entire new line. Starting from scratch -- without tooling, machines, drawings, plans or dies -- should've been prohibitive both in terms of cost and in terms of the time needed to develop the products, Sears alleges.

So, Sears claims, Emerson took an illegal shortcut. It used the Craftsman design as a blueprint, as well as Sears tooling and machinery, to get a jump start on the Ridgid line. And it did so, Sears claims, after signing a contract expressly agreeing not to use the tools, patterns, designs or molds developed for Sears for the benefit of another company selling tools in the U.S.

In its lawsuit, Sears alleges that it requested a list of the machines in the plant. In the spring of 1998, Emerson provided a list, but Sears claimed some of its property wasn't included. As a result, Sears asked to audit the inventory at the Paris plant.

Emerson agreed, but the Sears team was greeted as warmly as weapons inspectors in Iraq. Sears claims its team, which included auditors from Deloitte and Touche, was barred from taking pictures and inspecting the property during plant hours. Instead, Emerson would only let the auditing team into the plant in the early morning or late afternoon.

Sears claims that Emerson executives repeatedly warned them about their safety, that "workers at the plant might do physical harm to the Sears audit team."

However, Sears says that the auditors were never threatened by the plant workers. The executives, not the factory hands, were the problem.

Paris politicians and government officials are also skeptical that the union would have ever made any threats against Sears or its auditors.

"I cannot imagine any difficulties like that," says Ray Whitlow, director of economic development for Paris and Henry County. "These are country folks that are used to working."

Sears claims that, in addition to making it difficult for them to inspect the plant, Emerson stashed a lot of equipment in an abandoned shirt factory, equipment that Emerson claimed was obsolete. Although auditors were allowed into the factory, the suit claims that the machinery was stacked in such a way that many of the serial numbers were hidden from view. Sears also claims that two expensive and relatively new pieces of equipment were tucked behind large bins in an attempt to conceal them from the auditors. Sears claims that the scene was disorganized and chaotic, making it impossible to conduct a thorough or accurate audit.

The audit team left Paris, and Sears claims that they weren't satisfied with what they had been shown. But they proceeded with unwinding the relationship.

Several months after the audit, inspectors were on hand to watch scrap dealers pick up the tooling and dies from the plant. Sears claims that, unlike the chaotic scene a few months before, the machinery was set out in an orderly arrangement. The tooling was set out in a grid, and each machine had spray paint marks of various colors. Sears claims this was no accident. Emerson, Sears claims, was marking the machines to indicate which items it wanted back.

State Line Metals, a Puryear, Tennessee, scrap dealer, was hired to disable the equipment for Sears. One of the conditions of State Line's contract was that it could not resell the machinery to Emerson. Sears claims that Emerson also knew of the stipulation.

But instead of trashing the tooling, Sears says, State Line sold it to Q.C. Recycling, a scrap-metal recycling center in Clarksville, Tennessee. Sears alleges that Q.C. Recycling never took the title to any of the machines, or even possessed the property. Instead, they were merely a straw party hired by Emerson and were responsible for returning the tooling. Then, Sears says, the "tooling designated by Emerson was returned directly to Emerson for its use in manufacturing product for a Sears competitor."

Sears also claims that Emerson got hold of a "unique" grinder. Weldon F. Stump and Company had been hired to resell it to anyone but Emerson, Sears alleges. So instead, Sears claims, Emerson hired a straw purchaser, DRF Montrex, out of Clarksville, to buy it. However, Sears alleges the coveted machine never left the building.

Sears claims that Emerson, in addition to retaining Sears-owned drawings and molds, defrauded Sears, induced others to defraud Sears, and violated the Trade Secrets Act.

Questions to Knight and Emerson officials were referred to spokesman Matt Wisla of the St. Louis public-relations agency Fleishman-Hillard.

"The allegations in this suit are completely false, and we flatly deny them," Wisla says.

In the court papers filed in response to the lawsuit, Emerson admits that it approached Sears and asked to buy some of the tooling and that Sears refused to sell it to them. It also states that it used the garment warehouse to store tooling equipment. Emerson says that it placed both obsolete equipment and Sears-owned equipment in the warehouse when it was replaced with new tooling for the Ridgid line.

Emerson admits that some of the Ridgid tool parts were based on designs used in Craftsman power tools but that those designs were Emerson's, not Sears'.

And Emerson even admits that it purchased Sears' tooling from Q.C. Recycling and DRF Montrex, including a grinder that never left the building. However, Emerson says that the salvage companies weren't barred from selling the tools back to Emerson nor was Emerson prevented from buying the equipment. Emerson also claims that it bought $7 million worth of machinery for the Ridgid deal and didn't use the Sears tooling and grinder for Home Depot until after it bought them from the salvage companies.

Emerson says that it told the Sears auditors that the decision to end the contract was "unpopular with the union workforce." And it says that although it arranged machinery for pick up and marked Sears' machinery, it says it doesn't know anything about an elaborate spray-painting code.

In short, Emerson alleges in the court papers that "it used its knowledge to stay in business" after Sears terminated it as a supplier. Emerson "denies it owes Sears anything."

Emerson, in a counterclaim filed on September 20 against Sears, alleges that the Chicago-based retailer still owes it about $1.5 million for tooling and machinery purchased while the two were still together.

This isn't the first time that Emerson's business practices have come under attack.

Back in 1990, Emerson faced criminal charges for defrauding the federal government on no-bid defense contracts. With a no-bid contract, Emerson was required to show the government its costs. Based on those numbers, the federal government and Emerson could negotiate a fair contract price. However, federal prosecutors claimed that Emerson was keeping two sets of cost numbers, an inflated one used to negotiate the contract price with the government and a true cost list that went to Emerson's accountants. Emerson vehemently denied the charges, then pleaded guilty to four counts of fraud and paid a $14 million fine.

Over a decade later, Emerson is once again facing accusations that it lied and cheated to buttress the bottom line.

In Paris, a place where everybody seems to know everyone else's business -- the local paper publishes school absences and motorists stop in the middle of the street to talk to each other -- few want to talk about the accusations being flung by two distant companies.

"That involves a corporate divorce, and that wouldn't be anything that I would be involved in at all," says Larry Crawford, part-time mayor and full-time cattleman.

Ditto for Whitlow, the economic-development official. "We have nothing to do with that. In fact, we couldn't even venture a comment on that."

But they can't distance themselves from Emerson's recent announcement that the plant is closing its doors. Emerson is working on a deal with a manufacturer in China or Taiwan to make Ridgid.

And that's got some of the townspeople and workers who listened to Knight's feel-good speech back in '98 feeling suckered.

"We call it 'propaganda,'" Chadwick says. "We don't trust them, and we don't believe anything they tell us."

A faded Dr. Pepper sign hangs on the wall of Knott's Landing, a small diner around the corner from the Henry County courthouse. A red plastic placard hangs over the doorway leading into the kitchen, warning diners "microwave in use." At every table, an ashtray.

A weathered waitress with a gravelly voice saunters up to a man wearing a faded red baseball cap and dusty clothes.

"How y'all doin'?" she asks.

He picks up a menu and looks at the specials of the day, handwritten on a piece of paper torn from a pad from a local merchant.

"What you got to eat today?" he asks.

A middle-aged man with glasses and a dress jacket walks in the front door; the waitress looks up and greets him by name.

Snippets of nearby conversations about the National Rifle Association and Al Gore mingle with orders for some sort of bean dish, coleslaw or corn bread.

But in a region where good-paying jobs are disappearing and a way of life is changing, there's something else that jumps out quickly in most conversations. Folks worry about the economy; they debate trade. Talk about NAFTA -- the controversial North American Free Trade Agreement, which went into effect in 1994 -- is as much a part of lunchtime discussion in Paris as the Cardinals' post-season play is in St. Louis.

The Henry I. Seigel apparel company closed most of its Tennessee plants in 1998, including a plant in nearby Carroll County that employed about 2,000 people. According to Whitlow, the work was moved to Mexico, just like what occurred with some of the smaller apparel companies that used to have factories in Henry County. In nearby Murray, Kentucky, Mattel Inc. recently shut down a toy plant that employed nearly 1,000 people. Those jobs also went to Mexico.

The Emerson plant has seen more of its parts shipped in for assembly from Mexico, Taiwan and China.

The workers question whether the move will be in the best interests of America.

"It looks to me like a domino effect," Chadwick says. "If they're going to take this stuff offshore, overseas, those people there can't buy it. The people here don't have a job, they're not going to be able to go to the Dollar Store because they're not going to have any money. They're not going to be able to go to McDonald's. They're not going to be able to go to Wal-Mart. And those stores will start to suffer. It looks to me like it's the wrong thing to do."

There's some truth to that, says Robert E. Scott, an international economist with the Economic Policy Institute, a labor-funded think tank based in Washington, D.C.

Since NAFTA was signed by President Bill Clinton, Tennessee lost nearly 100,000 jobs because of the trade agreement, Scott says. Nationally, the free-trade toll has been more than three million jobs, most in production and manufacturing, he adds.

"Production workers are about three-quarters of all the United States labor force," Scott says. And the rush to move production out of the country has "had a tremendous impact on employment in manufacturing. But more importantly, it's had a huge impact on wages, both in that sector and throughout the country."

For people like Chadwick, the ones who are being pushed out of work, Scott says they suffer "substantial losses." He cites a U.S. Department of Labor study that shows "their wages are always going to be lower in the future than they are now."

Even looking at the forest, rather than the trees, Scott says it's hard to see a positive trend. "Much more money is going to the rich, but a lot less is going to the vast bulk of workers," Scott says. "The sum total of those two may come out to a slight gain, but many more workers have been hurt than have been helped."

However, one person cheering the move is Matt Collins, an analyst who tracks Emerson for St. Louis-based Edward Jones.

"From a shareholder's perspective, over the longer term," Collins says that shutting down the plant and moving the work out of the country "should be a good thing."

According to its most recent annual report for the year ending September 30, 2001, Emerson characterizes its deal with Home Depot as "successful," based on increased sales of Ridgid tools. But the company's overall performance lagged, as income before taxes dropped 27.1 percent.

The company's stock has been hammered, and options granted to top execs, including Knight, have lost their value for now.

Knight, who remains chairman of the corporation after relinquishing the title of chief executive officer in 2000, isn't hurting.

In 2001 he received over $6.8 million in compensation, according to Emerson's filing with the Securities and Exchange Commission.

Janice Chadwick, who'll be 60 when the plant closes, expects to collect a severance check of $6,075 -- $225 a year for each of her 27 years with the company.

Unlike younger workers with fewer years at Emerson, Chadwick can opt to take early retirement, but that'll mean reduced benefits. She hopes to find a new job, though after nearly thirty years of lifting and assembling, "I'd like to get out of factory work, maybe working in a grocery store or McDonald's."

It's a bitter pill to swallow for Chadwick, who'd hoped to retire from Emerson in five years and now faces the prospect of asking neighbors whether they want a drink with their burgers and fries.

"It is like we've given them the best years of our lives, and now they're slamming the doors in our faces," Chadwick says.

"They're not doing us right."