Shattered: An American Glassware Dream

Brown-Forman has shifted most of its Lenox crystal production from Pennsylvania to high-wage Germany. How could that be?

By Thane Peterson

Suddenly, 48-year-old Peter O'Rourke of Mt. Pleasant, Pa., is out of work. For two decades, he was one of only a half-dozen master glassblowers working in the U.S.. He's an artist who has crafted beautiful inauguration gifts distributed by every President from Ronald Reagan (a crystal jelly-bean jar) to George W. Bush. But at the end of January, O'Rourke lost his job when the Louisville (Ky.)-based Brown-Forman shut down the the only remaining U.S. factory that made high-end crystal stemware. Some 150 other workers shared O'Rourke's fate.

Most of the Mt. Pleasant factory's 1 million-unit annual production was transferred to Germany. The glasses will continue to be sold by Brown-Forman under its Lenox brand, but 70% of them will be produced by F.X. Nachtmann Crystal, a family-owned Bavarian company, with rest being made in Slovenia and Hungary. O'Rouke's reaction? If those jobs had gone to "anywhere but Germany, I'd understand."

So would I -- that's the part I don't get. Wages are higher in Germany than in Western Pennsylvania. Benefits are more comprehensive, the workweek is shorter, vacations are longer, energy costs are higher, and environmental regulations are more stringent. Yet, in a down market for crystal, Nachtmann earned about $6.2 million on sales of about $150 million in the fiscal year that ended in June, 2000, the most recent financial results I could find. It claims to make more crystal stemware than any other company in the world.


  So, how is it that a big, powerful company like Brown-Forman can't keep up with a little family-owned concern in the tiny town of Neustadt, Bavaria?

Company spokesman Phil Lynch says Brown-Forman finally threw in the towel on producing its own crystal stemware because Nachtmann can do it for 40% less, even though Brown-Forman and its unions have worked together to dramatically slash costs at the Mt. Pleasant plant. "We just couldn't compete," Lynch says.

It's certainly a sad fall from grace for Lenox, which once had hoped to make Mt. Pleasant a showcase manufacturer of the finest crystal. Back in 1981, the company recruited O'Rourke to come from Ireland to Mt. Pleasant and help train its workers in European cutting techniques. But the market was already shifting to cheaper, machine-made products, and Lenox couldn't keep up.

What's interesting about Nachtmann's success is that it's a throwback to the old days, before industries consolidated into a few big publicly traded companies that have to keep an eagle eye on quarterly profits. Nachtmann's factory is in the middle of Neustad, and the local economy is heavily dependent on the company. Each successive generation of the Frank family, which owns about a controlling stake in the company, is expected to take over the business and make it successful.


  "The family has a tremendous sense of responsibility for the community and the local workers," says Charles Tramontana, the Rhode Island-based senior vice-president for design at Nachtmann USA who has worked for the company since 1983. Nachtmann began making fine glassware in 1834, and dropping out of the business or switching to something else would be unthinkable.

It has succeeded by expanding into overseas markets while taking over weaker German rivals and turning them around. The company also has been obsessive about being the industry's most efficient producer. As the market shifted away from hand-blown crystal, it was quick to change over to machine production, installing 24-hour continuous-flow furnaces and other high-tech gear, and retraining glassblowers to run the machines.

But Nachtmann went way beyond that, Tramontana says. "A lot of their technology is secret," he says. "When they buy a new machine, they tear it apart and completely rebuild it to their own specifications." By contrast, "you'd need a whole new plant" to make Mt. Pleasant competitive, Tramontana notes. "The equipment is pretty antiquated."


 . At first glance, this story of one little David outlasting an American Goliath may not seem terribly important. But many of the factors working in Nachtmann's favor -- Germany's strong engineering culture, a stubborn commitment to manufacturing, and demanding consumers who won't buy shoddy products -- are also what have made the German auto industry so successful. Having lived in Germany for several years, I've learned there's a reason why it, with only one-third America's population, still has three major carmakers (BMW, Volkswagen/Audi, and DaimlerChrysler), while the U.S. only has two.

The story is also important because it says a lot about why many Europeans and Asians are so skeptical of the U.S.-led charge for deregulation and globalization. Cultures like Germany's are far more traditional than America's. Tastes change more slowly. Consumers have a much sharper eye for quality and tend to favor locally made products and designs.

They're also often deeply suspicious of Yankee-style capitalism in which manufacturing jobs are steadily abandoned to the detriment of local communities and employees. It doesn't help that Enron, already seen abroad as a symbol of corporate greed and contempt for loyal employees, was a major proponent of global deregulation and the "real companies don't make anything" brand of capitalism.


  My point here isn't to put Brown Foreman in the same boat with Enron. The company makes two of my favorite products (Early Times bourbon and Jack Daniels whiskey), and it's no Enronesque pillager of its own employees. Laid-off workers at Mt. Pleasant are getting severance and up to two years of retraining. And Brown Forman continues to look for a buyer that would reopen the Mt. Pleasant plant and reemploy the workers. That's pretty responsible for a U.S. company.

But it's also relative. America's version of capitalism -- like Germany's -- is heavily influenced by national values. Alas, Americans tend to undervalue tradition and fine craftsmanship. I realized that the other day when I got a credit-card flier offering me a Lenox bowl -- "the finest European crystal, a $36 or more value" -- for just $4.95.

Some buyer somewhere probably bought too many bowls and was trying to dump the overstock. At that price, I really should have bought one. But after talking to O'Rourke, I just didn't have the heart.

Peterson is a contributing editor at BusinessWeek Online. Follow his weekly Moveable Feast column, only on BusinessWeek Online

Edited by Douglas Harbrecht

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