[TAPE 1, SIDE A]

JOSEPH MOSNIER:

Interview with Sid Smith for the Southern Oral History Program's the North Carolina Business History Series. The date is Monday, January 25, 1999. We're at the offices of the National Association of Hosiery Manufacturers in Charlotte, North Carolina. My name is Joe Mosnier of the Southern Oral History Program. This is cassette 1.25.99-SS. Mr. Smith's full name is Robert Sidney Smith. Let me start by asking you to sketch out your place of birth, family, what your folks did, early education, [etc.].

SID SMITH:

Well, I was born and raised right here in Charlotte. My father worked for Duke Power Company, the electrical power generator here. He was the head of their claim department. I am the product of a second family for him, so he was quite much older than I was and passed away at age seventy-six. I was only nineteen when he passed away. My mother had been a schoolteacher and was a homemaker after they got married. I went through the Charlotte Public School System and then went to college in Spartanburg, South Carolina. I went to Wofford College. I guess the first big prominent name I saw on a lot of the big buildings down there and the name one begins to hear if you're a Wofford student is "Milliken," with their corporate headquarters in Spartanburg. They were very gracious to Wofford College. That was kind of my first introduction to a textile operation, the exposure that I had to the Milliken operation by going to college in Spartanburg, going to Wofford. I had signed up while in college for the Marine Corps and had indicated that I was going to go to Officer's Candidate School after graduating. It was my full intention and desire to be a full career military officer. That was my plan. I did a double major, one in economics and another one in business administration. So, I had a double major and no minor and headed off into the Marine Corps. Went through

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Officers Candidate School and unfortunately was wounded in Vietnam and was told that while I could certainly stay in the Marine Corps, I wasn't going to be in the inventory any longer. I said, well there goes that career. If you're not going to be in the infantry in the Marine Corps, you might as well start looking for another job. You're never going to be the commandant of the Marine Corps if you want to always aim for the top. So, I came home.

JOSEPH MOSNIER:

Let me stop you there before we turn to the—. We're interested in leadership themes as well, so that will motivate a few of these questions. What's your sense of the factors most responsible for your values formation? Would you point to your parents, as most people do, community leaders growing up?

SID SMITH:

The initial values were certainly installed by both parents. They were very strong influences in my life. Again, with my father being so much older than I was, his value system was based in an era that most people my age weren't exposed to. Being born in the late 1800s, his values had late-1800 values and he transferred those on to me. Plus, he was an outdoorsman, physical et cetera, so he imparted those. My mother on the other side was the epitome of grace, culture, class, the right knife, fork and spoon, Emily Post and all that. So I got those two kinds of things imposed upon me. They kind of became ingrained early on. Both parents were also very religious, and so I was brought up in the church. I think that was another good foundation. Like most kids growing up, you know you're exposed to church, but it doesn't kick in until later on in life. When the time came that I really needed to rely on religious and spiritual things, the foundation was there.

JOSEPH MOSNIER:

Baptist church?

SID SMITH:

Presbyterian.

JOSEPH MOSNIER:

Presbyterian.

SID SMITH:

So, that was there. Then the Marine Corps I think galvanized all of it, particularly Officers Candidate School, recruit training. That really kind of tied everything together in a real strong organizational content for knowing who you are, and then having confidence in yourself, and then being in a position to hopefully be a leader. That's certainly what the Marine Corps imparted.

JOSEPH MOSNIER:

What was your reason for selecting economics and business administration in college? How did you make your choice about which way to go in [your] studies?

SID SMITH:

Probably like most kids when I went to college, I didn't have any idea what I wanted to do. I knew that I was not going to be a "professional" lawyer, doctor, et cetera. I also was not the strongest student and I zeroed in on what I thought would be practical [and] that would stand the test of time. There are an awful lot of good majors. There are people that major in a lot of different things and then go on in varying careers in life. I picked one that I thought was practical. Maybe that's parental influence or whatever, but that's why I zeroed in on business. I didn't have any interest too much in the sciences, chemistry. Also [I] was a long way from a math whiz. I knew I did not want to do accounting, so I went for the practical business— what might hold me up if I needed it. I loved economics. Still do today. In fact, even today in my reading habits, I don't read fiction. I'll read textbooks and history books. That's my relaxing, my enjoyment.

JOSEPH MOSNIER:

Tell me about your decision to sign up for the Marine Corps. That would've happened—. If it happened mid-college, then it's right as Vietnam was just really starting to pop up onto the level of awareness.

SID SMITH:

I signed on the dotted line, so to speak, when I was about eighteen, my freshman year in college. There was a Marine Corps recruiter there. Even through my high school days, and probably back even in my childhood, I had been pretty enamored with military. I liked it. It was attractive to me. While we lived in town, we owned a farm out side of town, about a hundred and eighty acres about halfway between Charlotte and Gastonia. As I said, my father being an outdoorsman, he taught me guns, rifles, shooting. I could probably shoot as well as I could walk by the time I learned to walk. We would go hunting and we would stay out all night hunting. I really was enamored with that. My father was in the military in World War One, and then I had two half brothers from his first marriage that both fought in World War Two. I grew up with a lot of the war stories and experiences. Then, riflery and being outdoors, that's kind of what attracted me to the military in the beginning. So, when the opportunity came up, I was very attracted to the Marine Corps and when the opportunity was there, I signed up.

JOSEPH MOSNIER:

Was your experience in Vietnam one that in any substantial fashion altered the course of your sense of yourself, your sense of what you might want to do in the world? Did that have that sort of impact on you or did you entered and come out essentially the same person?

SID SMITH:

No, it definitely changed me. I don't think anybody can say that—. Even just going through the Marine Corps in peacetime, you're going to come out a different person. But to go through the Marine Corps and combat at the same time, you're going to be altered. There's no doubt about that. We've all heard the horror stories of Vietnam Vets. I think a lot of them are excuses and crutches that people stand on, but there's also some reality to some of them too. I was an infantry officer. I was in combat every single

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day. Not one day passed during that five-month period of time before I got hit that we weren't in contact. I don't—. I didn't have any psychological problems that a lot of people have had out of that. I don't know why or what the difference is. Maybe it's just makeup. Things impact on people differently. But, the Marine Corps imparted tremendous self-confidence, first of all. Going through Vietnam just added to that because I can look on things. I don't care how tired I get today; I've been more tired. I don't care how hungry I get today; I've always been hungrier. I don't care how scared I get today; I've always been more scared. So, it really does test your metal. I think that is a tremendous asset for somebody to be able to fall back on. One thing about being in Vietnam and combat is it also teaches you a lot about reality. That things are not like in the movies. You're talking about something that is quite real, quite graphic, quite impactful. Therefore, you'd better start looking at everything else in life with a different eye. Just 'cause your parents always promised you things would be a certain way, or the movies or the television has always said things turn out the right way, you better get a—. It gives you a strong does of reality to face and look at everything else. It makes you question everything, not necessarily from right or wrong, but from a reality standpoint. Is this really the way things are? So, I think that's what Vietnam did. I'm not talking about politics. I'm a big supporter of the Vietnam War. [I] was then, am now. [It was the] right thing to do. I'm not talking about politics. I'm talking about what is the reality of the situation. The reality of combat is something quite different than what you're given in boot camp or officers' school or in the movies.

JOSEPH MOSNIER:

Sure. Tell me about what led you back to Charlotte and this organization.

SID SMITH:

Well again, I got wounded and left the Marine Corps. When you do that, where do you go? Well, you go home. [Laughter]. So, I came home to Charlotte. I had a fraternity brother in college whose father owned an employment agency here in Charlotte. So, [I said]: "Hey, I'm looking for a job. We'll go register with him." Sure enough, he had a country club acquaintance with a man that was the president of the National Association of Hosiery Manufacturers and he was looking for someone to take over their statistical department. The person that had been doing that was ready to retire. Also, they wanted to improve it. They wanted to get more factual data, get it [the Association] a more substantive program. So, I interviewed with them and said, "I'm an economics and business background. I can do this." I even did some sample projects for them. I presented it back to the president and said, "These are the kinds of things that I can do for you" and interviewed for the job. It took them a year to decide whether to hire me or not. So, in the meantime I had found a position with Exxon. It was Esso back in those days. In fact, I was with Esso when we were going through the change over to Exxon. I was what was called a sales representative. I went through training here in Charlotte because they had a regional office here, but then they assigned me to my territory, which was in northern Florida. I lived in Jacksonville. I had all of northern Florida up into southern Georgia, up to about Savannah. I had about twenty, twenty-five service stations, several bulk plant distributors, heating oil distributors, and one or two airports that we sold product to. That took about a year. In the meantime the Association said, "Yes, they did want me to join them. Would I return to Charlotte?" I said, "Yes. That's more along the line of what I would like to do. It matches my interest more than

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what I am doing with Exxon." So, I left Exxon. Came back to Charlotte again for the second time and signed on as the director of Statistics.

JOSEPH MOSNIER:

Let me ask at that juncture, how big was the organization? What was the staffing level of the Association and so forth? What kind of group were you joining?

SID SMITH:

Well that was January, 1972. That was twenty-seven years ago now. The staff was approximately fifteen, sixteen people. Five of those were in the statistical department alone. They were doing everything statistically by hand: posting numbers, adding up columns of numbers, et cetera. The first thing that I did was to take those numbers and put them in a format that they could be computerized because this new wizard machine called a computer was now coming up. Most computer activities, unless you were a big corporation and could have a computer department, which took a room with a big machine standing in it—. Most of the businesses, the medium and small business, used an outsourcing service like a computer center. So what I did was I had found the right computer center and I computerized our statistics and cut those five people back to two, me and one other. That went over very well. To add to the statistics and do different things that none of them had ever done before really was kind of the beginning of, "Hey, maybe this guy will work out."

JOSEPH MOSNIER:

What was the typical project? What would you have gone out to try to put some numbers together on?

SID SMITH:

Well, the typical project was to do how much was produced and shipped by all the mills each month and they would send in the reports.

JOSEPH MOSNIER:

On a monthly basis?

SID SMITH:

On a monthly basis. That's all they'd ever done. They would also do a wage survey twice a year. That's all they had done. What I did differently was on several occasions, I took the macroeconomic indicators published by the government and took them, our industry data, and compared it to bigger sectors of the industry and then the economy as a whole. So, [I] could give a reference of what was going on not just in our own little world, but how it matches up with what's going on on a macroeconomic area. So, that was one project. The other key thing that happened I think was that we had some issues crop up in Washington in the lobbying area. The Association had done typical association lobbying, but one of the big issues in 1972 was the cotton dust standard was implemented by OSHA. Controlling cotton dust, which causes byssinosis, is important. We should do that. But, like most government agencies when they react, they just throw out a big net and cover everybody whether it's practical or impractical, needed or not needed. So, the knitting industry with hosiery specifically, we started lobbying that one, we don't have a byssinosis problem in our industry. We don't have brown lung problems in our industry, therefore, why add millions of dollars to operating costs and therefore, costs to the end consumer in the product? We started lobbying on that [issue]. I had the facts. I could prove things in the presentations using numbers. Washington lobbying was changing about that time in that it was moving from the emotional to the factual. What I was able to do was to take the Hosiery Association's positions and arguments and present them in a factual kind of way rather than just going up there like most industries were doing, "Don't do this to us." Like basic textiles protectionism against imports: "Just don't do that." But, that's it. It was an emotional argument. I began to move our presentations into the factual. I think that was another key element of why they then

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promoted me to vice president and said, "We want you to take over lobbying too." This was working. We did get our exemption to cotton dust. It's probably saved hundreds of millions of dollars for hosiery industry since that time. So those are two kinds of project things that moved me and the Association kind of on down the track.

JOSEPH MOSNIER:

Can you sketch the character of those lobbying meetings up in DC— who you would've met with and folks in OSHA?

SID SMITH:

Well, there's all kinds of lobbying. The legislator, the Congress if you will, passes laws which are kind of vague. What they do is grant authority to regulatory agencies to come up with final rules and regulations. So, your lobbying is different depending on who you're talking to. If you're lobbying for or against a particular piece of legislation, you will talk to congressman and senators, but more likely their aides that are in charge of that particular subject. In the regulatory agency you find the department and then the person or persons that are working on the writing portion. So, you are lobbying after the fact of the law being passed to frame or shape the final rules and regulations that are published. So using the cotton dust standard as an example again, we found the right person in OSHA who was working on the writing of that standard. They were quite skeptical. They had been given facts and figures and all these problems with people having health problems. The labor unions were living with them about we have to be as tight as we can. Again, nobody wants anybody to have brown lung. It's an awful disease. We don't want that. If it needed to be controlled in some situations, good. Let's control it. We made that argument. What we were trying to show is that is it is wasteful of national economic resources to try to impose it where it's not needed. So, that's kind of how we were presenting our argument and showing it in costs, in the manufacturing

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costs, in end product costs to consumers. It is wasteful and unnecessary and would make us uncompetitive against other industries around the country. That's how a regulatory [campaign] would go.

JOSEPH MOSNIER:

About what year did the cotton dust issue get resolved?

SID SMITH:

It started in 1972 and was resolved eight years later in 1980.

JOSEPH MOSNIER:

That much time?

SID SMITH:

That is another thing that one probably learned and picked up from my background, is patience. You're not going to get a quick answer in everything. You have to have the stick to-it-edness to hang tough through a long haul of trying to get people convinced that what you're doing is sincere. It is honest. You're not misleading them. I think that's one of the things right from the get go that I tried to impart in our Hosiery Association's input in Washington, D.C., is reliability. We're not going to mislead you. We're going to give you the facts, good and bad. We're simply here to make our case. We're not in enmity with you. We're just here. I think over the years on this case and a lot of the others, what we did was build up a certain amount of, "You know what? We can trust those guys. They're not trying to pull wool over our eyes. They're not lying to us. They're here presenting just straight information. We can rely on them." Now we fight real hard to save that and protect that.

JOSEPH MOSNIER:

Any members of the North Carolina delegation who sort of stick out in your memory as especially helpful to the cause or helped get you access? Did you have much contact with any members in particular that you remember?

SID SMITH:

Not back in the '70s. Again, that was a regulatory impact. I didn't really rely that much at that point in time on state representatives.

JOSEPH MOSNIER:

Oh, no. I meant members of the Congress from North Carolina.

SID SMITH:

Right. I don't remember specifically working with any of them on this particular regulatory agency. And let's remember, just because the Association is located in North Carolina, we don't just rely on North Carolina congressmen and senators.

JOSEPH MOSNIER:

Sure.

SID SMITH:

We are a national organization. There are manufacturing facilities in about thirty states. So, we rely on our constituency relationships anywhere we have mill and hosiery operations. We will call on our friends in Pennsylvania and Alabama and Tennessee, just as readily and quickly as we would call on them from North Carolina.

JOSEPH MOSNIER:

I know you've prepared written pieces in various places that talk about the longer history of the association and so forth. Can you sketch the most salient parts of the trajectory of the Association across the last several decades? What course of the fortunes of the Association—

SID SMITH:

It was formed in 1905 by a group of national, large companies in the hosiery industry. They could see, looking at other industries, that there were some industries that had coalesced together starting in the late 1800s in manufacturing trade organizations to represent the interests of that industry. In textiles and apparel there were some organizations that came before 1905 and there were some that came after 1905. It cropped up in a very fertile era for the development of industry groups. When they first started, it was run day to day by active mill owners, out of their own offices. There was no staff. There was no home headquarters or anything. If my recollection is correct, the first secretary, if you will, to the organization was a mill owner in Tennessee. Then it was transferred to and set up with a full-time headquarters and a full-time paid staff in

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Philadelphia, which was viewed as a central location between north and south because there was a lot of northern activity in manufacturing still in place and southern as well. Then in time it was moved from Philadelphia to New York because that's where the market week is. That's where you would make sales. So, they transferred it to New York in the '30s, I believe. In the mean time, a Southern Hosiery Manufacturers Association had sprung up, headquartered in Charlotte. There developed some tugging of war, if you will, between the two. Many of them were the same people, but then there were some that said, "I'm not going to be a member of the national." Others said, "I'm not going to be a member of the southern," so you ended up with two organizations. Finally, in about 1953, the two organizations merged. The national was the surviving entity and had two offices, one in New York and one in Charlotte. In 1956, marketplace changes had occurred and they closed the New York office and therefore, it was headquartered in Charlotte and has been ever since. Another big thing that the Association did was the year after they were formed, in 1906, they started a trade show of machinery, of yarns and chemicals. It was started in Philadelphia. It was called the Knitting Arts Exhibitions, KAE. Other industry segments from knitting, knitted outerwear, knitted underwear, sweaters, and there two organizations looked at hosiery group and said, "This is great. Why don't we all go into together?" So, we merged with them as far as the show. The Knitting Arts Exhibition grew, and by the 1930s it had been moved to Atlantic City in the big convention hall right on boardwalk where the Miss America pageant is always held. It was a huge operation. It provided a financial wherewithal that all three associations could count on. But, by the 1970s, Atlantic City was in disarray. It was a very unattractive place to attend, to go to. Most of the hosiery interests had relocated down

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south out of the New York area. Our members kept telling us, "We want out of Atlantic City. Move the KAE. Put it in Atlanta. Put it somewhere else. Let's just get it closer to home and out of this unsavory Atlantic City environment." It was before the renovation of Atlantic City. The two partners would have nothing to do with it. They did not want to move. So, after the 1979 KAE was over, we turned to them and said, "We give it to you. It's yours. You can have it. We're walking away and we're coming down to Charlotte, North Carolina. We're starting a new thing called the International Hosiery Exhibition." We started our own trade show. It has been held every two years and is in the process of being shifted to an every three-year cycle right now. It has been our show. We run it. We have no partners and it has been an excellent vehicle first and foremost as a way of getting technology in front of our people. It's been an excellent vehicle to get exhibitors to show their wares to the entire hosiery industry literally worldwide, but particularly throughout the western hemisphere. It certainly has been a strong asset for the Association itself, which is another added on benefit that the Association does.

JOSEPH MOSNIER:

So, it meets both the marketing and the technology introduction needs? It accomplishes both of those purposes.

SID SMITH:

That's correct.

JOSEPH MOSNIER:

In '79, you said? So you've seen that process through from the very beginning.

SID SMITH:

Yes. In fact, one of my added on duties was to get that show started when we were leaving in '79 and I was involved. About that same period of time my predecessor, whose name was Sam Berry, and he was the one that was here when I was hired—. By then, I was the executive vice president and there was another vice president.

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He and I and the other vice president were really running the place. He was coming close to retirement anyway. We were [wondering] who's going to succeed him. I don't know that everybody in the industry knew that there was a succession plan in place, but at least with the board of directors or the key leaders at that time, there had been a discussion that I would succeed him. I said, "That's fine. Whatever y'all want to do. Yes, I'd like it, but it's y'all's decision." He got sick. He came down with cancer. For about the last two years of his life, he really did not come into the office very much. He was physically unable to come into the office, certainly in the last year of his life. So, I was already running the place on a day to day basis. I would go to his house and meet with him and compare notes and catch him up and get his direction and thoughts and come back and go to work for another week or whatever. I remember there was a chairman back during that period of time that called me up one day and said, "You know what we ought to do is, we ought to go on and make you president now." I said, "No we won't. First of all, as long as Sam Berry is drawing a breath of air, he will be the president of this organization. Number two, I don't need any title to run it and everybody around here doesn't have any doubts about who is running it. I don't need it, and we're not going to do that." He said, "Okay." Unfortunately, he did pass away. Right after that, they did elect me. I think it was '83, they elected me. It may have been '82 or '83 that they elected me to succeed him to be president.

JOSEPH MOSNIER:

Worth mentioning any sort of ebbing and flowing to the membership level in the organization? [The membership] always has been, remains the principle industry trade group, obviously. Any substantial shifts of that sort?

SID SMITH:

I guess the peak activity of the Association— as was probably true with a tremendous number of other industry groups— was World War Two, because everything in this country went onto war production, including hosiery and socks. Nylon was taken away, so ladies' hosiery you had to go back to silk and cotton. Producing and operating under the War Board instructions, rules, regulations, it necessitated an organization that could be a conduit for information between the industry and government. They needed each other. The industry had to have a group they could turn to to say, "What does this mean? What do I have to do today for the war effort?" I would say that was probably the high water mark for the Association and for every association. Since my joining in 1972, which was my first introduction— and I think probably from the high watermark of World War Two— the trend line has been constantly one of fewer companies, consolidation in the industry. When I joined the industry in 1972, there were probably 600 companies in the business. Today there are 300. I would say if you look back to World War Two, there were 1100. So, it's been consolidation. Now at the same point in time, actual output production in units and sales and dollars has gone the other way. They've gone up. So, it is a consolidating into the hands of bigger groups and bigger organizations.

JOSEPH MOSNIER:

Looking back across this historical landscape, what have been the most important parts of the story in terms of the broad fortunes of the hosiery industry post war period, thinking of specific periods of import challenges, technological innovations, regulatory developments?

SID SMITH:

Looking at the product area I think is probably the critical one. We have to remember that hosiery is really two industry, two sectors. I like to describe them as being

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like two sisters. They're very much alike, but then they're very different. There is the ladies' sheer hosiery business. Then there is the sock business for the entire family, including ladies. They are two businesses. They are very much alike in some ways, but they are also very different. They have different markets, different machines, use of different raw materials, et cetera. Probably the two biggest events, one of them was right before World War Two, which was in 1937 when nylon was invented. Nylon married together the sheerness of silk with the strength of cotton or a natural fiber. Prior to that, if you wanted sheerness, you had to use silk, which was extremely expensive and very delicate. Or, ladies wore cotton stockings. They were not sheer et cetera. This gave them sheerness and strength at the same time. When World War Two came in, all of that production was taken away. All of that nylon went into war materials. When Dr. Carothers, a research chemist at DuPont, discovered and invented, if you will, nylon— it is a DuPont product, although it now has generic connotations to all of us— the first pair of nylon stockings went on sale or was presented at the New York World's Fair in 1938. It was a huge hit. Ladies only wore stockings, a thigh high garment. Nylon was still rigid. It did not have stretch to it. It was rigid like cotton and wool. So stockings were produced just like socks were produced and marketed to specific foot sizes, 6, 6 1/2, 7, 7 1/2. The array, if you will, of product that had to be carried at retail was huge if you were going to fit this population out here. That's why as early as the 1920s that you had the creation of a hosiery department inside of a store, because it took so much space to stock up and the hosiery department as we know it today was created. All of that nylon production was taken away into war production. When the war was over, the first sale of nylons was in San Francisco. A riot broke out and they had to cancel the sale, but the

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nylon came back on the market. That was, I think one of the critical elements was the introduction of nylon. The second critical one came about 1965. In the early '50s the yarn producers learned how to make a stretch fiber by crimping the nylon and setting it under heat. The hosiery industry then began to make some stretch-like products, but nobody paid much attention to it. Ladies still wore stockings, although they were stretch stockings. They fit better. They fit at the knee and they fit at the ankle, but they still were stockings. In 1965 the supermodel named Twiggy stepped out on a fashion runway in London, England in the newest rage called the mini-skirt. The skirt was shorter than stockings were long. If the ladies of that era were going to wear this new product, this mini-skirt, they had to have another product. So the industry came out with pantyhose. The first pair — or what is recognized as the first pair— was made by Glen Raven. One of the Gants— and they were making stockings at that time in addition to making yarn— actually let the stocking run long at the top, put a slit in it and ran it through a sewing machine, sewed on an elastic waistband, and you had a waist high garment. Mr. Gant made some and took them home and let his wife try them and she said, "This is great." So, pantyhose hit the market in 1965. It was a huge success. It was a liberating event for women because they could now get away from girdles and garters and snaps and buckles and all the stuff that went with the traditional non-stretch stockings. That's why once the mini-skirt went by the boards, if you will, and other fashion came in to take its place, they never went back. They stayed with pantyhose. I think that pantyhose introduction was the second really big post-war change. I think the third big change—. Some people would say branding, national brands taking over rather than just selling generically, is a

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big factor. It is a big factor when you look at sheers. It is beginning in the sock business, but it is not quite to the same degree at least yet.

JOSEPH MOSNIER:

Meaning that a customer, a woman, might identify and go out and select a L'eggs brand stocking—.

SID SMITH:

A national brand. That's right.

JOSEPH MOSNIER:

But in the sock market people still are less brand conscious.

SID SMITH:

They'll buy store brand. The companies haven't put the money behind the development of a national brand. Now, there are strong examples contrary to that. There's some tremendous and wonderful sock brands out there, but they just didn't make up the same percentage of the total industry as was true over in sheers. The big thing that changed for socks which started kicking in in the '70s and 80s was we began to develop and market socks for specific end uses. There was a time in a man's wardrobe, or anybody's wardrobe, you had only two or three kinds of socks, blue, black and brown. You wore them for everything. Then, there was the athletic sock that was specific. Then, we came out with casual socks that were somewhere in between athletic and dress. Then, we started even sub-categorizing, like within the athletic group there are socks designed for basketball, socks designed for jogging, socks designed for bicycle riding. They are engineered for the needs of that particular activity. So, we began a real marketing oriented thrust in socks, and that certainly raised the per capita consumption and the interest in the sock market. I think that was a major factor in the run up, if you will, of the production and sales and popularity of socks. The two biggest things that we're probably in the middle of right now is a fashion cycle, the "casual look." Casual has certainly impacted on the frequency and wear use of ladies' sheer hosiery and has shifted

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quite a few of them to socks. They don't have to dress up the same way. I guess there's a lively debate as we sit here today: Is this going to ever reverse itself? I think most people agree that casual has certainly captured its share of the look. It will always be there, but at the same time, I think there will be a return to dressing up. We might even see some signs of it today. Those become generational things from one generation to the next. I think there will be times when the population does dress up a little bit more than it is maybe today. The other is the introduction of discount stores. I think that's had a tremendous impact on the industry. It is an entirely new focus, if you will, as far as channel and distribution. We used to sell—

JOSEPH MOSNIER:

You mean Wal-Mart, Target?

SID SMITH:

Correct. If you look back in the '50s and even '60s, department stores— traditional neighborhood or national chains department stores—were the predominant way that the consumer bought their goods. They were located usually in downtown locations. I think one of the critical elements there was that manufacturers could make a decision of who in a particular locale would carry their products and then limit that distribution. They could pick a particular department store and say, "Okay, I'm going to sell my brand or my products through you. I'm not going to sell them to anybody else in your neighborhood or in your city." They could do that. They could also set what the retail price was, and they could hold the retailer, the department store to that. If the retailer didn't abide by it, then they lost their license to carry it and they could shift to somebody else. That kept pricing and channels of distribution controlled in the hands of the manufacturer and/or the selling agent and/or the distributor that had that line. That was true of all apparel, not just hosiery and of a lot of other products too. But there was a

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growing little group of companies called "discount stores" that felt that was discriminatory towards them, and that they should have the right to carry national brands or designer brands. They lobbied Washington to have that changed. The Federal Trade Commission agreed and did change the rules and regulations as it pertains a manufacturer controlling its distribution of its products and to where a manufacturer can't do that now. We can make a suggested retail price, but the retailer does not have to abide by it. Under the rules and regulations, an apparel manufacturer cannot limit distribution. Now, they can limit who they sell to based on credit worthiness or whatever, but you can't just say, "I'm only going to sell to certain chains of distribution," anymore. That changed the ball game. It changed to where the discounters could then come in, buy in volume and sell at lower prices. Of course the market place has just shifted away from discounts and now the lion's share of hosiery and sheers and socks, and sold through discount type—.

[TAPE 1, SIDE B]

JOSEPH MOSNIER:

This is side B of the first cassette with Sid Smith in Charlotte on January 25, 1999.

SID SMITH:

To reiterate, the amount of sheer hosiery sales through discount is thirty-three, thirty-five percent. Whereas in the sock category, it's sixty, sixty-five percent. In both cases, it is still the largest channel of distribution. That is a tremendous shift from when the majority of all sock sales and the largest channel of distribution, even of ladies' goods, was through other channels— either department stores or for ladies' hosiery, grocery stores. So, that's been a big change.

JOSEPH MOSNIER:

I imagine that translated into downward price pressure at the wholesale level.

SID SMITH:

Yes. This country is going through deflation, as most economists have pointed out. The consumer price index increases have been very low. We have not had inflation for quite a few years. Bill Clinton gets no credit for it. It's the discounters. They are driving the retail economy. They are the market force to deal with. They deal in volume and they deal in price. At the same time, they demand quality too. So, the manufacturers are squeezed to produce high quality on one side, but do it fast, do it quick and do it at a very competitive price. There are a couple of other things probably that we ought to talk about in historical developments. They relate to pantyhose only and not the whole hosiery industry. With pantyhose being a very large product category, [one development] is the advent of the shift of selling pantyhose in the grocery store from the department stores. In '65, when Twiggy stepped out on that runway, most hosiery— including this new product "pantyhose"— was sold in the department store. That's where women went to buy their goods. One of the biggest manufacturers at that time, if not the

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biggest, was Hanes hosiery, family owned out of Winston-Salem. Gordon Hanes was running the company at that period of time. They were making this new product, pantyhose. One of the things that he did was he came up with a new innovative packaging and a marketing play off of the word legs and eggs and came up with L'eggs and started packaging pantyhose in a little plastic shaped egg. It was very unique packaging. It got a lot of consumer attention. They [the Hanes compay] backed it with a lot of advertising and turned L'eggs into a national brand, just like they'd always done with their Hanes brand product. But, he also looked at the channels of distribution and said, "Well, where do women— in 1968, '69, 70, '71, '72— where do they do most of their shopping?" Well, it was the grocery store. He said, "Well, I'm going to put this product where they are." He went to the grocery stores and said, "Let me sell those L'eggs here." They said, "You've got to be kidding? Why are we going to put these in with canned goods?" He said, "Listen, I've got a freestanding module. It's very attractive. I'd like to put them right at the checkout counter. It's the last thing they see as they go through there. I'll put them in here at no cost to you. You'll only pay me when they sell. I'll take care of stocking. What do you have to lose?" They said, "Oh, okay." So, they tried it. It went great guns. That was kind of the story of the development of L'eggs. Other hosiery manufacturers came in with similar marketing techniques. No Nonsense [pantyhose] is another example. Grocery stores became the largest channel of distribution for ladies' pantyhose. It was purely through innovative marketing and merchandising. Instead of producing a product and putting it out there and saying, "Gee, I hope you like it and I hope you come to the store to buy it," we're going to track you down and grab your attention with our packaging. Really, that was the beginning of that

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shift over to grocery stores. Now we're seeing the shift to department stores, excuse me, discount stores.

JOSEPH MOSNIER:

Discount stores.

SID SMITH:

We're seeing that shift over to discount stores. Just in the last year or two, discount has taken the final one or two percentage points it needed to get higher than groceries. It has done that.

JOSEPH MOSNIER:

You haven't mentioned technology. Any important—. Obviously there are technological aspects say to the development of just the right machines to make pantyhose all in one unit and so forth. You mentioned nylon. You mentioned the crimping that allowed for elasticity. Are those the principle things there or are there other more recent [developments] say in fibers or in—

SID SMITH:

Knitting technology.

JOSEPH MOSNIER:

Speed and quality?

SID SMITH:

There've been several. If you go all the way back to the turn of the century—. We have to be careful what we say now, we mean the last century, back to 1900. If you go back to the turn of the century, most hosiery was still knitted on a flat bed knitting machine. It was still knitted fabric but it was flat. You would take a pattern for hosiery whether it would be socks or ladies' stockings. You would lay that pattern down just like you would for a shirt pattern. You would cut around and you would roll it over and you would seam it and that was what created the seam in the back, called fully fashioned or full fashioned or seamed hosiery. That's why the seam was there. You had to sew it. By the mid-1920s and '30s, technology had come to where we could knit in a circular tube or seamless cane. The majority of the industry had made the switchover to seamless or

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circular diameter knitting by the 1920s. The next biggest change really was when computers took over the machine—.

JOSEPH MOSNIER:

Which would have been about—?

SID SMITH:

First introductions could have been as early as the late '60s, early '70s. To acquire machines and get large banks of them up and running probably was not until the '80s and now the '90s. It did a couple of things, but there's a step in the middle. If you had just a basic circular knitting machine, it was a mechanical entity. It had chain drives and cogs, and the chain would move, and the cog would hit the bottom of the needle and make it jump up, and it was totally mechanical. The next step was to put in electronics in place of mechanical. The next biggest technological change was to put electrodes in place of a lot of mechanical cogs so that electronic circuitry could drive things. That increased speed. We could now drive these machines much faster. In the 1970s and into the '80s, very roughly and the technical people in the industry would be better at this than I am, but approximately the circular knitting speed for a pair of ladies' sheer hosiery jumped from 300 revolutions to 1200 revolutions because of electronics. Once you got electronics in place, the next attachment is computer control. Now computer control has kicked in in the last ten to fifteen years, which would put us into the mid-'80s and of course on into the '90s. When you had a mechanical machine, to change the pattern or change the product that that machine made, you had to physically tear the machine down. You had to have a mechanic with a pair of pliers and a screwdriver that would take the machine and tear it down, reconfigure the cogs and the chains, put it all back together and start it over. It generally took eight hours to change over a machine. So, if you had a hundred machines in your plant, you took 800 man-hours to change a style. Guess what?

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Nobody wanted to do that. So, you had very little versatility and the consumer had limited choice because nobody could be going through all these pattern changes all the time. Once you get electronics and then computers hooked up to it, we now change the pattern on the computer. You either direct wire it or use a cassette to drop in the new configuration into the knitting machine. Rough rule of thumb is we can change patterns—. Not considering design time, we can change what the machine is doing in about sixty seconds. So, it increased the flexibility and the versatility of the mill. [So] that if in the old days somebody would come to you and say, "Can you make this product for me?" You'd say, "Forget it. No. I can't. I'm not changing over to that." Now, a retailer comes to him and says, "Can you make this product for me?" There may be two hundred dozen switches [which is] nothing as far as a run. "Sure. I'll be glad too." [I'll] make the two hundred [and] I'll be off making something else in another hour from now. That tremendously changed our flexibility and our ability to change and really let marketing and designs and patterning take off.

JOSEPH MOSNIER:

All come to the fore.

SID SMITH:

It's made the industry more responsive.

JOSEPH MOSNIER:

How capital intensive was the computerization phase? Did this represent the replacement of one generation of plant equipment with another – say, between the '60s and the '90s?

SID SMITH:

Yeah. There is a phase in there that one could—. If the mechanical machine had electronics to it, you could kind of do an add on the computer. But the computer really could not initiate changing functions that well as an adaptation. Maybe you could track what was being produced through a computer, but you really couldn't make pattern

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changes that much. So, it did require recapitalization of the industry and that is still going on. In the sheer business, it took off very quickly because the sheer business with this advent of pantyhose and this advent of new marketing and with the fact that it was very much nationally branded [and] owned by the hosiery producer, had been consolidated into the hands of a few people that were bigger companies and had more capital available to them. Therefore, they made that transition fairly quickly. The sock business has not been populated by that kind of adaptation. It's been smaller companies and therefore, making that capital transition has been much slower. It has been more difficult for some. There are some that have not even made it today, as we're speaking and maybe never will. But that's going to have an impact in the next few years about the competitive nature of some individual companies in the sock business. The capitalization from the sock side has been a bigger hurdle because they've been generally smaller firms.

JOSEPH MOSNIER:

You've begun to hint at it there. Can you take a few minutes and describe the broad character of the consolidation on both sides, [the] factors most responsible [and] the character of the entities emerging from—?

SID SMITH:

Let's talk about the sheer business first. Remember, we've got to deal with them like two sectors. There were several hundred sheer hosiery manufacturers in the United States— probably three, four, five hundred— back after World War Two. They were making stockings. But, it was that advent of the switch over from stockings to pantyhose in 1965 through '70. It was a guessing game. Is this a fad or do I go into this? Do I start making these pantyhose or are stockings going to come back? There are people that guessed both ways. There are people that said, "No. I'm going to keep making stockings." Of course, stocking sales were going down. Pantyhose sales were going up.

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We were making pantyhose as fast as we could make them, and the demand in the market was wonderful. Oh, it was just fantastic, and we were getting whatever prices per dozen that we needed in the market place. [Retailers demanded,] "Just get me the product because women have to have this!" We were producing them hand over fist. A lot of companies were jumping into it. It was about the time that speed on that old stocking machine was beginning to pick up; so, we could make them faster. Then, three things happened. First of all, equipment changed. The old slow stocking machine that some pantyhose were being made on, because you were making a cylinder and then sewing it together. There was a new machine being developed that would make pantyhose, high speed— doubling, tripling, and quadrupling the speed of the knitting. It was designed to make this pantyhose product and there were companies beginning to buy it. You can imagine where that left this old stocking manufacturer, who decided, "I'm not going to sell my old stocking machine because they're going to come back. This pantyhose thing is a fad." So, machinery changed and the ability to make them fast really went up. Second thing is, there was a foreign—. Pantyhose are made all over the world by this time. There was a firm that decided from overseas, that it was going to buy its way into this market. It was the biggest market for pantyhose there was. They made pantyhose. They came in at very low prices.

JOSEPH MOSNIER:

Who was that?

SID SMITH:

It was a company called Schulte-Diekoff out of Germany. Their family is still in business today here in America, as one of our companies. They began to enter the marketplace with very competitive prices. Many of the American family owned pantyhose companies said, "We're not going to give this away. We're going to go down

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in prices with them." They went and they decided, "I'm going nickel for nickel, penny for penny. They go down; I go down." The last price I heard during, let's call it a price war—. The last price I heard quoted on the screen in New York was three dollars and fifty cents a dozen wholesale. That doesn't cover the cost of the yarn that makes a dozen to make the hose, okay. But, everybody went down. Everybody went down.

JOSEPH MOSNIER:

This happened right about when?

SID SMITH:

About 1970. It's the beginnings of it— '70, '71, '72 was when we were going through it

JOSEPH MOSNIER:

So people were having a tough time.

SID SMITH:

Then fashion changed. It changed away from the mini-skirt about 1971, '72. It didn't go back to a skirt. Remember this is Vietnam. This is the hippie era. It went to jeans. We went to pants, which is the antithesis of what hosiery needs in a fashion. That market just slammed to a stop. In 1972, when I joined the Association, over one hundred women's sheer hosiery companies shut down in the first twelve months that I had come to work here. I started going, "What in the heck have I got myself into?" So, it was a very compacted, very ruthless consolidation. But, there were about fifty or sixty companies left in ladies' sheer hosiery. Now that consolidation from 1972 until 1999 has continued, but it has been tapered. The companies that were left then and that are left now are bigger; they are stronger; they are more technologically advanced. They've got excellent management teams. They've got a handle on national branding. They are competitive on a worldwide basis.

JOSEPH MOSNIER:

Fair to say generally a trend away from family owned and controlled to corporate owned and publicly financed and so forth or not so much?

SID SMITH:

Yes, that has occurred. Though, there are still a number of family owned entities in the sheer business that have good size to them. Today—from the 1972 era where we had about sixty of them— we're down to about twenty or twenty-five women's sheer hosiery companies. But even out of that, you could probably count on one or two hands, the principle players, that have the lion's share of the business. There are still some people that make specialty products or niches and things, and they'll always be there. Let's start over on socks.

JOSEPH MOSNIER:

Can we take a quick break for just a moment?

SID SMITH:

Sure. [break] I think we were going to start on the same trend line for socks. Socks, there were probably five or six hundred companies in the sock business when I joined the Association. Certainly there was right after World War Two. Socks have been always different than sheers. It is unique in many ways. There are more styles and more sizes and more colors in socks and more patterns in socks than there are in ladies' hosiery. There always have been. A lot of people don't realize that or think about it, but ladies' hosiery really doesn't come in that many colors. But socks do. It is that degree of differentiation that has been able to support more entities. Everybody has got something a little different. It is that diversity that has maintained a fairly large group of companies. Now, manufacturing technology has changed both in speed and in computerization and in pattern changes. Companies have made the capital investments to get into the equipment, which means that the ones that have made that capital investment have been more competitive. But, that really didn't matter up until the real emergence of discounters, when price was the competitive factor. If you can't continue to compete on price, you are really up against it. We have been predicting— everybody in the industry has been

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predicting— a real major shakeout out in the sock business, and it hasn't come. It has been quite surprising to a lot of people. But, I think it is the resilience and persistence of these smaller entrepreneurial based sock producers that have been able to survive in any kind of environment. It is only recently, I'm going to say the last five years, that we believe that the situation is changing enough, that we might be right on the precipice of the sock shake out. Here's why. If I go to a retailer and say, "Here are my socks. Do you like them?" "Yes I do. I'd like to buy them." "Great. Here's my price." They say, "Wonderful." I buy them. We go into business. This retailer is one of these large discounters. I produce that year's supply and I go back to him and say the next year, "I need to raise the price to cover the cost of yarn and the cost of labor." They say, "No. There will be no price increase." Okay. So, I go back to my company and I go back home, and think, if I can't raise my price, I'm going to have to cut out overhead, cut out inefficiencies. I have to get my house in order. That's what they have done. They have tightened it down. You go back to your retailer the next year and say, "Now I need a price increase." "No. You're not getting one. In fact, I want to lower prices if you want my business." Okay. So, you go back home and think, "Boy, squeezing that first ninety percent of inefficiency out was, you know, those were the easy to identify ones. Now I got to squeeze that other ten percent out." That has been hard. Oh, that has been just very difficult. This is where, "Boy, if I couldn't afford that new more efficient machine before I have got to find out a way of affording it now, even if I've got to borrow to get it. Boy, squeezing out that last ten percent has been awful." People have gone through that. Now a year goes by and I go back to my retailer and say, "Boy I've really got my house in order, but I need a price increase." They say, "No." You go back home. What happens

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now? That's where we are. Half of all of the sock manufacturing companies in the United States lost money last year. The only way that many of the sock companies and this number of sock companies have continued to operate is through marketing and through this introduction of new styling and this proliferation of new end uses. The unit growth has been in place, not dollar growth, except connected to unit growth. But, unit growth has been going up and up and up and up and up. So, they've been able to spread their cost out on more units. That's kept them afloat. The underlying question has been—. As long as this sock market in America and this sock consumption in America continues to grow, they're able to spread those costs. They are able to hang on a little longer. They've been able to play the game. What happens when unit growth stops or turns down? It's going to be like a bloody train wreck. It's going to be like one car running into the next car right behind the next. It's going to be like dominoes going. The third quarter data for 1998 showed the first negative in units in socks, both at retail and at wholesale. As we sit here today, I'm waiting for the fourth quarter numbers. As we look into 1999, is the market saturated? Has the consumer now got enough socks at home in their sock drawer? Remember, the units don't have to even fall. They can stay flat. It's the growth that has kept them afloat. What happens if this is the era and is the time in which that unit growth has stopped? That's what we're waiting for.

JOSEPH MOSNIER:

Tell me about the challenge— across this span again, backing up and taking the broad sweep of time again— presented over time by imports in hosiery.

SID SMITH:

Other than the specific period that I mentioned earlier, about a particular foreign manufacturer trying to buy their way into the pantyhose market, if you will, and pantyhose imports only got as high as ten percent— that was high enough to change the

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price structure, but it never did take the volume away— there really has not been much import competition. Though the Far East, low- wage nation countries— South Korea, Taiwan, many years ago Japan, though not anymore— had low priced products. But, there were several things that protected the hosiery industry. They were called natural protections. First of all, hosiery is a small ticket item. Under the textile and apparel industry's protectionism, there were quotas in place. If you were a foreign country that had a limited quota in cotton or wool or nylon products, you'd rather fill up that quota with sixty-dollar sweaters or a three hundred-dollar suits than a two-dollar pair of socks.

JOSEPH MOSNIER:

Because the quota went on unit volume, I guess?

SID SMITH:

Some of them do. Every one of them is different. I'm just using a situation, that if you did have a limitation, you'd rather use it with big-ticket items versus a small ticket item. That was a natural protection. Second of all, through this automation that I talked about— higher speeds and then computerization— we've been able to get our manufacturing costs down, and particularly the labor portion of it down. Labor is somewhere between seventeen and eighteen percent on the bottom side to twenty-three to twenty-five percent on the topside. Well, if you've got twenty percent labor in a two dollar product and you save half your labor costs by going to a low wage country, you ain't saved a whole lot. I say that for emphasis not for poor grammar. You've haven't saved much. Then, you add on the transportation costs and the insurance, you've more than made that up by the time it gets here. The third thing is, retailers over this period of time want us to carry the inventory. They don't want any inventory. But, when they want those goods, you ship it. So, with "just in time delivery," electronic data interchange, all of those kinds of linkages with our retailers, our mills generally— whether it's socks or

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sheers— are shipping in forty-eight hours to receipt of order. You can't do that from Taiwan. Proximity, relationship, low ticket item, et cetera have meant that the retailers have not been able to go out on their own, shop the market and buy goods. They can get the highest quality here at commensurate world prices. Right here in the United States. Now comes NAFTA [North American Free Trade Agreement]. There is a thing in the NAFTA agreement—

JOSEPH MOSNIER:

What was the Association's position on NAFTA?

SID SMITH:

Let me go back to our Association's position on all our international trade. Back in 1972, the entire textile and apparel complex was totally protectionist. It was what I always termed knee-jerk protectionism. When I took over in '82 or '83 as the CEO, I remember for that whole ten year period in between, almost every board meeting was a discussion on our position on some international trade treaty or protectionism or whatever. We generally— by majority vote, not unanimously—voted to hang with the textile and apparel complex and back their positions on being protectionist oriented. Keep them out at any cost. We began to see some market opportunities overseas through exports for our products. We began to see some of the inefficiencies that we were being subjected to from who we were buying from that, we've got great cotton here in the United States. We've got great cotton spinning, but I wonder what price we could get from Pakistan on our raw materials? I wonder what quality we could get? Are we doing ourselves a favor to keep ourselves limited and our friends in the textile industry certainly would like to keep us limited. We don't want to buy overseas. We want to buy domestic, but we also want to make sure we're getting—. Remember this economic environment we're operating in, we're going to have to source our goods where we can get them at the

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right quality, at the right price. We want that to be our friends and neighbors, but by golly they've got to do their part too. I remember very distinctly, literally the first board of directors meeting when I was the new CEO. I asked the board very bluntly, "Now I want y'all to tell me. I can go to Washington, D.C. and I can get quotas and tariffs, but under international trade law— which I was totally boned up on by then having lived it for ten years— they're going to be spotty. They're going to be very ineffective. All of them supposedly have time limits on them. Now if you want us to take all of our Association's activities and resources and efforts and vest it there, we can. Or, we can take that same time, effort, and resources, and we can focus it inside the four walls of our mills. We can try to get our house in order. Where do you want it to be?" Our board stood up and said, "We are shifting to a free trade status. We want the Association's activities and programming and efforts and resources [to be] about how can I manufacture better. What are the human resources factors? Start human resource programs for us. Do more economic studies for us. Focus there." We made a public, we're all parting as friends kind of presentation to the textile and apparel complex and to retail and to Washington and to the general public. We said, "Listen, we are leaving. The little Hosiery Association is leaving the textile and apparel complex. We are not a member of it anymore. We will support them and work with them cooperatively when and where we can." I had private conversations with the other associations explaining that, too. "We're friends, but we just have a more free-trade orientation. We're not trying to do you in. We're just going to be free-trade oriented. We have adopted that position." Apparel moved pretty quickly right there after us. Like [they thought] "Hmm, maybe we ought to rethink this." Now, the unions didn't go, but the manufacturers did— the

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Haggars, the Farrah slacks, those kinds of companies. Many of them had done that anyway. Now there are rumblings and indications that basic textiles are moving that way too. [The textile companies are thinking] that, "The scenario has shifted. The world has changed. We've got to change. Knee-jerk protectionism is not the answer. We weren't winning anyway." So, we and a lot of our companies during this period of time— particularly some of these big pantyhose manufacturers— were looking for ways to cut costs. They could either automate on one side or send the goods off shore to have them sewn. Under the tariff schedule, there's a proviso. It was called 807. It's now 9802. They changed the tariff number. Under that scenario it says that you could send fabric or pieces of garments offshore that were made in the United States from American components. You can cut them and sew them and bring them back into the United States. You only pay a duty on the value that was added while it was outside the country. So, for pantyhose manufacturers the economics worked. We could knit the hosiery blanks here, ship them to Puerto Rico, Haiti, El Salvador, various places, have them sewn, ship them back and pay the duty on the value, and it was still more economical than what we could do domestically using hand sewers. If it was a product or a particular program that you didn't want to buy equipment for, then that was a great way of doing it. So, we began to use that very much so.

JOSEPH MOSNIER:

I didn't realize that pantyhose today came off the machine in two different cylinders and had to be sewn.

SID SMITH:

That may be the next step. But, that 9802 proviso said that you can cut it and you can sew it, but if you do anything else to it— if you die it or bleach it or package it— you lose your right to claim 9802. You can't claim it. You have to pay full duty. So, the

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economics of it did not work for socks, because all you've got to do is close the toe. The economics were not there. Then, NAFTA came up. In our normal free stance on trade, we had backed the Canadian Free Trade Agreement. We were very competitive against Canadian hosiery manufacturers. We figured that [because] we're shipping a lot of goods to Canada, we can really take over that market. A lot of our companies under the Canadian Free Trade Agreement went in and bought up all those Canadian companies. Not all of them, but a large number of them. Hanes did. Kayser-Roth did. Others did. We kind of merged the Canadian market into the U.S. market and looked at it as if it were ours. There were still Canadian manufacturers up there, good ones. Don't take me wrong. But, we became a major factor there. But, the people kept asking us, "What are you going to do when the shoe's on the other foot and you're looking South to Mexico?" We said, "All right, we've backed Canada. We're going to stand and we're going to Mexico." We started looking at Mexico City. You know what? Twenty-five million people. That's like adding New York, Chicago, L.A. and San Francisco all together. They're all in one metropolitan area. No, they don't quite have the fashions that we have, but it is a metropolitan area. What a heck of a market. We may start trying to sell some goods down there. Another thing is, this market is going on down south. All throughout Central and South America, Brazil, Chile, Argentina, those economies are coming on. Remember, this is 1980, 1990 and we're saying, "The Mexicans that we know have good business relations. We need to partner with the Mexican industry. So we backed NAFTA. NAFTA had a change buried in it, that has to do with 9802, that you can cut and sew, but as it relates to Mexico, you can also dye and bleach and package and bring [the product] back in. Ultimately all that's going to be duty free anyway. So now, the

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economics work for socks. So, we're seeing the sock business go down there. This industry has always been an industry that has a very large intra-industry shipments. The old eighty/twenty rule. Produce eighty and buy on the outside twenty. Sometimes it's higher than that; sometimes it's lower than that. We've always had little gray mills out here that we would buy from. We now have more gray mills to choose from. Some of them speak Spanish. Some of them speak French. So, we have broadened the base, if you will. Those imports are coming into the United States dramatically, but it is either us using the 9802 offshore processing or is us shifting our sourcing. The sale is still being controlled by the U.S .hosiery manufacturer. We still control it. Imports from Asia are tapering down. If you back up and look at NAFTA on a big picture, why did the United States want NAFTA? [We wanted NAFTA] to merge our three economies together, to replace imports coming in from other parts of the world, [and] to provide economic development. If we're going to have capital investments, let's keep those capital investments in North America. Guess what? It's working. It is working. We have hosiery companies tell us that if NAFTA didn't pass and they would be able to get duty free shipments back and forth over time, they would be more likely to move to Mexico than they would be if NAFTA did pass. They would have a greater incentive and ability to stay where they are. So I don't think—. This is an emotional area and an emotional issue, and there are companies that vehemently argued the other side, and there's not a unanimous opinion—.

JOSEPH MOSNIER:

Did you lose members over the issue?

SID SMITH:

Not to my specific knowledge that somebody called up and said, "Because of your stance we're quitting." No, because we were doing a lot of other things too. It

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wasn't an either or. But, I do not believe any more companies have moved to Mexico than would've moved to Mexico if there had not been NAFTA. In fact, I'm led to believe by some statements that there are possibly less. There is some hardship being put on U.S. knitters if they're not competitive and if a person can provide the quality and provide the price from a Mexican source. But, you've got to be internationally competitive in what we see out there in the future anyway, because you're not going to have protection. The American consuming public is not going to face paying inflated prices just to protect a particular industry. I don't care if it's automobiles, electronics, or shirts or clothes or computers. They're not going to pay extra at the cash register to keep some American industry in place. We feel that what we have put in place is a far more competitive American hosiery industry. That doesn't mean that they're all going to survive. It's very emotional. So, that's kind of been the international scenario. The flip side of that is the export side. It has been one of my biggest frustrations. When you've got companies that are sitting in the middle of the biggest, most lucrative consumer market in the world, you get fat and happy. They have really not looked up and looked around to the rest of the world to the degree that I would've liked to seen them do that. If this U.S. market is becoming saturated, maybe more of them are going to return to that or take a look at that. I hope so. In in my thirteen, fourteen or seventeen years at the helm, that's been one of my biggest frustrations— getting people to move into the export side of it.

JOSEPH MOSNIER:

Trace if you would for me the evolution of labor relations and the whole union question and the hosiery side of textiles. Has that been an issue that you've had to spend much of your professional time during your tenure attending to in any shape or fashion?

SID SMITH:

No, because the hosiery is basically a very low percentage of unionized. It's less than [a] ten percent unionized labor force. Of course, [it is] probably around five percent, if not below. We really have to jump way back in history, just briefly. If you go back to the middle 1800s, the hosiery and the textiles were based in New England and the primary raw material was cotton. The Civil War came around and that textile industry, including hosiery, was cut off from cotton. They had to source cotton from Europe and Asia and other places. They vowed, never again. If you study your history books, there were a lot of people that even after the armistice—.

[TAPE 2, SIDE A]

JOSEPH MOSNIER:

This is the second cassette in the January 25, 1999 interview with Mr. Sid Smith of the National Association of Hosiery Manufacturers. We are in the Charlotte, North Carolina, headquarters of the Association and this is the second cassette interview; so, it is tape number 1.25.99-SS.2.

SID SMITH:

Again, even after the Armistice was signed of the Civil War, a lot of people weren't sure it was going to remain peaceful. It could all spring up again. The textile interests up in the northeast vowed never again would they be cut off from cotton. Many of them began to move south to get close to their raw materials. Land was cheap. They were even able to come in and buy some of those old places. [They] even began to move down the spinning [manufacturing from the north]. They put the spinning mills right at the edge of the cotton field. So, it was a close proximity. That transition carried on into the 1900s. The deteriorating labor market in the northeast continued to move everything down south. By the mid century, 1950s, the core of the hosiery manufacturing had been moved south. Therefore, we were in the non-labor union south. So, they [the unions] were not able to get a hold of or get into a lot of companies. The companies worked very hard to remain non-union. [The Association has] nothing against the right of a person to unionize, if they'd like. That is a right and we would, I think, argue even for that right. We simply argue that we can do a better job working directly with our people face to face. We take pride and concern about them. You also remember that almost paternalistic feeling that some of the old textile mills had. They [the mill owners] provided houses. They provided medical [assistance]. They provided everything. [Mill owners had] real, close paternalistic feeling to[ward] their people. Though that has given

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way to modern times, there's still an affinity to the employee. That has kept them non-union.

JOSEPH MOSNIER:

Do you have a quick sense of the wage differential between that tiny segment of the labor force within the industry that's unionized and the industry-wide non-unionized wage level? Is it a big difference?

SID SMITH:

No. I have not quantified it. In some ways the non-union was compensated better. I think if someone would ever do a real, in-depth honest look at a lot of agreements, that in the end one would see that the compensation for non-union is sometimes better. [This is true] particularly if you take into the fact that the union employee is paying through withholding a certain amount of money out of each paycheck. There has been virtually no differentiation. There's certainly been more flexibility in work hours and in things as it relates to the labor force being non-union.

JOSEPH MOSNIER:

Any important labor challenges, in the span of your [presidency], within the industry?

SID SMITH:

The hosiery industry has traditionally from World War Two on up until a few years ago been a light manufacturing [trade], and therefore, has been very heavily populated by females. We've had primarily a female workforce. That has, in many cases, been the second income to the family. The husband works somewhere else. The female of the family works in the hosiery mill and has an add on paycheck or it has been the second job of a two job working person, male or female. They've been able to do a second shift or work another shift at the hosiery mill and make a few more dollars. Our challenge— and one that many of our people in this industry desire— is we are anxious to get the wage that we're able to pay our employees to where it would be the equivalent of

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a primary family breadwinner wage[earner] working one job. That's what we would like to do, but it's impossible to do in such a competitive environment when you can't get any price [control] passed through. That's number one. Part of the reason we want to do that is with this new high technology equipment, we need a brighter, more educated, more skilled workforce. That is difficult to find with full employment basically going on throughout the southeast as we sit here today. Finding and keeping labor is our biggest challenge. So, what we're doing is, we're using a lot of immigrants. We're getting—. I can go into hosiery mills today, where the predominant language spoken is Laotian or Spanish. They're males not female, though females too. The labor force is changing into a more of a balance between male and female. It is becoming more diverse as far as culture and language. The work ethic and the stick-to-it-edness of many of these immigrants is excellent. They're here to work. They appreciate what they've got and they're very skilled, but the language barriers are a challenge. [We are] producing employee handbooks in two or three different languages. [We have to worry,] "Does that whole line supervisor, can he speak enough Spanish to get across to his instruction?" Those kinds of things are real, real challenging. Labor, now and into the future, is the big question mark. It would be labor that makes this industry move around [relocate], if it has to move around. It won't be price. It won't be raw materials. It will be labor. We need people. We can't find enough of them. Labor is the critical issue, not just for us but for a lot of other industries. Now again, we might not have that problem if we were able to get our wage rate to where we would like to get it to and yet still s