SHOW: THE FLIPSIDE 11:00 AM Eastern Standard Time
March 5, 2004 Friday
Transcript # 030501cb.l32
SECTION: Business
LENGTH: 4795 words
HEADLINE: Employee Healthcare Crisis, CNNfn
GUESTS: David Hale, Dennis Swartz
BYLINE: Kathleen Hays, Gerri Willis, Stephanie Elam, Mary Snow
BODY:
KATHLEEN HAYS, CNNfn ANCHOR, THE FLIPSIDE: This is THE FLIPSIDE. I'm Kathleen
Hays. Joining me are Gerri Willis and Stephanie Elam. Our big story today taking
a look at the outsourcing of jobs. Notice the three of us, big smiles on our
faces, well it's Friday, we love doing the THE FLIPSIDE, we're employed a lot of
Americans still aren't.
Very disappointing news from the Labor Department today on the February jobs
report. Only 20,000 jobs are created. Where are they, a lot of people are saying
they're going overseas. We're going to talk to two people. Two people who are
actually out there in this whole business of trying to stay in business, one
small manufacturer who has outsourced and is helping others do it, it is working
great for him. Another person who didn't outsource and says that's another good
strategy, another great flipside, not even a debate. Just let's just really get
into the issue with real people.
GERRI WILLIS, CNNfn ANCHOR, THE FLIPSIDE: Exactly and of course I was asking
about numbers, how many people have been outsourced. Some of the numbers we've
seen in the past, outsourcing cost 3.3 million Americans their jobs over the
past 13 years. Keep in mind though the labor force is some 139 million it is
just not that big of number. But now contrast that is-to-what managers say is
going to happen in the next few years. I'm telling you this is just the start.
HAYS: Amen.
STEPHANIE ELAM, CNNfn ANCHOR, THE FLIPSIDE: And also taking a look at where
are the jobs going from. Is it the service sector or is also the manufacturing
sector and who is really getting hit and impacted by this.
HAYS: It's just a topic from Washington to Main Street, the is one on
everybody's lips, certainly a big one on THE FLIPSIDE today. We're going to
continue with our look at various aspects of the job market. We're going to look
at two people who are involved with an organization called Just One Break. They
help people with disabilities people with handicaps find jobs. Very tough right
now when the job lines are long to try to move to the head of it but this is a
group having success doing that.
WILLIS: Fifty-five years old this group, they've been doing it for a long
time. So they know exactly how to do, we will get some tips exactly on what you
should be thinking about if you're in the situation and we'll explore exactly
what those opportunities are.
ELAM: And there's benefits to the companies that actually hire people with
disabilities, and that is something that the companies tend to not look at it.
HAYS: That's the flipside of it and we'll look at that today.
Another thing we'll be taking a look at is extreme career makeovers. I just
love this. You know a lot of people are so fascinated with the TV show where
people get all the plastic surgery and liposuction. So this is a big career
move, I mean not just well from TV producer to TV anchor but maybe from TV
anchor to kindergarten teacher. I guess.
WILLIS: Or the other way.
HAYS: There you go.
ELAM: And it is just exciting, because the people say no matter what, if they
were living off nothing for a period of time or the fact that they make less
money than they did before, they're happy and they are fulfilled, and that is
probably the reason that their quality of life is so much better.
WILLIS: I think what is so interesting about this is we're going to get some
actual ideas about how to do this. This is really intimidating to a lot of
people. You know they feel like they're stuck somewhere in some kind of a job
they don't like. But how do you take even that first step?
HAYS: OK, and we'll have Clara Mcintosh from "Essence" magazine coming along
to help us with that one. Of course a lot more coming up today on THE FLIPSIDE.
An accusation by a Georgia family against Ford results in a huge legal award
but the auto giant says it's all wrong.
Plus starting your own business at home. Well in today's five tips Gerri is
going to tell you all of the things you need to know to get started.
And ay be trashy, hey but it is what they want to read. The sex column is
becoming a mainstay of many college newspapers. Stick around; we're going to
tell you why. So if you have a question or comment about any of these stories
anything through our the show, get ready get your finger warmed up to hit those
buttons on your dialer, 1-800-304-3638. We would love to get your e-mails, you
always make us think, THEFLIPSIDE@cnn.com.
A new development in the Martha Stewart case. Leading the show with that Mary
Snow is outside the courthouse with more. Mary.
MARY SNOW, NEW YORK: Hi there, Kathleen. Good morning. And the latest ruling
from the judge on juries question, not a good sign for Peter Bacanovic the
co-defendant of Martha Stewart. Late yesterday the jury sent a note to the judge
about the count of perjury against Bacanovic, specifically about the two-witness
rule. The question was this; can a phone log record be considered corroborative
evidence, a second witness to back up the witness' testimony?
And this question came late in the day. The judge told the lawyers to do
legal research. Obviously Peter Bacanovic's team tried to argue that those phone
records could not be considered a second witness, but this morning, the judge
said yes. They can be considered as a second witness, and that is not a good
sign for Peter Bacanovic, because you need two witnesses in order to find
someone guilty of the charge of perjury.
That was in the judge's instructions. So the judge replied to the juror
saying that the fact that they even asked this question shows that they're very
careful and intelligent jury, that it was not an easy question and Bacanovic's
team saying they looked all night, going through various legal cases to try and
prevent the judge's answer today. This is day three of deliberations, and the
jury so far has asked for several pieces of evidence throughout their
deliberations so far. Kathleen.
HAYS: Well I can only -- I can imagine what it's like being sitting in that
jury box and having to sort through such a complicated case. Mary Snow thank you
so much for joining us. We know you'll this throughout the day on CNNfn. And we
'll look forward to getting more updates as the day progresses. Thanks again.
Weaker than expected job growth in February, is dashing hope that higher is
on the rise. The government says non-farm payrolls grew by just 21,000 jobs last
month, falling short of Wall Street's hopes of something around 125,000 or more.
Is the culprit outsourcing? Exporting jobs to Asia where labor is cheaper may be
bad news for U.S. workers but you know what its good news for many small
business owners.
(BEGIN VIDEO CLIP)
KATHLEEN HAYS, CNNfn ANCHOR, THE FLIPSIDE (Voice over): Six years ago, David
Hale and his partners realized their small manufacturing firm in Farmingdale,
Long Island, was in trouble.
DAVID HALE, INTERNATIONAL SMART SOURCING: It became clear that EHC was losing
its market share, was becoming less and less profitable, and in fact was in the
death spiral and moving towards bankruptcy.
HAYS: But instead of closing up shop, he and his partners found a way to cut
costs and keep the company afloat. They moved three-quarters of their
manufacturing offshore to China.
HALE: Not only did we save the company and save all the jobs associated with
the company, but we returned the company to profitability, and now we're in the
position that we've been able to increase our product line and add new product
lines.
HAYS: Angry members of Congress are jumping on the stop outsourcing bandwagon
but they focus mostly on stopping tax breaks for big corporations who outsource
jobs overseas.
REP. BERNIE SANDERS, (I) VERMONT: What we're calling for is an end to the
absurdity of the taxpayers of this country providing billions and billions of
dollars in corporate welfare to the largest corporations in America.
HAYS: If small businesses are outsourcing now, too, this could be a big
problem. Small business accounts for half of all private sector jobs in the U.S.
and more of them are feeling the pressure to outsource. In Silicon Valley, many
venture capitalists don't won't even look at a business plan unless it includes
outsourcing jobs to Asia. According to job placement executive, John Challenger.
JOHN CHALLENGER, CHALLENGER, GRAY, CHRISTMAS: Small businesses are now
competing in a global market, especially startups. If they don't get access in
the tech world to the low cost talent from overseas they can't even get venture
capital money.
HAYS: In another sign of the outsourcing times, David Hale's company has
branched out and started international smart sourcing. A company that provides
one stop shopping for other small firms who want to out source production to
China. Even a cheerleader like Hale laments the loss of jobs here but he insists
in many cases there is no other choice.
HALE: I also want to be quick to add that there still is a loss of
manufacturing jobs despite the fact that some people are retrained and despite
the fact that you create additional jobs that have different functions. But our
clients see that as the much more desirable alternative to losing everything.
(END VIDEO CLIP)
KATHLEEN HAYS, CNNfn ANCHOR, THE FLIPSIDE: David Hale, president of
International Smart Sourcing is here with us in the studio. He of course sees
out sourcing as the best, maybe the only solution in many cases.
On the flipside, other executives who say keeping jobs at home is best for
business. Many of those and in fact one of us is joining us today, Dennis
Schwartz, president of Health Care Management Resources and he is joining us
from Nashville, Tennessee. And we welcome you both to THE FLIPSIDE.
DENNIS SWARTZ, PRESIDENT, HEALTH CARE MANAGEMENT RESOURCES: Thank you
Kathleen.
DAVID HALE, PRESIDENT, INTERNATIONAL SMART SOURCING: Thank you.
HAYS: David, we just heard your story told in the story that we were just
listening to. So let's go first to Dennis Swartz with Health Care Management
Resources. Dennis, tell us about the story of your company. Why you were
considering outsourcing jobs and then why you were able to decide that could you
survive without doing that?
SWARTZ: Well actually about three years ago we found ourselves in a situation
where we were unable to find enough qualified individuals to do the billing and
the follow-up and the cash posting and so on for the hospitals that we are
responsible for. We located a town about, oh, 75 miles from Nashville that had
about 22 percent unemployment. The area was very, very attractive. They provided
a lot of benefits, and today, we have 120 employees working in that area.
WILLIS: Dennis, I wanted to follow up quickly on that with this question. My
understanding is that you think business operators have an obligation to
actually employ Americans. What is the obligation of business owners in this
country to hire locally?
SWARTZ: Well I think it's more than just hiring locally. Just for the sake of
hiring. By hiring people in a particular area that is underemployed, what we're
able to do is take that community and actually revamp that. It's not just the
employees and those wages. It's the restaurants; it's the lumberyards. It's the
whole infrastructure of the county and of the city is that has changed. And the
personal rewards that I've experienced and my company has experienced is
unbelievable.
ELAM: Dave, lets get you back in here. Because when you talk about the
movement of jobs overseas, I'm assuming it's not a job for a job but were some
jobs that you had to create at your home base here in the United States?
HALE: Oh yes, and I think that is one of the advantages of outsourcing. Is
not only do you have the opportunity to save the jobs that you can save, but you
also create new jobs, and our particular case in our subsidiary electronic
hardware corporation we were able to create new jobs in marketing, new jobs in
engineering, also new jobs in purchasing and the accounting department.
Because now, we were able to regain our competitive advantage and we were
able to literally save the money that we had been spending and also save the
company from bankruptcy. There was a small public corporation; this was a
dramatic turn around for us.
ELAM: And how many jobs did you move all the way over to China in the first
place, just so we have that?
HALE: We actually lost about 40 to 45 jobs in our manufacturing facility, and
we replaced those jobs with much higher paying jobs. We also went to great
lengths to retrain some of our people, some of the footage that we shot
yesterday is my hero, Roy, who was a mechanical operator and who's been trained
in computers now in shipping and receiving.
Additionally we retrained our current sales manager for plastics, used to be
the foreman for the molding department.
HAYS: Viewers, I bet you have something to say about this, 1-800-304- 3638.
You want to ask questions, make comments, you may be a small business person who
wants to know from either of these gentleman how do I avoid outsourcing or how
do I get in on the act. There's the number to call, feel free.
And Dave, what I also want to focus on, it just seems to me and Dennis, you
're listening to this, too. I think trying to stop outsourcing may be like
trying to stop a river from flowing down hill. It is happening and not only is
it -- did work for your company, you have started the subsidiary where you
actually help, you're a conduit now for other small manufacturers to get their
manufacturing done in China, get the goods quality control and get them shipped
back to their customers here. It just shows me, I think, that this is a trend
the politicians can't turn back.
HALE: Absolutely. In fact as I was watching your show this morning one of the
subtitles was "Outsourcing Outrage," and I guess from my perspective, it would
be "Outsourcing is the Rage." Because I look at out sourcing and certainly all
my clients do, and our customers as the solution. And again it's like looking at
the glass with that has half full of water. If you look at it and you say, does
outsourcing lose jobs and result in job loss? Yes, half empty. Does outsourcing
also retain jobs and create new jobs? Yes, half full.
But if you're a small business owner and you're faced with competition and
you're not looking and considering outsourcing, then you're looking at your
glass of water being empty and that's and alternative which is bad for
everybody.
WILLIS: Well let's go to the caller, Dave from Ohio. Go right ahead.
CALLER: Hi are you?
WILLIS: Good, go right ahead.
CALLER: I have a comment about this whole thing. I am and sure you've seen
the employment numbers, the gains this morning. You know, the government is
constantly indicating retraining. Well, you know, my question is, what do you
retrain for and how do you know this is not going to place you in the same
position after you retrain? I mean, can you spend years of your life retraining,
look at what's happened to the programmers, and then I understand that we're
down like almost the river of no return here. But I'll tell you; I think we're
all going to pay for this in the long run. Thank you.
WILLIS: Well I think that is a great question for Dennis, actually, because
he had to do some retraining.
SWARTZ: Absolutely. We spent quite a bit of time retraining individuals who
had good verbal skills, good computer skills and actually we have taken a county
that was predominately blue collar and created a white-collar environment. These
employees have become very very productive, they've got into management
positions, and really it has changed a tremendous amount of lives.
ELAM: We have another caller on the line, Steve in New York. What's your
question or comment?
CALLER: Yes, my question for Mr. Hale is are there any other public companies
doing what he's doing right now and if so, what does that mean for our earnings
over the next 12 months for his company?
HALE: Well, our earning outlook is extremely positive. In fact, we will
release our earnings this Tuesday and it will be a dramatic turnaround from the
previous year and the year before that. Our ticker symbol is ISSG. Look forward
to having you give me a call and I can explain in more detail why we're going to
do even better next year.
Really, what's going on is, since we have proved the concept with one of our
subsidiaries of how we can turn that subsidiary around, from that experience, we
're able to develop another subsidiary that actually sells this service, and I
know of no one else that provides the full service approach to outsourcing your
manufacturing that we do. There may be other firms out there, but certainly, I
have not found one at this time.
WILLIS: Well I've got a question for you but let's go to Michael in New York
first. Michael, are you there? Hello.
CALLER: Yes, I am.
WILLIS: Go ahead.
HAYS: Please go ahead.
CALLER: Yes, this question is for David. David, with regard to the economic
scope of savings, it certainly makes sense from that perspective, but how do you
view your controls from a management perspective, spreading and outsourcing to
various countries? You're a small company here in New York or Long Island, but
how does that come into the management structure and what do you foresee you
doing for the future?
HALE: Our value proposition is that we make outsourcing for our customers
risk-free and we make easy, and that's because we have an office in China of 25
personnel. Which are logistics coordinators but principally our project
engineers, project managers and quality control personnel. So they provide the
necessary oversight of the factories that we do business with.
It's very important that we have looked it over, 400 factories and then we
selected only 39 factories thus far. So our certification rate is somewhere less
than 10 percent of what we look at. So we pick the right factories, we provide
the oversight. In essence, we provide the control for our customers that
guarantee that their product is delivered to their quality specifications and on
time.
And that's why I make it risk free and make it easy.
WILLIS: Well David I want to ask you a question coming off of something
Dennis said at the top of this interview. He said he feels he has an obligation
to hire people at home. I'm wondering how you respond to that because this is a
really emotional issue with so many people. It sounds like your business wouldn
't have made it if you hadn't had done this. But how do you respond to people
who ask that question?
HALE: I agree 100 percent and I want to applaud Dennis' efforts to hire at
home. In fact when we did our rehiring and hiring of our new jobs, obviously it
was all done locally. So I think to the maximum extent you can, do you have the
obligation to hire in the local area. However, if that's going to mean that you
're going to lose your business in its entirety I think you have to make the
tough choices and the tough choices are do I lose it all or do I just outsource
the manufacturing jobs, keep the jobs that are associated, grow my business and
save my business and add new white collar jobs.
ELAM: How many people did you hire here? You lost --
HALE: We hired approximately 15 people, but we hired those much like Dennis
was talking, they're mainly white collar workers, and we replaced the blue
collars for the white collars in many cases.
ELAM: We have another caller on the line. Larry in Texas. Go ahead.
CALLER: Hello.
WILLIS: Hi Larry.
CALLER: Hi, I just wanted to comment. I think outsourcing makes a great deal
of sense in many instances. However, I have a problem when some outsourcing
requires movement of technology from the United States to foreign countries, and
if that technology has been developed at a subsidy by taxpayers having given
incentives to the company.
HAYS: So let's raise that question of incentives. Because Dennis, I was
wondering with your operation being able to do what you did, did you get any
help from the government? Did you get tax breaks; did you get any help out with
your workers' compensation bill anything like that?
SWARTZ: As a matter of fact, we did. A lot of this was after the fact that
there are many community programs, there are county programs and also state
programs that does give incentives. There are worker programs that allowed us to
hire some people, and be subsidized. There were some training programs. So yes,
the state and county governments did help tremendously.
ELAM: So Dennis, how much of this would you say then was actually a business
decision for you to go along with this?
SWARTZ: It was a business decision first of all. We needed people, but more
importantly, we were able to find an area that wanted to help us. They helped us
locate a building. In fact they actually gave us a building and they also
secured a low interest loan for us. This was actually the community.
So everyone was behind it, and I think the most important thing is that
really for the first time in my life, I had employees come up to me with tears
in their eyes and tell me that because of me their kids had a good Christmas, or
that they had no idea what was going to happen to their life. And because of me
and it really wasn't me, it was my company, but we've provided something, and I
would not take anything for that experience.
ELAM: Marty in Georgia, what's your question or comment?
CALLER: Well hello. I have a question for David and I want to compliment
Dennis on his choice of business perspective on cutting his costs and staying in
the country domestically. What is -- has anybody considered, I never hear in the
press anybody talking about the long-term consequences of outsourcing, because
if you follow down this path. If your competitor is outsourcing, he's got a
major cost advantage over you.
You've got to pretty much do it also in order to compete. So what happens
when we start to undermine the earnings power of America as a whole because a
lot of these products, well most of them from what I understand manufactured
overseas and the services in say the India sector are all being sold back to
America.
So if you undermine long-term the earnings power in these jobs that go
overseas which economically makes a whole lot of sense, especially if there's no
sort of taboo against it. Because once one competitor in America does it, all of
the others are going to have to do it, too like I just said. Can you both
address that, please?
HAYS: We'll start with David, yes.
HALE: Well certainly it's a great question. But I have to tell you, I'm
unqualified to comment upon national economic or national labor policy overall
and there's certainly many experts that could respond to your question better
than I can. If you would allow me to stay in my lane and say that I have not
experienced what you're talking about in dealing with small and mid sized
manufacturers.
Most of them are in the survival mode, and what they want to do is keep their
businesses and retain the jobs that are associated with those businesses. So I
'll defer to those who are much brighter and much more experienced in national
policy than I am.
HAYS: Dennis.
SWARTZ: I think, again, we are not a manufacturing company. We perform a
service, and that service is to hospitals, and those hospitals require us to
interact with their patients, with insurance companies, with employees within
the hospital, and we need to have employees who not only speak English, but also
understand the culture. Understand what happens in the United States and
understand the problems that patients may have. So we're almost required to have
people that understand and live in this country, and can interact in a very
professional manner.
HAYS: Gentlemen, we have to leave it there. I thank you both so much. Dennis
Swartz, Dave Hale, I think you are both such great examples of what makes the
U.S. economy so strong. Small business guys who are getting it done, doing what
you have to do to move things ahead. Thank you so much for joining us on THE
FLIPSIDE today.
HALE: Thank you Kathleen. It was a pleasure.
SWARTZ: Thank you.
HAYS: And I also want to thank our viewers. You guys are just scary smart
sometimes. Great questions. You always help make the show what it is. Thanks so
much.
Coming up next, total household wealth is at a record high. How did Americans
conceal cracks in their nest eggs? We will give that topic and more a good look
over in our "Two Cents" coming up next.
(COMMERCIAL BREAK)
HAYS: OK, wow, that was a great way to start the show about jobs. And I was
going to do my "Two Cents" on jobs but there's something else that we have to
cover a little breaking news angle on something. I'm going to do my "Two Cents"
on this. We're updating a story that we've following here today on CNNfn, and it
has to do with MBNA one of the big credit companies now saying it's going to
discontinue its 9/11 themed master card.
"The New York Daily News" reported in its Friday edition the company had
issued a credit card using the world famous image of three New York firefighters
hoisting the American flag at ground zero. To promote it's spirit of American
credit card. The newspaper reported that some questions the bank's motives in
issuing the card. An MBNA spokesman said the company apologized if anyone was
offended by the card.
Now I just have to say for starters, that photo the day it appeared in "The
New York Post," right after the attacks, it was such a beautiful photograph. I
still see it and it goes right to my heart. So you know, it's not just any
photograph, and I think my "Two Cents" is I'm so glad that MBNA decided to pull
this and I hope this is a lesson to anybody else who thinks you can
commercialize something that at this point people consider this the families
sacred ground, even the president being a criticized now for using 9/11 imagery
in his campaign ads. That is another one, but boy when it comes to credit cards
you did the right thing, MBNA and don't anybody else get tempted.
WILLIS: Well you know this reminds me in a company that used Martin Luther
King "I Have a Dream" speech. Do you remember that? That just grated the wrong
way. I've got to tell you.
My "Two Cents" today is that you're were going to talk about the jobs and the
problems with the jobs report it just wasn't very strong but there's a flipside
to that today. Numbers on U.S. household wealth. You would have thought with
jobs being so poor, maybe household wealth was dipping. It's not, it's going
straight up. In fact it's now at a record high, $44.41 trillion. Can you believe
that number? That's a big number.
ELAM: Very large number.
WILLIS: As of the end of 2003,just amazing. That's even higher than the top
of the dot-com boom. Here's what's going on. People's homes are going up, up, up
the value of people's homes rising 5.1 percent each in the last ten years. That
's a big part of it. Of course, we've seen a turnaround in the stock market. I
just want to say I think it's a great thing, and just when you think things are
the darkest, there is a bright spot sometimes and it is that household value.
ELAM: I have a dark spot to talk about. I'm going to hand out my like duh
award to a lawmaker in Albuquerque, New Mexico he was actually charged with
drunken driving just hours after attending a bill signing ceremony to highlight
the state's newest effort to crack down on DWI. Not to smart there at all.
Republican Joe Thompson, 37 years old, he is the house minority whip, he say
he's embarrassed but thankful nobody else was caught up in his little moment
here with DWI. But his vehicle rode to into the intersection and he got stopped
at a red light. Cops pulled him over and he registered a .111 on his breath
alcohol test. The legal limit in New Mexico is .08.
He has now said that he is going to drop his recently announced campaign for
the seat on the State Public Regulation Commission. If you're going to be a
lawmaker you're a leader, so therefore you've got to set an example. Don't drink
and drive. I think it's pretty cut and dry.
WILLIS: Enough said.
HAYS: I put my "Two Cents" on your "Two Cents."
WILLIS: It's one of the things you think no, somebody made that up. That's
from the onion. It is not actually from (INAUDIBLE)
ELAM: Exactly right.
HAYS: Too far-fetched you wouldn't put it in a movie script. But it is true.
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