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Author: Phillips, S. Davis (Dave), interviewee
Interview conducted by Mosnier, Joseph
Funding from the Institute of Museum and Library Services supported the electronic publication of this interview.
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2006-00-00, Celine Noel and Wanda Gunther revised TEIHeader and created catalog record for the electronic edition.
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Title of sound recording: Oral History Interview with S. Davis (Dave) Phillips, January 27, 1999. Interview I-0084. Southern Oral History Program Collection (#4007)
Title of series: Series I. Business History. Southern Oral History Program Collection (I-0084)
Author: Joseph Mosnier
Title of transcript: Oral History Interview with S. Davis (Dave) Phillips, January 27, 1999. Interview I-0084. Southern Oral History Program Collection (#4007)
Title of series: Series I. Business History. Southern Oral History Program Collection (I-0084)
Author: S. Davis (Dave) Phillips
Description: 115 Mb
Description: 29 p.
Note: Interview conducted on January 27, 1999, by Joseph Mosnier; recorded in High Point, North Carolina.
Note: Transcribed by Unknown.
Note: Forms part of: Southern Oral History Program Collection (#4007): Series I. Business History, Manuscripts Department, University of North Carolina at Chapel Hill.
Note: Original transcript on deposit at the Southern Historical Collection, The Wilson Library, University of North Carolina at Chapel Hill.
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Interview with S. Davis (Dave) Phillips, January 27, 1999.
Interview I-0084. Southern Oral History Program Collection (#4007)
Phillips, S. Davis (Dave), interviewee

Interview Participants

    S. DAVIS (DAVE) PHILLIPS, interviewee
    JOSEPH MOSNIER, interviewer


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Are you trying to listen to me to see if it's recording correctly?
That looks good. Let me just top this at the start here. This is an interview with Mr. Dave Phillips in High Point, North Carolina on Wednesday, January 27, 1999 for the Southern Oral History Program's North Carolina Business History Series. This is cassette 1.27.99-DP, like Dave Phillips. My name is Joe Mosnier. Mr. Phillips, I thought we might start with just a quick sketch of your early involvements in the furniture business say coming out of school and going to work in your family's company. I'm going to ask sort of what the furniture industry looked to you like, looked like to you in that year.
Well, I came from Chapel Hill and was able to join my father's textile business. The name of the company was Phillips-Davis at the time. It was a company that he had started forty some years previous. It was a converter, meaning you would buy and sell product. He had gone to certain mills like Cannon Mills and would buy it by the large contract and be able to sell it by the roll, which meant fifty yards, to the different furniture companies, not only in North Carolina but also in America. We didn't export a lot back then. North Carolina was known as the upholstery furniture capital along with the regular furniture, meaning casegoods. Since that time, the upholstered market has expanded all over to where it's from a transportation standpoint the pieces are bulky. So it's easy to set up an upholstery shop all over America. You have a strong upholstery market, not only in North Carolina but also in Mississippi in California and what have you. It's different than casegoods. Casegoods is when you're making wood products, the investment is so enormous, the brick and mortar and machinery. The amount produced at

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one time is necessary to make it competitive and that's where North Carolina really got its reputation as the furniture capitol because of the companies, Broyhills and Bassetts and Thomasvilles and what have you.
Then also North Carolina now maintains its reputation as the furniture capital of the world because of the showrooms in High Point. About eight million square feet are located in High Point that show furniture twice a year for about ten days, which seems an enormous investment, which it is. But there used to be lots of regional markets, New York, Chicago, Los Angeles, San Francisco, Dallas, and Atlanta. All of those regional markets now have basically disappeared or become very small in their particular region. Now High Point is sophisticated enough to where people can come, have a drink, stay in a decent hotel and can accommodate all the people from around the world.
High Point when I first got into business in 1966 in the textile end of the business, my father had been in the foam business and the spring business, which are suppliers to the furniture industry. He was also in the factoring business. But you might think what commonality is there among all this and it is simply the customer. That client that you get to know, you sell them all these different products. So it's that relationship. Then the showroom business is a part of it. My family has been involved in many aspects of the furniture industry as suppliers. We've never manufactured furniture per se. I was thrilled to get into the textile end of the business because I thought it was very creative, very dynamic. The foam business wasn't as exciting. It was more of an engineered type product as was the spring business. The factoring business is almost an engineered product. Anyway, I had the opportunity to get in the textile end of it.

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Over the next ten years I learned that the need to be vertical, to control your own manufacturing was going to be very important. That's where you're going to make the most money, but also the need to simply survive. The old days of being a converter were limited in my opinion. I was the first quote converter to go out and buy a manufacturing plant. I did that in the mid-seventies. My father died in '75. He was ill for several years. In '74 is when I actually bought into a manufacturing plant. Within the next few years I bought control and a hundred percent ownership. That's been the basis of our evolution from Phillips-Davis the converter to Phillips Mills the vertical textile mill. Then we bought other plants. We started exporting. We computerized. We had state of the art machinery. It became a very sophisticated, stylish but commercial product. We sold the likes of the Broyhills and Bassetts and La-Z-Boy who in turn sold to the Sears, the Wards, the Levitt's. So it was mass America. By the time I sold the business a year and a half ago, we had become the tenth largest, within the top ten, ranked eighth or ninth largest upholstery fabric mill in the world. We export a lot of our products, up to one-third, to the world markets: the Middle East, a lot of business in places like Turkey and Saudi Arabia, a lot of places in the old Soviet Union, Poland, Russia, very little to the Far East, some to Australia and New Zealand, very little to South America, Latin America. At one time we had a manufacturing plant in Canada. When free trade came about, we sold that plant because we couldn't compete with ourselves. Prior to that we would simply manufacture in Canada what we had created in America and had already sold and had commitments to the Canadians for. They simply made it up there. With free trade, all that changed. But anyway that was a very exciting episode in my life to where we took a small business and built it up to doing a substantial amount of business and sold it

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for a lot of money. It took good people, quality people. They are all still a division of Culp. Culp has retained the name of Phillips, which I'm proud of, which my father would've been proud of.
Let me ask you this. Approximately when did you take the decision to sink all this money into refitting your plants, your plant? How did you measure the prospects? That's a lot of recapitalization. You've got to go in and buy new machinery. How did you measure the prospects for that sort of investment from your end of the furniture textiles business? This issue of technology and textiles across the last twenty or thirty years is obviously a very important and interesting one.
Good question. We bought the original plant in '74. I bought into a plant that had old equipment. I soon learned that you are not going to make a lot of money if you have old equipment. The quality is not as good. Your efficiency, your labor cost is too high. So I took the first step of upgrading it once I owned control and actually moved the plant to another building and put in at that time better equipment, not all new equipment but better equipment. Then through the '80s some other equipment started hitting the market. We built a second plant about ten years ago and bought all brand-new equipment. That's when we really started making a lot of money because it was absolutely the best quality. We got computerized to where our creativity could be translated on a piece of machinery in a very short period of time. Instead of months, we could do it within days. Therefore we had better placements with better customers because we were providing them a greater service of creativity. Our styling staff, we used a couple of people and when I sold it, we ended up having twelve full-time designers creating product. The same thing's happened to a lot of other industries, the car

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industries and what have you. You have to be very creative, very fast. That's what happened here but our business, when I took over Phillips-Davis in the '70s, we were probably doing five million. When I sold a year and a half ago, we were doing fifty-five million. I sold it for around fifty million dollars. So it really paid off. I must tell you it was having the best machinery and the best people.
What put you ahead of the competitive curve? Why wasn't there someone, why wasn't Mr. Smith down the road also seeing this opportunity? How did you get ahead of that game, win that market?
Some of the competition had done a better job. I had watched them, and I had seen them pull away. It was because of better machinery, and it was because they had a lot of designers. So I used this as a way in which I saw how they became successful that I had to do the same thing. I had a lot of competition that didn't do the same thing, and they fell behind or went out of business. So it was either do or don't. It became very obvious to me that I had to do it.
And you mostly competed down the road then on quality.
Quality and design. But not on price. We had to be competitive, but price was not the main factor.
Tell me about the financial services end of your financial involvements back then. A brief sketch of factoring services in the furniture industry and so forth.
In the old Phillips-Davis company, there was a financial officer named Bill Webster. Bill in the '50s before my father said, 'We are paying a factoring company a lot of fees to protect our accounts receivable,' which simply meant buying the accounts receivable and collecting the money and guaranteeing a certain amount of money back to

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a primary source. He said, 'Let's do it ourselves.' My father said, 'Let's start a factoring company' of which Factors, Inc. became a subsidiary of Phillips-Davis Corporation. Bill Webster and he ran it until 1970 or '71. NCNB bought it in 1971. They promised not to change anything about it, that they were coming to High Point and wanted to use it as a base to really grow their business. They changed everything within six months. They let my brother go who was a salesman in the company. They let Bill Webster go. They took one guy to Charlotte named Bill Crews, and they completely revamped everything. Well, it's been very successful for them because it's the financial services division now of Bank of America, and they've done an incredible job, and they took it as a base in which to enter into a market.
However, they exited the furniture industry and went after lots of other industries, which makes sense. So we just simply said, 'Let's do it all over again.' Bill Webster was available. The office space was available. The same furniture was available. So we just set up shop within six months and started all over again. Even the name Factors, Inc. was still available but we felt that we should change the name so we called it First Factors. Bill Webster was the President, and we started off as a subsidiary of Phillips-Davis. It did very well.
We did one thing that was very interesting that made us so successful so quickly in that factoring company. That was, previously my father had borrowed a lot of money from a lot of different banks. I went to a bank called First Union who was just emerging in North Carolina and said, 'Look if we gave you all of our accounts receivable instead of loaning money to us personally or to just the corporation, we pledge all of the receivables to you as collateral. It's like inventory or everything else. Would you loan us the money

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we required all from you, not from a lot of banks.' That had never taken place before in this type of business. They agreed to do it. It allowed us the capital to grow very quickly.
My father died in the mid '70s and as the business grew, the textile business was growing; the factoring business was growing. My brother and I owned approximately forty percent each of what—we owned forty percent of the holding company, which is Phillips Davis, which owned these other companies. There was a guy Jimmy Foscue who owned twenty percent. We came to the conclusion that we needed to go our separate ways. So in 1979 I sold my interest in the factoring business to Jimmy Foscue and Phil Phillips. They sold me their interest in the textile business.
Well as it turned out within six months we—oh I had an inquiry from two guys who ran the First Union operation locally and said they wanted to get into the savings and loan business because that was the thing happening in North Carolina. We had privatized savings and loans, all these mutuals. I said, 'I've got a better idea because that's a very competitive business. It is very regulated. Why don't we go back into the factoring business if they're going to leave the bank.' They had seen the success that we had achieved in the factoring company because of our relationships. So we started Phillips Factors. We laughed about it, and we talked about it shouldn't we call it Second Factors or Guilford Factors or North Carolina Factors, but we factor all the company so we called it Phillips Factors because it ties into Phillips Mills. We were trying to talk about keeping the name confidential away from ownership by the parent company, which still was going to be Philips Mills or Phillips Industries because we factor a lot of competition. We factor a lot of our suppliers. We factor a lot of our customers. Everybody would

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know about it. So we just said, 'What the heck, we'll just tell everybody about it. It's Phillips Factors. It's a part of Phillips Industries, which also owns the textile business. So we started that and have grown that business over the last eighteen years and have just sold it to BB and T. We had, our financing was primarily coming from Wachovia. BB and T is a bank that has become extremely successful over the last decade. We began a relationship with them, and then they offered to buy us, and we felt that it was appropriate to do so. So it's the—the old factoring company, First Factors had just been sold to GE. Why that took place—
GE Capital?
GE Capital. My brother, when he found out that I was selling to BB and T, called me and wanted to buy our factoring company. I said, 'I've already signed a deal with BB and T.' He said, 'With their clout and financial capabilities it's going to put a lot of pressure on them, First Factors.' Therefore he'll have to find someone to buy him because when these banks get involved, they have unlimited funds. Therefore, they can be so competitive. They just take all the profit out. So within a short period of time, he sold out to GE Capital. So in the last, the other—that's how the financial services business evolved.
Tell me about how you came to be involved in furniture marketing and Market Square here in High Point and the story, a very successful story of really reshape, continuing to shape that emerging aspects of—
It is going to be incredible what this does for the city of High Point. We have sold to a company called Vornado, a very large real estate investment trust listed on the New York Stock Exchange run by some quality people. The head of Goldman, Sachs

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Real Estate, a guy named Mike Fassitelli now runs Vornado. Goldman Sachs is a great investment banking firm. But he is going to use his expertise to really make this REIT, one of the real leaders in that industry. They have a strategy that I'm very impressed with. This weekend I was in Madison Square Garden, and they own most of the real estate around Madison Square Garden, the old Alexander's block next to Bloomingdales that they are going to build a major complex on. They own the Merchandise Mart in Chicago, which gets them into that niche of the business, which got them into buying Market Square. So they are great operators, but they understand the dynamics of real estate. They are not just the typical apartment REIT or shopping center REIT. They understand niches and the potential of niches and the maximizing of return. At least I hope they do. I've invested in them in the future, and I hope it pays off.
But as to how we got here, Market Square is an idea that came about because of me going to the furniture market, regional furniture markets. I came back from San Francisco market in the late '70s. The way I used to come to work was right across from Market Square. I looked up and I'd been passing this building my entire life. I said that it was identical to the building I was in in San Francisco called the Icehouse, which was a wonderful old plant that had been turned into a furniture showroom complex for decorators in San Francisco. We had, we meaning, I had also invested in a company called Behrends and Company, which is an advertising agency. They used to do the state of North Carolina's work. Used to be called Bennett Advertising and then Bennett, Harwell and Henderson. They were a major tenant of mine in another building. I had been asked to invest and became the Chairman of the Board and Dick Behrends ran it. Anyway, the man who used to run the International Home Furnishings Market in High

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Point, which was originally called the Southern Furniture Building, which is the main complex in this town. A fellow by the name of Leo Herr, he had come to work for Dick Behrends and said to me in a meeting that he thought High Point needed more showroom space. I said, 'I've got a great idea.' I pointed to this building out the window, and they both thought I was crazy. Because everybody has a feeling that [cough] this place was old and has windows and is two blocks from downtown. It just doesn't fit. I said, 'Well fellows, I have just been to San Francisco and this and that.' They had never seen the building. I paid for their tickets to go to San Francisco. They came back. They were suitably impressed.
That's when I called Mr. Tomlinson and came over to the building and sat down with him in his office and said, 'Would you give me an option to buy your building over a period of time or part of it or half of it or what have you.' It's five hundred and fifty thousand square feet, but there is a 200,000 square foot section and then there is a 350,000 square foot part. They debated it and he did. So we called it, Dick Behrends named it Market Square. We tried to get some people interested in doing it, the Furniture Manufacturing Association was still taking place but we would sandblast brick and bring people down here and what have you. Century Furniture Company were good friends of mine, fraternity brothers of mine. I called Buck Shuford and I said, 'Buck, would you consider coming to High Point.' We felt that the whole market was going to start migrating to this town away from Hickory and Lenoir and whatever it used to be called, the Figure Eight. The buyers would come down here and travel over this region of the state because there was not enough showroom space in High Point or accommodations. He said, 'No. I'm not going to leave my home. I don't want to come down there and live

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in a motel room', which shows you the attitude. It's not what the customers want; it's what the suppliers want. We had a lot of comments like that. My option expired. I was never able to put it together. Then Tomlinson went on into bankruptcy.
The best thing that happened then was the people that bought Tomlinson out of bankruptcy came back to me and said, 'You had this idea. Would you do it again?' and at a much better price. I said, 'Well, for that price, I'll do it again.' Let's talk about it. It was a very reasonable price. Your talking about not spending very much money at all for a five and a half thousand square feet, twelve acres. It's phenomenal. So we put an investor group together, and the people who had bought Tomlinson, two people got in, Chuck Haywood and Jake Froelich. Jake and Chuck, they had been fraternity brothers, not fraternity brothers but roommates in boarding school. Chuck was in the furniture business, and Jake was in the veneer business. I said, 'I think y'all should be part of this thing because as you exited the machinery and slowly move out and we put together a group and slowly move in, let's all do it together.' So they became part of it. A guy named Dave Zagarolli who is a furniture designer in Hickory was the person we asked to be the general manager who would develop the property who would actually design it. He had had some restorations in Hickory. We thought he was pretty good. We got other investors like George Lyles who is a dear friend of my father's and a dear friend of ours. Then Sandy Rankin who is a dear friend. There are some other names. One was the plant manager that we asked to be an investor, and I've forgotten his name. But anyway, there were originally eight investors.
We went back to Buck Shuford. Buck Shuford said that the time had changed. It was a couple of years later and he felt that he had to go to High Point because his

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customers told him he had to. So he would lease, he would be our biggest tenant with 45,000 feet. But he wanted nine percent ownership for that because he was renting nine percent of the building. We said, 'Okay. You've got it.' But our first tenant was Kittenger. Kittenger had never been to High Point. We called up Kittenger. He said, 'I don't want to come to High Point. We do all this stuff all over the world, the White House and this and that, on and on, the State Department. We don't need to come to High Point.' I said, 'Would you please consider a great deal from us?' I sent a plane for him and picked him up and brought him back down here. We gave him the Tomlinson showroom that was already upfitted free. He said, 'I can't turn it down.' He said, 'That's just too good.' The Kittenger name at that time was the best name in furniture in America. So they were really our bell cow. You aren't talking about giving them three thousand square feet of showroom space where you can try to lease 550,000, but that was the stamp of approval.
Within two years, this place was full. It was an incredible success story. We found people like Natuzzi. Natuzzi now is across the street just moved out. We came across him in Copenhagen, Denmark in a furniture show. He is a baldheaded Italian with a great flair and is the largest leather manufacturer in the world. He is vertical where he grows his own cows, has his own tannery, makes his own foam, makes his own furniture, puts it in boxcars and ships it all over the world on containers. He's phenomenal. But he had never been to the American Market. He came here, rented a little space, took off, and now he does close to a billion dollars around the world. He's built a fabulous new building across the street, cost him fifteen million dollars. It's his showroom that he uses twice a year. So it's just lots of interesting folks like that.

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If I could just add on to that. The Market in High Point, the 1.1 million square feet that we've evolved into, we added a tower. The tower was the first mixed use building in the state of North Carolina. We were amazed that it was. We felt Charlotte or somebody had already done something like this, but they had not. The rules had to be rewritten to accommodate us.
This building.
This building we're sitting in right here, Market Square Tower. Eighteen condominiums on the top, a swimming pool, underground parking. The first five floors are an extension of the old building showroom space. The next five floors are office space, primarily for again suppliers mostly fabric people. We sold the condominiums to anybody whether you're a retailer, manufacturer or supplier. They're all very creatively done. It's been an interesting adjunct to the Market.
Then the building itself, what happened, we created a thing called Showtime. This, the fabric industry, maybe a hundred and fifty, two hundred suppliers from around the world who sell fabric to the furniture manufacturers who come here and sell it to the retailers. They had never had a market all their own. They were always simply told by furniture manufacturers be in my office or manufacturing plant somewhere in America on that day, and there was so much wasted energy of all these suppliers trying to get in all these places. So we said, 'Let's have our own show. We'll ask the furniture manufacturers to come visit us. We'll have nice showrooms. It'll be orderly. It'll be efficient.' So we created Showtime that has now become a necessity in the industry. Thousands of people come in here from all over the world. The foreign market comes in

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here to show their wares. The foreign buyers even come in here to see the wares. So it's not just more of the Americans. It's become a great thing, another aspect of High Point.
Tell me about what factors you think—North Carolina's economy has really taken off twenty, thirty years. By the way, I'm looking at my watch as well; we need to quit about when?
Oh about ten until—. We've got another thirty minutes.
Tremendous development across the economic scene in North Carolina in the last twenty or thirty years. Tell me what factors at root do you think explain why North Carolina has had such an economic boom across so many new industries as well, across that span of time. Are there essential features of North Carolina of the region that are in play? Why here? Why not?
High Point's a very unusual state.
North Carolina.
What did I say?
You said High Point.
High Point, excuse me. North Carolina, well High Point's very unusual. Nobody's made that transition like North Carolina's made that transition. It was all blue-collar towns until the last hundred years as was Greensboro and Winston primarily. We were the manufacturing center of America. A greater percentage of the workforce in the Triad and in North Carolina was in manufacturing than any other area in America. It had to do with furniture, textiles, and tobacco manufacturing. Well, those industries have changed dramatically over the last two decades. It has forced the cities, the counties, and the state to come up with a strategy to diversify this state. So it started really with

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enlightened leadership in the state level, the legislature and the Governors. It goes back to, in my opinion, to Luther Hodges. He was a businessperson from Eden, North Carolina. He was in the textile business with Fieldcrest Mills. He was Lieutenant Governor, and the Governor died, and he became Governor. He is a businessperson who understood the dynamics of industry. He wasn't a politician. It was under his leadership that Research Triangle Park was fashioned. The business community loved the idea, and the educational industry in North Carolina loved the idea. It's been incredibly successful. It didn't start off as successful. It took years. There were a lot of questions. It hit, and then it set a tone in North Carolina that these things really are workable when you get the public-private sector working together. It's the greatest example ever of this in this state. That changed attitudes. That said, 'We can do this on the state level. We can form groups around the state to help work together and formulate strategy and infrastructure.' Things of that nature. So I think it had a lot to do with attitude.
Another example of that, Joe, is the banking industry, which is phenomenal in North Carolina. You say why? Well, it's not just because of Crutchfield and McColl trying to compete with each other. That's a lot of it. And it's wonderful. But North Carolina was the first state—now I'm saying this but I don't know if it's a hundred percent correct—but the first state in the south and their might have been another state in the country, that allowed statewide banking. In other words, you could go throughout the state of North Carolina and set up shop. A lot of state charters allowed you to do it in one city here and one city there. So that's what got Texas in trouble. That's why all the Texas banks got into trouble with the oil and Houston and Dallas and whatever it was. They weren't big enough to handle the blows that came their way. North Carolina passed

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statewide banking; therefore, it gave these banks, the NCNBs, the First Unions a base in which to build upon. They then took it to other states. Then there became regional banking. The laws were changed, and it's evolved from there, and now it's just wide open. But it was that public-private relationship that allowed that to happen. You just happened to have two horses that just jumped all over it.
You've got another great bank here in North Carolina, Wachovia who used to be the biggest bank in North Carolina and is the best run bank from what everybody says with fewer losses and what have you. Then you've got this bank that all of a sudden started up, Southern National and BB and T, two eastern North Carolina banks that are now, they're the biggest bank in North Carolina on assets in this state. North Carolina is fortunate, and this has helped our profile. The Research Triangle, I tell you, Duke University, our university system, Chapel Hill these are all major assets. The Medical Center, you think about most states. They don't have these medical centers. They don't have three international airports. They don't have the profile that this state has across the board. So they don't look at North Carolina as a textile state or an agriculture state or a tobacco state. I mean, we're big in hog manufacturing and not too proud of it. We've taken a hit with tobacco, but it's so ironic that Duke University was built on the back of tobacco as was Wake Forest University, great medical centers and educational centers that all came about because of that horrible thing called tobacco.
Tell me about whether or not you see, it seems—I would infer from what you've just said that you see a pattern of essential continuity across the various gubernatorial administrations here in this state across say twenty or thirty years, even not withstanding the Jim Holshouser Republican administration that popped up in the early

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'70s and then Jim Martin's tenure. Democrat, Republican, Democrat, Republican, you pretty much see a steady policy, climate atmosphere in North Carolina for business.
Very. We've had a good clean government. A lot of states around us have had, I hate to use the word dirty government but they haven't been clean. There's no scandal in North Carolina. Whether they're Republican or Democrat, it's been quality leadership. The Republicans came in the first time in a hundred years and ran the house and that's just fine to have a balance like that. It's switched back now to all Democrats. Jim Martin was an excellent Governor for North Carolina. I guess we really are gifted that we've had one guy who's been Governor for sixteen years or will have been sixteen years. He's been fabulous. He was a politician, a pure politician, the first eight years. The second go around, which I had the wonderful opportunity to work for him, that was behind him. He had matured to where he really understood the dynamics of North Carolina and loved the educational capabilities and what have you, loved and appreciated economic development. When he interviewed me, he called me out of the blue and asked me if I would—.
I was about to ask, one of those questions—
All right.
Tell me your story of how Dave Phillips came to be involved in that level in the state's political affairs. What's the background there?
He called me. I had become impressed with him and what he said in the campaign that he wanted to be a good business Governor. There was a concern the first go around that he was a little bit too liberal. He had never tasted business. He was honest, energetic and enthusiastic, but he didn't totally understand the dynamics of

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business. The person he was running against was a businessperson but not highly regarded. I felt that Jim Hunt would be the best for the state of North Carolina. I was absolutely intrigued when he called me the day before Thanksgiving and asked me to come to Raleigh or asked me if I would consider being the Secretary of Commerce. I said, 'I'd love too.' I went the day after Thanksgiving and sat in his office, and I thought we'd talk for an hour, and we talked for three hours. I finally got around to asking him the questions as to, which concerned me. Well how committed was he to economic development? He said that he'd say in his inaugural address that he is a changed person. He used that terminology. He said that I have learned being out of government for eight years, being a lawyer dealing with businesses that 'By golly I understand how economic development works.' He said, 'I am totally committed.' Not that he wasn't in this first eight years of administration but he didn't stress it. Here he stressed it. He made me feel good about it because most people even though I was a registered Democrat, most people thought I was a Republican. I had supported a lot of Republicans, and I frankly was somewhat concerned that he might hold that against me. I will never forget when he asked me if there was anything else I want to say to him. I thought well good gracious I thought well I'll just tell him that I had supported a lot of Republican candidates, and I'm sure it will come out, and I didn't want to embarrass him, and he needs to know that. One of which was Jesse Helms in '84, which he ran against. So I just had to run it out. I just had to level. He understood. Well anyway, he offered me the job in a couple of weeks.
It's the most exciting four years that I have ever spent. I loved working for him. He's a hard worker. He is honest. He includes you in everything. You're right by his side, and he traveled the world. I met fascinating people from all over the world. But

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also I was able to really carry out a lot of fabulous programs on economic development that he was totally for. We discussed his philosophy and he let me flesh out. But he totally supported it. A lot of it was identical to his vision anyway.
One of which was regionalism. He believed in regionalism. I had been involved in regionalism here in the Triad. It's a real simple concept, but he saw it work at the Research Triangle Park. He started a thing called Triangle East, which helped Wilson, North Carolina, which is where he's from. But it's a conceptual sort of a thing. The best way I can explain it to you is we are trying to induce people from all over the world to come to our state. We're one of fifty states and that if you've got to get them focused on the Southeast United States as to what is going on with us compared to wherever. From there you've got to get them on our state. Once you get them here, you don't want to talk about a hundred counties and five hundred communities. There really are over five hundred communities in North Carolina. Everybody obviously wants economic development. So we found out through our coming together in the Triad to form a regional partnership that it's like a shopping center. You've got certain anchor tenants. At the same time you've got lots of other folks that they'll pass by in smaller shops in the mall. At least they'll have a shot at the consumer. If you're not putting them in the mall, you're never going to have a shot. To make our rural areas to have some chance of competing, if we can let everybody create the mall and walk them through the mall whether its on a web page or through a book or however we do it and show all of our capabilities. Not everybody wants to live in a big city. Let the buyer shop and figure what suits their taste. So that's the concept of regionalism.

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We broke down the state into seven regions. We got the legislature to fund it. So it's easy to say I need to be in the West or on the Coast or I need to be in the Triangle for this reason. Once you're there, you have a shot at twelve, fifteen, eighteen counties and lots of cities. Everybody cooperates. Why let them out? When you've got a buyer, don't let them out of the mall. Lock the doors. Just get a little piece of them, but don't let them go to another state. That's what had been happening. What's happening is all these other states are starting to emulate what we did. It's nothing but common sense. It's easy to do but psychologically it's another barrier that people try to protect their turf. Developers and politicians, it's just some of the same old stuff. But it's evolved into being a very successful concept and program.
Was it hard to sell businesses considering North Carolina for the first time on North Carolina did you find? Or maybe a better question is what was the pattern of response to your solicitation that they consider North Carolina as a place to locate?
We've got a great product in North Carolina. So it's an easy sell compared to most states. It goes back to the Research Triangle Park and the universities and the airports and all that infrastructure that has evolved over the last forty years. It's just a quality state. You've got a little bit of everything here. You've got basic manufacturing; you've got high tech; you've got things that appeal to the lifestyle of executives. We've learned that that's important whether they like to fish or snow ski or play golf. If you think about, most states just don't have that. I mean, if you think about the Southeast, there are no other states that have mountains except North Carolina. They all come into North Carolina, the mountains or our coast, which is fabulous. We have an edge. They've either been here to participate in something from a lifestyle standpoint. They

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like that. But there's no reason to turn us down. We're competitive in our infrastructure, our utilities costs, our water and our housing, great education. So we don't have any big blemishes. Most states have big blemishes. So yes, it's an easy sell.
What would you say were the principal challenges to the model of development that you had in mind. Were there any great hurdles that had to be overcome? Were there any losers along the way you had to try to accommodate and bring along and the success story as well?
This whole battle of incentives. A major situation that is still going on. We had never competed, and there was a lot of built up frustration when I first got into office as to why the state lost BMW. We lost to South Carolina. We had been in office ninety days and here came Mercedes. We felt compelled to really go after them and did and put an incentive package worth about one hundred million dollars together for them. Something of that magnitude had never taken place in this state before. It boiled down to three states, Alabama, South Carolina, and North Carolina. South Carolina had gotten BMW because of enormous incentives and basically bought it and were very creative in the way they bought it through their state ports and the way they financed it and things of that nature. So that was the beginning of quote the incentive wars. Mercedes became the worst of all of them. There's never been anything as bad since. Mercedes played it beautifully. They played us all off against each other. Alabama gave them the most by far.
Let me interrupt right here. I just need to turn this tape over.



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Okay. All going.
Alabama ended up giving them total elimination of any state income taxes for up to twenty years or the investment they put into it would be really five hundred million dollars. The newspapers claim it was worth 350 million dollars compared to our 100 million dollars. Frankly it's worth a lot more than that because there are a lot of other deals that any expansion or any additions during that twenty years, a billion or two billion they invest, they get it all back. They were hoping for putting Alabama on the map, which they did. The world was just astonished. So we understand what the state was trying to accomplish.
Not an economic play for Alabama or not in the narrow sense.
Correct. It was profiled what they were hoping for to pay it off was all the supplier companies coming there and paying full taxes. Get the mother ship, and let all the other ships pay for the freight. A lot of companies have gone there, and they've hired a lot of people, and they've done a great job training them. But it's still going to cost Alabama a lot of money. You can debate is that PR; is that advertising—what are the intangibles. Well North Carolina just wasn't desperate. We're still not desperate. We've been so good for so long that we didn't have to play that game. However we've played it to the degree that we felt compelled to do it. We thought we would be pretty darned competitive. We were just doing a pretty good job and that South Carolina was still more aggressive than we were because they felt compelled after they won BMW they wanted Mercedes too. They've got a great location near Charleston where all the cars will be shipped out and products will be shipped in. Our ports weren't as strong as Charleston.

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So they were terrific in what they were doing. Alabama just was desperate. Since that time all the people that have had anything to do with it have all been fired. The Governor's been fired. Big controversy. But anyway it was fascinating for us, but that's just an example of incentives. There are times that you need to be competitive or more competitive than you are just on your own for different reasons. One is helping other regions of the state that just don't have the resources. If you can absolutely bait some company to come in there and say for these dollars I'll employ a lot of people and invest a lot to where your property taxes will have some added dimension to it. Therefore, we have created an incentive program on a tier basis for the more distressed counties in North Carolina. We're trying to re-engineer the state to where instead of giving fewer grants of money, companies earn less taxes or have to pay less taxes, earn the tax credits. It's working. We had a meeting last week in Raleigh where we talked about an analysis over the last few years of how all these things have evolved. That's probably one of the most gratifying things I've done because when I was Secretary of Commerce during all that, it's the thing that I worked hardest on to get implemented. It's implemented and it's really paying off.
Did the legislature cooperate in crafting the sort of regulatory environment that you thought was appropriate?
They did. We had a healthy battle with the Department of Health and Natural Resources. We finally had to create a special task force to help us deal with each other because our job was to go after business. Yes. We've learned that certain businesses are not good for the environment. We didn't want to go after them. We turned them down. We were educated, meaning all of us that recruited businesses all

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along but there were some gray areas with proper modification or this or that. So what we're trying to say is tell us what you could live with and by golly we'll tell the companies. Don't slam the door in their face. They're trying to do the best they can. So we've made a lot of headway within the administration but also in the legislature.
Let me take a different sort of question. Thinking back across your span working in business in North Carolina, '60s forward, can you talk about the way you became integrated into networks and can you describe the networks of business leaders both within furniture probably initially I suppose and then more widely? Can you describe that network that prevails both formal and informal?
Well the one thing that I was very surprised to learn was when we first got the major CEOs of the Triad together for the first luncheon. We were trying to create a regional approach—.
This is during your tenure in Raleigh.
No, this is prior to that. This is when I was involved in, the head of the Piedmont Triad Partnership, prior to that, what we called the Piedmont Triad Development Corporation. Tom Hearn, President of Wake Forest, represented Winston; Jim Melvin ex-mayor of Greensboro, represented Greensboro; and I represented High Point. I had been involved because I was head of the Chamber of Commerce and head of the High Point Economic Development Corporation and things like that. First meeting we put together, we hired, not hired, we invited the five biggest CEOs from each city. Found out that the head RJ Reynolds had never met the head of Jefferson Pilot. We were dumbfounded. You would think that these networks do exist, that people just come across them in their lives. But they don't. We found that in these regions, and we found

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that in North Carolina. I mean, there is an organization where people, it's kind of a glorified Chamber of Commerce, it's nice and it's helpful, but it isn't the answer. So networking in North Carolina is very important. It just means simply getting to know each other so that we are all kind of working together. But we found out that it wasn't working in these regions. Having set up the regional approach, we staffed it half private business, half governmental officials, head of the Chamber, the mayor or the city manager but put CEOs at the same table. That's how you kind of work everything out. Instead of being in conflict, you're partners. That's the whole concept for the first time of this regional approach in North Carolina.
In my work for the Program a couple of years ago, I did a series on politics in the '60s and that spun off a series on North Carolina GOP particularly reaching back even further. One of the themes was the broad transformation away from the traditional () to the Democrat party in the South over to especially in national and statewide elections to elect a lot of Republicans in the last ten or twenty years, a broad shift in the South in that in those years. Can you talk about your sense of the parties in the South? Why for example Dave Phillips is maybe still a Democrat when as you say some people might have taken your measure and said I bet he's in the GOP?
My father was the Democratic mayor of High Point. I came along and just registered as Democrat back in the late '50s early '60s, I guess. Just never changed. My wife is a Republican. I've always been real open as to whom I support. It's, when Jim Martin asked me to be on DOT board. He called me up and said, 'Would you serve?' I said, 'I'd love to.' He said, 'What's your party; what's your party affiliation?' I figured well that's going to be the shortest appointment in history. I said, 'I'm a Democrat.' He

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said, 'We thought so. We heard a rumor that you were.' But he said, 'We're looking for a Democrat. Under law we have to have one of the opposing party.' So I served on the board and loved it. And when I was announced to be Secretary of Commerce, the board about fainted because they never knew I was a Democrat. They always thought I was one of their Republicans. So I mean I don't think it makes a whole lot of difference. I think people today, I mean the ones that are really serious about running for office, they've got to line up, but the business community I don't think it makes a whole lot of difference. A person called me yesterday and said, 'I understand that you're going to be giving to so and so but would you give to me?' I said, 'Yeah. I like you as a person and I wish you well. I admire you for having the courage to do what you're doing.'
Another question. Does the state spend the right amount of, invest the right level of resources in education from a business leader's perspective and I'm thinking both at primary and secondary on the one hand, public schools, and then the higher ed level.
I think they spend most of their money on education. I've forgotten exactly what the figures. Two-thirds of all the revenue come into education in North Carolina. It's probably the most important things obviously that you can put your money into. I think the universities could charge more tuition, and they're discussing all that. Some of the graduate schools are charging more, the business schools and things of this nature because they can get more. It's the pricing of their peer group. The university system itself is so highly regarded. It's such a value. The general feeling of people I've talked to in the state, we all know very well that you could charge more, and you're not going to have any problem whatsoever. That could help. If we're losing professors, then we're crazy not to charge more. It's so hard to get money out of the legislature. It's going to be

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hard now because the windfalls are over with. We've got to deal with an economy and certain situations that come up. We've got to hold on to the valuable resource of our really good professors. We're not doing it.
The high schools in North Carolina are getting better. We've got a long way to go. Jim Hunt is extremely concerned about all this stuff. So I became educated about all of this myself, which I had never totally appreciated. It goes back to even his Smart Start, which is a very creative idea. But we've got to pay our teachers more, and we've got to have higher standards. He's made tremendous progress in all that.
Our community college system is one of the jewels of economic development. It's a phenomenon. We have fifty-eight campuses. One of the key reasons we have been so successful in economic development the last fifty years is because we have such a fabulous system. However, we're not paying those teachers enough. There's a major article that came out this week that talked about we're losing a lot of them. They're frustrated, and they're banding together, and it's awful. So, to what degree we can charge more for community college, I don't know. That's going to be tough. The high schools, you just got to put more money into them. Colleges can charge more. We want to be competitive and we want to provide what has been said for so long is the backbone of North Carolina is the reasonable priced education system. So it's got to be a balance. Education is a number one priority.
And you think the business community will rally to that view.
Exactly. If you don't have education, you don't have economic development. There's educated workers. That's going to be more important in the future than it has in the past.

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Last question because I know we're bumping up against the edge of our time here. Think back across these thirty or forty years on the question of say race and gender. How minorities, racial minorities and women have entered the work place in the North Carolina economy. Reflect for a minute on the course of that transition and its relative success or lack thereof. What's your, take the measure of the integration of racial minorities and women in North Carolina workplace across that span.
I think it has been very successful. Just think about where we were. I can remember where I was in the '50s and early '60s. Yet, you're talking about just one generation. To have that change in mindset in one generation, it usually would take in my opinion longer to deal with this evolution. But I think we've come a long way. It's hard to believe what was there before. But I think it's necessary, and it's marveling absolutely necessary. It's somewhat embarrassing that we as a state or a nation didn't deal with it before. But then you travel the world and find out that we're ahead of most of the world. We're true leaders.
I remember when I hired a female to be a plant manager for me in the textile business in the '70s. People thought it was incredible. They looked at me and I said, 'Well, I think she's the best.' She was fabulous and did a fabulous job. But some of my peers in the textile industry had just never conceived of such a thing. So I felt good about it.
When I went to Raleigh, I was exposed more to minorities and not just from North Carolina but around the world, and it gave me a great feeling that dealing with all these people that I learned about them. I'm not talking about just North Carolinians or blacks and whites but the trips we took to South Africa with a delegation of blacks from

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North Carolina. A delegation of Jews and we went to Israel. It was fabulous. Palestine and all through there. The trips to Korea and Japan and China and on and on gives you an appreciation of the diversity of North Carolina, the beauty of North Carolina of all these people working together and accomplishing something, especially in state government. I had an enormous amount of minorities working for me, and I was so proud of my team that it didn't make any difference of who they are or where they're from or what have you. We always worked as a team. I thought it was fascinating, especially in Commerce where we had an international division with offices all over the world. We recruited all over the world therefore we had lots of nationalities. So it's I think from an attitude standpoint, North Carolina is very mature, very sophisticated. I think being a southern state has never ever held us back at all on any kind of approach to the world's problem. Alabama I think kept hearing words about Alabama. So they had to overcome that reputation hoping that the Mercedes deal would help them out. We never had that problem.
We could go on but I know we're at the limit of our time. Thank you so much.
Thank you. I love—