Textile Club finds new home

February 10, 2003

Chip Butler III (C), president of Service Thread Manufacturing Co., Charlotte, NC, chats with Bo Thomas (L) of Thomas Textile Co. and Harold Dunragan after the Carolinas Textile Club’s January meeting at the NC Center for Applied Textile Technology.

By Devin Steele

BELMONT, NC — After several years of gathering in Charlotte, NC, the Carolinas Textile Club is now holding its monthly meeting at the North Carolina Center for Applied Textile Technology’s new facility here.

The club’s January meeting not only was its first at the $3.2 million, 26,000 square foot addition, but also the first “official” event staged in the building, according to the state’s books, although several events took place there during the final phases of completion.

The event was held in the 150-seat auditorium. The building also houses three equipment labs, a physical testing lab and two computer labs.

To kick off “official” activities in the much-anticipated facility, Dr. James Lemons, president of the school and a board member of the Textile Club, invited three of the NCCATT’s “business education partners” to address the group. Those speakers represent companies that have located equipment at the school for training students and outside users.

Billy Tate, director of customer support for Saurer Group, Charlotte, NC, noted that his company for years had a training facility in the NCCATT’s existing facility.

“But when we were offered additional space here in the new building, we decided to move all of our training from South Boulevard (in Charlotte) to this location,” Tate said. “The Schlafhorst rotor spinning and winding equipment that we’ve installed here represents a fairly large portion of the installed base in the U.S. market. So, for the textile school’s purposes, this is a major asset.

“For our customers, this location offers quick access from the interstate, good local accommodations and a much less congested area than South Charlotte.”

Tate added that Saurer has scheduled 15 training sessions, or about 150 training slots, this year.

Randy Chaney, technical director for the Textile Machinery Division of Murata Machinery USA, Inc., Charlotte, NC, added that his company also plans to soon conduct all of its training on its state-of-the-art equipment located at the school.

“Also, since we have the machines over here, when a training class is not going on, we hope to use these as a second lab for Murata and also for sampling for our customers,” he said. “In our lab now those machines are running constantly, five days a week. It would be nice to have a facility off-site that we can also use.”

Murata also will continue to send employees to the school to take such curricula as textile fundamentals and computer training.

Locating equipment at the NCCATT is a new endeavor for Uster Technologies, reported Raul Thomas, textile lab and training manager.

“We see some great synergies here as far as having some of our training classes here and working in conjunction with the school and with the other partners,” he said.

Thomas said his company was grateful to the school for modifying a room in the new building to house a Uster yarn and fabric testing laboratory.

“We believe it’s a win-win situation,” Thomas said. “We have a state-of-the-art laboratory and the center has access to some state-of-the-art laboratory equipment.”

Uster buyout by
managers gets approval

February 10, 2003

USTER, SWITZERLAND — A management buyout of the Zellweger Uster division of Zellweger Luwa was approved by the European Union Commission on Jan. 21.

The new entity, Uster Technologies, will continue to provide quality control and measuring systems for the textile industry.

Participating in the new business are investment companies CapVis and Quadriga Capital. Senior management of the former Zellweger Uster has taken a minority share. All 470 employees are included in the transaction, officials said.

Uster’s headquarters and production center remain here, near Zurich.

The division was bought for $118.5 million, excluding an earn-out of $11.1 million. The company recorded sales of $117 million in 2001.

“Now that the deal is closed, we will concentrate on the further development of our business,” said Geoffrey Scott, CEO of Uster Technologies. “We will pay even closer attention to our customers’ needs and focus on customer-oriented services and innovative technologies.

“In the near future, we intend to achieve significant growth. The reasons for this are increased entrepreneurial potential, future-oriented new developments that will bring growth in new market areas and the USTER® brand, which is very well established worldwide.”

Uster Technologies develops new technologies for the textile industries that set worldwide standards, Scott added. For example, with the USTER® FABRISCAN for automatic fabric inspection, Uster Technologies has established a favorable position in an important market area, he noted. Its leading position will be further consolidated with the development of new quality control systems, he added.

A strong position has also been established in the United States with USTER® INTELLIGIN, a system to optimize gin process control, Scott reported. Uster Technologies is also a leader in quality control for fiber and in the production of cotton, worsted and filament yarns, he said.

Uster Technologies has achieved its strong market positions through continual investment in research and development, he added. Most products are less than three years old, and Uster Technologies holds several hundred patents worldwide, he said.

The company intends to continue to further expand with new product lines to Asia, one of the fastest-growing markets, Scott said. Currently, 60 percent of exports already go there.

Vane peeks into quota-less world

February 10, 2003

Mary Vane of DuPont Textiles & Interiors discusses future in 2005 and beyond.
Photo by Devin Steele

By Devin Steele

CHARLOTTE, NC — Mary K. Vane of DuPont Textiles & Interiors (DTI) recently gave Southern Textile Association (STA) members a glimpse of a quota-less world in the not-so-distant future.

The picture she presented appeared disheartening — but not hopeless, if domestic textile and apparel companies are developing a “breakaway strategy” to differentiate themselves in an even-more-cutthroat environment.

“I don’t think that incremental changes in our businesses are going to be enough to keep our businesses thriving,” Vane, DTI’s director of international trade and business development, said during STA’s Winter Technical Conference here. “We need a repositioning strategy.”

Defining her presentation on global competitiveness for U.S. textiles as a “call to action,” Vane offered a number of tactics companies can employ to ensure future competitiveness. But, first, she reviewed a number of trends before providing a peek into the near future.

“Probably the most frequently asked question I get is ‘what’s going to happen in 2005, when all the quotas are removed?’ ” she said.

Vane reminded the 200 or so attendees that, under World Trade Organization rules, quotas are being gradually eliminated over a 10-year period, with Jan. 1, 2005 marking the end of the phaseout.

In answering the previously posed question, she looked at examples of two products that already have had their quotas removed, on Jan. 1, 2002. For the first 10 months of 2002, imports of knit fabrics and textile luggage increased 29 percent and 28 percent (in kilograms), respectively.

That quota elimination also affected the price of those products, she said, noting that knitted fabric fell from $714 per kilogram to $5.83 and textile luggage slipped from $8.06 to $5.89.

“Perhaps that’s an indicator of what you might see when all the rest of the quotas are lifted,” she said.

In envisioning a quota-less world, Vane first noted that quotas have artificially distributed the textile and apparel industry around the world. When those quotas are removed, however, business is going to flow to those countries — about 20 or so — that are the most effective and efficient, she said.

As this business shifts, an extreme imbalance between supply and demand will be created, which will deflate price.

“That business is going to shift not in 2005 but in 2004, because the quotas will be removed and the goods will hit the ports on Jan. 1, 2005,” she said. “That means you back up the length of time that goods are going to be off the boat, that goods are going to be produced, that textiles are going to be made, that products will be designed and ordered. So I think fairly early on in 2004, you’ll start to see the effect of this, which means we don’t have the luxury of time. We really could be less than 12 months away from seeing an impact here.”

Vane added that the result of quota removal is that consumers will win, at least according to most economists. “The consumer will have a wider choice of goods, the best quality and the lower cost,” she said.

A major concern of Vane, she said, is that the economies of so many developing countries are dependent on textiles and apparel. For instance, Pakistan relies heavily on the production of textiles and apparel, which account for 75 percent of its exports, she reported. So countries that are hurt by quota removal as China emerges as the big winner post-2005 will need government subsidies in order to be sustained.

“When those subsidies occur, you’re going to have some unnatural market forces at work,” she said. “You’ll probably have a lot of dumping going on, which is going to unsettle our prices even more.”

Such a scenario would occur in an environment where, already, price deflation has occurred, she noted. In fact, prices today are slightly lower than they were a decade ago, she said.

Vane reminded listeners that competitive shields in the form of duties will still exist in 2005 and beyond, however.

“These duties come down bit by bit and they’ve been coming down over a 10-year period,” she said. “Your duty on fabrics is still going to be about 7.5 percent on average. And the duty on apparel on average is still going to be about 17 percent. That competitive buffer is getting slimmer, but it’s still your buffer.”

She added, however, that duties will probably be driven down even further in the next round of WTO negotiations, but that further decline would also be gradual.

Strategies

Vane concluded by offering a few strategies of how companies can reposition themselves in this global environment. For one, she said, companies need to create a reason to buy their products.

“We have to excite them,” she said. “We have to emphasis value and not just price. A lot of these ideas are ones that DuPont is engaged in. We committed to introducing 25 new products over a five-year period and that innovation, staying ahead of the crowd, is absolutely going to be essential to survival. And I don’t think it’s just innovation in product designs, but it’s also innovation in marketing approaches, as well in exciting the consumer.”

Also, getting away from commodity products and creating a finer market segmentation also will help, she said, as will emphasizing brand identity and brand demand, developing new methodologies and processes and striving for continuous improvement.

Companies also need to play on their strengths, which include being close to market and being able to deliver quickly, she said.

“It’s not just being able to shift production runs, but it’s also being able to deliver samples so that you get the order in the first place,” Vane said. “This is an area where often we lose the business because we can’t deliver the samples fast enough, so there’s an issue of speed both in product development as well as speed in the production runs.”

Vane also encouraged audience members to consider adopting Six Sigma, the highly developed process that helps companies focus on developing and delivering near-perfect products and services.

Another strength U.S. manufacturers should use to their advantage relates to distribution and services, she said. “This is an area where we absolutely can win and should win,” she said. “We do know our consumers and customers and we should know how to service them better than anybody else in the world.”

As customer bases expand outside the U.S., companies should also explore novel ways of financing because many foreign customers aren’t used to dealing with financing in traditional manners, she said.

Finally, Vane said, information is an asset for businesses and they should leverage their knowledge of their customers to their advantage.

“That is a tangible asset that you can use in a partnership,” she said. “And perhaps this global environment suggests that we have innovative, global alliances, where we marry our competencies to the competencies of other firms. I don’t think it’s necessary that we do everything ourselves.”

NTC Forum set for next week

February 10, 2003

NEWARK, DE — The National Textile Center, a federally funded academic research organization, is holding its 11th Annual Forum Feb. 16-18 at the Hilton Head Marriott Beach & Golf Resort in Hilton Head, SC.

The research consortium consists of eight universities that share human resources, equipment and facilities. Participating schools are Auburn University, Clemson University, Cornell University, Georgia Tech, NC State University, Philadelphia University, the University of California at Davis and the University of Massachusetts at Dartmouth.

The group’s mission is to enhance the knowledge base for the continuing viability of the U.S. fiber/textile/fabricated products/retail complex.

The meeting, under the theme “Seekers of Uncommon Knowledge,” will feature updates of research projects through such means as posters and exhibitions. Attendees will include industry leaders, students, manufacturers, designers, educators, researchers, retailers and recruiters.

Janine Benyus, author of Biomimicry: Innovation by Nature, will keynote the general session. She intends to answer the question, “How will we live?” The biomimics goal is to find benign and sustainable ways to meet humans’ needs for food, materials, medicine and energy.

During the full day of poster sessions on Feb. 17, several speakers will take to the dais. They include:

• Dr. Norman Badler, director of the Center for Human Modeling and Simulation, University of Pennsylvania, who will discuss the relationship between human movement, language and communication;

• Dr. John Gosline, professor at the University of California-Berkeley, who will talk about how such items as horses’ hooves, spiders’ silks and fish skins may provide insights into design principles for natural and manmade structural systems;

• Dr. Bruce Novak, head of the Department of Chemistry, College of Physical and Mathematical Sciences, NC State, who will presents ways to adapt polymers to fit human needs; and

• Dr. James Bezdek, professor, who will cover a diverse range of topics;

An NTC panel will select the winning grad student presentation from each member institution.

Four feature presentations will be made:

• Dr. John Gosline, Zoology Department, University of British Columbia;

• Jim Bezdek, Computer Science Department, University of West Florida;

• Dr. Bruce Novak, Howard J. Schaeffer Distinguished Professor of Chemistry and Department Head, Polymer Science and Organic Chemistry, NC State University; and

• Dr. Norman Badler, director, Center for Human Modeling and Simulation, University of Pennsylvania.

Want to attend?

What: 11th annual NTC Forum

When: Feb. 16-18

Where: Hilton Head Marriott Beach & Golf Resort, Hilton Head, SC

Information: Call (302) 235-2100; send e-mail to Rhonda@rhonjohn.com; or visit www.NTCresearch.org.

Briefs

February 10, 2003

Cone director’s group hires proxy adviser

GREENSBORO, NC — Mark Kozberg, a Cone Mills investor and board member, has put together a group of investors to oppose the company’s recently disclosed plan to recapitalize, according to a filing with the Securities and Exchange Commission.

Kozberg, who bid to take the company private in 1999, said the investors group holds an 8.9 percent stake in the company. They are soliciting proxies for the election of a slate of directors at Cone’s next annual meeting.

The group’s nominees include Charles Barry, a Minneapolis businessman; Randall Kominsky, chief investment officer of CRP Holdings Inc., a private investment firm; and Edward S. Adams, the Howard E. Buhse professor of law and finance and co-director of Kommerstad Center for Business Law and Entrepreneurship at the University of Minnesota.

Those additional directors would give Kozberg’s group four seats on the 11-member board.

Last month, the denim maker struck a preliminary deal that would allow it to pay for a new manufacturing plant in Mexico. Cone said it entered into a letter of intent with WLR Recovery Fund II, a fund managed by W.L. Ross and Co., to buy up to $27 million of convertible notes to support a recapitalization of the company’s balance sheet to pay for the plant.

Meanwhile, the company said Thursday that in 2002 it experienced its first profitable year since 1994. The company made $3 million, or 8 cents a share, in the fourth quarter after losing $1.4 million, or 10 cents a share, in the comparable quarter last year.

Sales for the quarter rose 15.5 percent to $102.3 million, compared to $88.6 million for the same 2001 quarter.

Dan River rebounds nicely

DANVILLE, VA — Dan River Inc. last week reported net income of $4.2 million, or 19 cents per diluted share, for the fourth quarter.

These results compare to a net loss of $10 million, or 46 cents per share, for the fourth quarter of 2001. Net sales were $153.2 million, up $7.4 million or 5.0 percent from $145.8 million.

For 2002 sales were $612.9 million, down $18.1 million or 2.9 percent from $631.1 million. Before the effect of a change in an accounting principle, Dan River reported income of $7.4 million, or 33 cents per share, for fiscal 2002, compared to a net loss of $20.9 million, or 96 cents per share, for 2001.

“At this time last year, we had set in motion a plan that would allow us to return to our historic levels of profitability,” said Joseph L. Lanier Jr., chairman and CEO. “All the necessary actions had been taken to bring inventory and capacity levels more in line with the current business environment.”

Johnston Ind. files for Chapter 11 bankruptcy

COLUMBUS, GA — Saying it was caught in the “severe downturn” of the U.S. textile industry, fabric producer Johnston Industries, Inc. has filed for Chapter 11 bankruptcy protection.

The company, founded in 1972, filed the petition Jan. 31 in U.S. Bankruptcy Court for the Middle District of Georgia.

Johnston intends to phase out production of simple poly-cotton commodity fabrics that have been hurt by lower-priced imports from Asia, according to reports. Instead, the manufacturer said it will focus on higher-end weaves for industrial and automotive customers.

“The market is not going to allow U.S. textile companies to compete in commodity markets,” James Murray, Johnston’s chief financial officer and executive vice president, told The Columbus Ledger-Inquirer. “So we have to structure the company to play to its strength, and that’s our well-known reputation for producing high-quality engineered fabrics that you can’t get anywhere else.”

Johnston Industries recently reduced its work force by 200 at two plants in Opp, AL. About 1,500 employees remain with the company at eight plants in Alabama and Iowa. The company did not say if it intends to lay off any more employees.

Johnston hasn’t established a timetable to exit from bankruptcy, company officials said.

The company is organized as two autonomous business units — the JI Fabrics Division and the Fiber Products Division, according to the company’s Web site. JI Fabrics includes the company’s former Greige Fabrics and Finished Fabrics divisions.

In 2000, CGW Southeast Partners IV LLP, an Atlanta investment firm, bought Johnston Industries, taking it off the New York Stock Exchange and making it a privately held company. This was closely followed by the restructuring of Johnston’s JI Fabrics manufacturing operations, which resulted in the consolidation of Columbus Mill into the other facilities.

In November, Johnston sold the Composite Reinforcements division.

Johnston’s JI Fabrics Division includes Southern Phenix Textiles and Stitchbond in Phenix City, AL; the Shawmut Finishing Complex and Distribution operation in Valley, AL; Opp and Micolas Mills in Opp, AL; and TexTest, a certified testing laboratory located in Valley, AL, which is used by Brooks Brothers and other manufacturers of fine apparel to ensure conformity with their stringent performance requirements.

Cotton Inc. Research Fellow shares NCC award

NEW YORK — Brian Gardunia, who last year was awarded a “Research Fellowship” as part of Cotton Incorporated’s Agricultural Research’s Breeding and Genetics Initiative, tied for first place in a student paper presentation competition at the Beltwide Cotton Conference in Nashville, TN, last month.

The topic of Gardunia’s paper was “Drought Resistance Screening,” which described a novel technique for screening cotton genetic populations for drought resistance.

Gardunia received his bachelor’s degrees from Brigham Young University in Provo, UT with a concentration in plant breeding. He received his master’s degree in plant breeding last summer, also from BYU.

Gardunia began his doctorate program in August 2002 at Texas A&M University in College Station, TX, where his area of research focuses on transferring genes for fiber quality and other important traits from related cotton species into modern cotton varieties.

The Cotton Fellows (CIF) program was launched in early 2002. Five stellar graduate students were recruited nationally in its inaugural year and all are involved in cotton breeding research projects under the Cotton Breeding Initiative. These projects will significantly enhance the germplasm base in cotton breeding today and many years in the future.

Guest Editorial

February 10, 2003

Challenges for yarn, fabric makers vast

By Mike Hubbard

Editor’s note: Mike Hubbard is executive vice president of the American Yarn Spinners Association (AYSA). Following are excerpts of a speech he gave to the Southern Textile Association (STA) during its Winter Technical Conference in Charlotte, NC.

THE THEME of today’s meeting, “Meeting the Challenges of Intensified Competition” is, without a doubt, the most crucial issue facing American textile producers and supplier companies.

The U.S. textile industry is changing rapidly to meet changes in the market. Yarn and fabric manufacturers are continually seeking out new niche and specialty products. The comfortable days of producing commodity products in vast quantities seem to be gone forever. Competition from Pakistan, China and other developing countries is tough, particularly with their low wage rates and the strong U.S. dollar. New products, smaller runs and shorter lead times are the order of the day. ...

Some of the problems facing U.S. textile producers come from import pressures, unfair trade practices and other barriers to trade.

Despite the string of bad news, there have been a number of success stories for U.S. textile producers. Since the Caribbean Basin Trade Partnership Act went into effect in October 2000, we have seen a dramatic increase in the amounts of U.S. yarn and fabric going to that region of the world. This is not a trade agreement, it is a U.S. law that allows apparel made in any of 14 beneficiary countries in Central America and in the Caribbean to enter the U.S. duty free, if that apparel is made from U.S. yarn or U.S. fabric made from U.S. yarn. As a production-sharing arrangement using U.S. textile components and regional labor, the legislation has provided a way for U.S. and regional companies to remain competitive globally, and even take some apparel business back from Asia. Some of the biggest assets in the success of this legislation thus far have been the focus by U.S. textile producers on cost competitiveness and good service. In addition, the proximity to the U.S. market means quick turnaround times, providing U.S. retailers the ability to restock mid-season and carry lower inventories.

During 2001, the first full year the legislation was in effect, we saw U.S. yarn exports to the region jump to 136.6 million pounds, an increase of nearly 86 percent over the previous calendar year. The most recent trade data from the government shows that from January to October of 2002, yarn exports already total 172.3 million pounds. While fabric can be knit in the region from U.S. yarn, U.S. knitters have also benefited nicely from the legislation.

Exports of U.S. knit fabric with U.S. yarn increased to 72.7 million pounds in 2001, a 164 percent increase compared to 2000. Because the government changed the way it accounts for knit fabric, numbers are not exactly comparable to 2001. However, we can still discern that knit fabric exports in 2002 were nearly double what they were in 2001. The law does not allow fabric woven in the region to qualify for any benefits, but fabric woven in the U.S. does.

U.S. weavers also saw sizable increases in their exports to the region in 2001, and like yarn and knit fabric producers, have seen similar success in 2002. This new export market has not fully offset contractions in other markets, but it has been a tremendous asset for those companies able to sell their products in the region. In the coming years, I suspect many regional apparel producers will move towards higher value added as they seek to remain competitive with Asian apparel producers.

THE U.S. GOVERNMENT has announced that later this month we will begin official negotiations for free trade agreement with five countries in Central America. Unlike the current arrangement, it is probably a safe assumption that the agreement will allow the use of regional yarns and fabrics. There are also some parties pushing for the use of third country yarns and fabrics as part of the deal. From AYSA’s perspective, the beneficiaries of a free trade agreement should be the signatory countries, not third countries. For that reason, we oppose allowing third country components in the goods receiving benefits. ...

As part of the big trade bill passed into law last summer, Congress reauthorized the Andean Trade Preference Act, which for the first time, includes textiles and apparel. Under this legislation, apparel made in the Andean countries (Colombia, Peru, Ecuador, and Bolivia) can enter the U.S. duty free if made from U.S. and/or Andean yarns and fabrics. That legislation just went into effect last October, so we haven’t yet had an opportunity to gauge its success. Given the well developed textile and apparel industry in Colombia and Peru, and the fact that these countries make only about half of the yarns and fabrics in the apparel they send us currently, there may be some good opportunities for U.S. companies. For the products they do make, they could provide some pretty tough competition for U.S. producers.

Unlike the CBTPA countries, there is a large amount of weaving capacity in the Andean countries, particularly in Colombia and Peru. Andean apparel producers tend to focus on higher value added products.

One area of concern has been exports to our NAFTA partners, particularly exports to Mexico in the last year. Mexican textile and apparel producers have faced many of the same difficulties as their counterparts north of the border. A weak U.S. economy, a strengthening peso and relatively higher wage rates, combined with lower priced imports to that country, have caused some difficulties for Mexican companies and obviously, their U.S. suppliers. While some business has been lost to the CBTPA countries, the overall decline in yarn exports to Mexico in the last year does not appear to be the result in a shift in production to the Caribbean Basin. ...

PERHAPS THE greatest issue of concern to the U.S. textile industry, however, is the proposal submitted by the U.S. government for the current round of trade negotiations at the WTO. The U.S. has proposed the total elimination of tariffs over a period of 10 years on all industrial products, including textiles and apparel. Low tariffs would be knocked out pretty early on, possibly removing the last remaining protections afforded to the U.S. industry. Ostensibly, countries with high tariffs would have relatively low tariffs by 2010. Then, under the U.S. proposal, the tariffs would be phased out completely by 2015.

Having seen efforts to level out tariff levels before, many textile producers are understandably skeptical about this proposal. The fear is that the U.S., and perhaps other industrialized countries, will reduce or eliminate tariffs, while developing countries do not. Lest we forget, part of the ministerial declaration launching this round of trade talks promises “special and differential” treatment for developing countries. “Special and differential” is not defined, nor are developing countries defined. Many of what may be considered “developing” countries don’t seem to have any problems being highly competitive in global markets in terms of price, and often in terms of quality. AYSA holds the position that the U.S. should not consider further tariff reductions until the rest of the world lowers theirs to our level.

The U.S. proposal also concerns me because it doesn’t address non-tariff barriers. This is a much more difficult problem to address simply because countries can be very creative when finding ways to keep your products out. Sometimes, non-tariff barriers to trade are obvious, such as minimum price requirements. Other non-tariff barriers are hard to find or difficult to prove. ...

Whatever the final outcome of the numerous proposed free trade agreements and the WTO trade round, we are moving each day into a more globalized economy. Competition from abroad is fierce and it will probably grow only fiercer.

Your challenge is to find ways to make your products more competitive, through the development of niche and specialty products, seeking new efficiencies and developing new markets. I recognize that this is easier said than done, but it is not an insurmountable challenge. The task before you is great, and I wish you all every success in your efforts to compete and prosper in the coming years.

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