Sunday, August 21, 2005

Criticizing DeVos on China doesn't add up

Democrats may have beefs with candidate, but his company's moves in Beijing don't qualify.

By Daniel Howes / The Detroit News

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ADA -- Here in America's weakest jobs-producing state, Gov. Jennifer Granholm and her Democrats are taking early shots at likely Republican challenger Dick DeVos, scion of one of Michigan's leading business families.

Their current accusation -- that as head of the family company, Alticor Inc., parent of Amway, DeVos "cut nearly 1,400 jobs from Michigan and created tens of thousands of jobs in China" -- isn't shaping up to be a very effective one.

The allegation, aired on behalf of a governor who touts herself as pro-business and hungry for international investment, doesn't check out. Not that the charges can't be repeated by the Michigan Democratic Party, some media outlets (see www.mi-democrats.com) and a Granholm fund-raising letter.

"Not only were zero jobs transferred to China," DeVos told me in his first comments on the issue. "Michigan was the beneficiary of Alticor's investment in China. It's a distortion and completely inappropriate of the governor and her spokespeople ... to mislead the public."

As Granholm and DeVos hurtle toward the '06 governor's race, China and the threat posed by its low-cost work force will be a hot-button issue. From small machine shops to United Auto Workers headquarters, China is the newest economic enemy to loathe.

The case of Alticor doing business in China is not really one of those cases. Nothing Alticor produces in its Guangzhou plant under the Amway brand is exported from China -- to the United States or elsewhere, Alticor said.

Did an Alticor restructuring in 2000 cut 1,301 jobs worldwide, 597 of them in Michigan? Yes.

Did Alticor invest $110 million in China more than two years earlier? Yes. And did it later pump another $110 million into China? Yes.

But the business logic of those moves -- driven by opportunities in China, the Asian economic implosion of '98 and the emergence of the Internet as a commercial force in the United States -- doesn't seem to matter much to lowest common denominator politicos.

On Monday, nearly 11 weeks after Michigan Democratic Party Chairman Mark Brewer first leveled the charges, DeVos's campaign is expected to detail the circumstances of Alticor's restructurings and its investments in China. The explanations, necessary but probably not sufficient, are too long in coming.

"Dick DeVos needs to explain why those people were laid off in Michigan and why hundreds of millions of dollars were invested in China," Brewer said Friday. "What we're saying is, 'Show us the documents that verify all this.' "

Democrats and other Republicans may criticize DeVos for championing school vouchers, as Granholm does in her fund-raising letter. They may criticize him for being a West Michigan Republican, or for being an heir to the Amway fortune of his father, Rich DeVos, and co-founder, Jay Van Andel.

But retooling Alticor so it can prosper in slow-growth Michigan and invest over the past decade in fast-growth China -- in total, a $220 million investment that Alticor says now contributes roughly $2 billion in revenue annually to its $6.2 billion business -- is far better for Michigan than it is bad.

Why? Because one-third of Alticor's revenue is now generated in China. When repatriated to Alticor, Chinese revenue helps fund capital investment and R&D spending in Ada. Alticor operations in Michigan and California ship materials to its plant in China, making Alticor something of an anomaly in the make-it-where-you-sell-it global business world.

Pallets in the Ada plant are stamped with "Made in U.S.A." Grab some packaging from a production line and beneath the product chatter in two, three or four languages you'll see "Made in U.S.A."

Of the 57 countries where Alticor operates, 55 are supplied by plants in Michigan and farms in California. The other two -- China and India -- are supplied by domestic plants, as required by government foreign investment rules.

Only in China, where the government required direct-sales companies like Amway, Avon and Mary Kay to open retail shops, does Alticor operate a 162-store retail network employing 3,600 Chinese.

Alticor also employs 810 staff members across China and 590 at its Amway plant there; in India, it employs 345. By comparison, Alticor employs 3,900 in Michigan, 1,400 of which are in manufacturing and distribution.

In the 2000 restructuring that eliminated 597 jobs in Michigan, the company says 180 left voluntarily and 225 vacancies were eliminated. A U.S. restructuring two years earlier affected 650 employees, 432 of them in Michigan. Of the total, 375 elected to retire early and 275 accepted severance packages.

Brewer's right: Michigan voters should decide if Alticor-in-China is a big deal. The facts point to one conclusion -- no, not really.

Daniel Howes' column appears Sundays, Wednesdays and Fridays. He can be reached at (313) 222-2106 or at dchowes@detnews.com.