Philly Firm Faces Fight to Survive By Bob Fernandez Salsa music blares from a factory boom box as Akouvi Tokoni grabs a used Honda Civic distributor from a milk crate. The 32-year-old immigrant from Togo checks the metal casting to make sure that it can be rebuilt to the correct specifications. Satisfied that it can, she inserts bushings and seals, sprays the part with compressed air, and screws in wire harnesses before passing the par- tially built distributor to a coworker. By the end of Tokoni’s shift, Cardone Industries Inc., Philadelphia, Pa., will convert more than 1,500 used distribu- tors into good-as-new parts ready to ship to wholesalers, repair shops and auto dealers across the country. Cardone is the city’s largest factory employer, with 4,200 workers in five Philadelphia plants. It is also the country’s largest rebuilder of auto parts, turning out more than 12 million parts a year. Now, that is all at risk. As giant parts- makers such as Delphi Corp. shed thou- sands of jobs in their struggle through bankruptcy, Cardone faces its own fight to survive as a Philadelphia manufacturer. Competition from China has Cardone so rattled that its normally reticent chief executive is reaching out for help, both in Philadelphia and Washington. “TI want to do my best to keep as many jobs here as I can for as long as I can,” says Michael Cardone Jr., the son of the com- pany’s founder. At the same time, he says, “T still have to be competitive.” He’s fighting some powerful forces. Abroad, it’s China’s newfound economic might, bolstered by its soaring ambition and cheap labor. At home, it’s America’s seemingly insatiable appetite for lower- priced goods. Cardone is a beacon for people such as Tokoni who are trying to climb the economic ladder without the benefits of a college degree. A job at Cardone pays $7 to $15 an hour, plus benefits. Imran Abdool, 20, who packages steering com- ponents, is using part of his Cardone Industries paycheck to attend pharmacy school. “I feel lucky because a lot of my friends are not even working,” he says. But Cardone Industries is fighting a flood of Chinese imports that are so cheap that they undercut the parts the company rebuilds after salvaging used parts from service stations, auto dealer- ships and junkyards. To maintain market share against the Chinese influx, Cardone Industries has cut prices across its product lines by 16 percent in the last five years. In 2005, Cardone slashed prices of its water pumps by 22 percent. Another product under siege, drive axles, has declined in price by about 60 percent in the last decade. The cuts come at a time of dramatic increases in energy costs and double-digit hikes in healthcare costs. Trying to become more efficient, Cardone last year relocated a Philadelphia line that rebuilds drive-axle compon- ents to a new, 250-employee plant in Matamoros, Mexico, and says that more marginally profitable product lines could head south. The company has even turned to China to make some parts, creating in 2004 a line of new products called Cardone Select. It has ramped up productivity and broadened its product line, but this hasn’t stopped the financial slide. “We’ve squeezed as much out of the Philadelphia operations as we can,” says George Zauflik, vice president for gov- ernment relations. “We’re at that point where something has to shift here.” Although it wouldn’t happen over- night, shifting some of Cardone’s oper- ations out of the area would be a blow to neighborhoods surrounding the compa- ny’s plants. Philadelphia manufacturers eliminated 200,000 jobs in the last 30 years, shrinking this part of the city’s economy to about 31,000 workers. Cardone, which started up in 1970 with five employees, has bucked this outflow, becoming one of the city’s and state’s largest private employers. Michael Cardone, an evangelical Christian who gives inspirational speeches to business groups around the country, has worked hard to make his company part of the Philadelphia com- munity. About 500 of his workers and nearby residents attend church services in his factories on Sundays or when the last shift departs on weekdays. “We feel we are doing a lot of good,” he says. Cardone’s predicament illustrates how yet another U.S. industry is slip- ping away, with jobs and investment going to cheaper foreign markets, par- ticularly China. It also shows why the Bush administration is under pressure to take a tougher approach on trade issues with China. Since 1998, U.S. manufacturers have eliminated 3.4 million jobs as China’s trade surplus with the United States swelled to $201.6 billion from $57 bil- lion. Industries such as clothing, office products, furniture and toys have already ceded much of their production to Asia. Consumers are the big beneficiaries. When the United States opens its mar- ket to imports, consumers get lower prices and more choices. Free trade allows nations to do the things they are good at and relinquish the things they are not good at