Can U.S. textiles make money?

Week of Oct. 29, 2001

TQCA explores engaging question


TQCA President Allen Little presents a plaque to Howard Olson’s widow Pat as her daughter Laura Gossage and Dr. Radhakrishna Parachuru of Georgia Tech look on. Olson, a Georgia Tech faculty and TQCA member, was honored posthumously for his longtime service to the organization.

By Devin Steele

MYRTLE BEACH, SC - Neil Cahill, vice president of the Institute of Textile Technology, posed a stimulating question during the Textile Quality Control Association’s 50th Fall

Conference here this month:

Can money be made making textiles in America?

That simple yet hard-to-answer question certainly has been on the minds of plenty industry representatives lately.

The answer, in a nutshell, is “yes,” Cahill said. But making money requires playing by a new set of rules, which involves but is not exclusive to this industry sector - personnel from such areas as quality control, lab, research and development and production.

“The ironic part of it is, the thing we spent 50 years becoming masters of - plant performance and productivity - is not the answer for the future,” said Cahill, based in Charlottesville, VA. “We don’t forget about productivity, we don’t forget about cost control - that would be foolish - but by itself it is not the answer.”

“This American textile industry will never compete by being the low-cost producer. That’s just not in our future. So, is there another set of competitive equations that will allow us to compete and make money? Yes.”

Cahill, who went on to explain those formulas, was one of a several notable speakers who engaged TQCA members during their golden anniversary meeting. Under the theme, “Quality: Past, Present and FUTURE,” the meeting also featured presentations from Jim Conner of the American Yarn Spinners Association; Mike Todaro of the American Apparel Producers Network, Dr. Blanton Godfrey, dean of the N.C. State College of Textiles; Mike Honeycutt of Lawson-Hamphill Sales, Inc.; and Mitch Hensley of Ramtex, Inc.

Also, a presentation was made to the Georgia Tech Foundation (GTF), which supports the School of Textile and Fiber Engineering at Georgia Tech, in honor of Dr. L. Howard Olson. TQCA presented a plaque to Olson’s widow Pat and their daughter Laura Gossage, in honor of his longtime service to the organization. Also, Dr. Radhakrishna Parachuru of the school received a $2,000 donation from the organization on behalf of the GTF for a scholarship fund started by Olson in 1996 during his bout with cancer.

Quality vs. value

Cahill noted that the industry was doing “OK” until 1999, the first year the domestic textile industry as a whole was in the red. “Somebody, without asking our permission, changed the rules somewhere about 1996, ’97. It definitely was present by ’99,” he said. “And the rules that they changed were that our competitors all over the world began to ship in products that basically had the same level of defect control, but they were doing it at a superior price. So they had the same quality, they had defectiveness at competitive levels and it finally came to roost in 1999.”

Quality - defect avoidance, conformance to specs - will continue to be an important issue for competitive companies, Cahill added. But an extension of quality called “customers’ perceived value” is beginning to develop that is enabling companies to differentiate themselves.

“What we’ve found out is that the high-profit companies in some way - some did it with the profits, some did it with service, some did it with innovation, some did it with alliances - were making their money by following a strategy of value advantage. They were basically saying, ’the only thing customers are going to pay extra for is value.’ “

Remaining cost-competitive and high-quality producers is a must, Cahill said. But those are defensive actions, he added. Survivors will also employ an offensive strategy by adding customer value to the mix, he said.

“Is quality and value the same thing?” he asked. “No. They are integrated. Quality deals with the issue of the customer’s acceptability of the product. Value deals with the perception of worth. Perception of worth is the degree to which the customer believes your company made a contribution to its success.”

“I think this is what it’s going to take for us to make money.”

NTA on trade issues

Week of Oct. 29, 2001

Any new TPA should be postponed

Editor’s note: Following is the section of the Northern Textile Association's statement related to various trade issues.

• Stand-still approach - There should be no further unilateral trade liberalization for our sector at this time. The U.S. industry has not had adequate time to digest the changes put into place by last years Africa/CBI legislation, much less the continuing liberalization taking place as part of the NAFTA and the Uruguay Round.

We do not know what the CBI and Africa provisions will mean in terms of practical impact on our customers, on investment trends in the region and on our market overall. Only after a reasonable time period to digest the enormous changes incorporated into U.S. textile trade policy in recent years will our industry be able to determine whether we can absorb a further liberalization of the U.S. market.

• Trade promotion authority/new trade round - Any legislation designed to grant trade promotion authority for a new multilateral round of trade negotiations should be opposed. The U.S. textile market has been subjected to major liberalization as part of previous GATT/WTO negotiating rounds, while gaining little if any reciprocal access for U.S. made goods. For example, as the Uruguay Round drew to a close, then-President Clinton sent a letter, dated November 16, 1993, to several members of Congress discussing a wide range of textile issues.

In that letter, President Clinton defined as a specific goal in the textile section of the Uruguay Round to have all participants lower and bind their tariff levels to no higher than 7.5 percent for manmade fibers, 15 percent for yarns, 30 percent for fabrics and made-ups and 35 percent for apparel. Obviously, the round did not come close to meeting that objective. As a result of repeated failures in past trade rounds we believe that TPA should be withheld by Congress and that any round of WTO talks should be postponed.

• Transshipment - Fraudulent imports designed to circumvent U.S. quota and tariff requirements continue to pour across our borders. Billions of dollars of illegal textile and apparel imports enter the U.S. market annually.

Further, the Africa Growth and Opportunity Act created tremendous incentive and opportunity for non-African companies to open facilities in sub-Saharan Africa where foreign workers assemble garments from yarns and fabrics of non-African origin while avoiding U.S. tariffs and quotas. This essentially creates an economy based on smuggling.

The U.S. government needs to apply adequate resources, significantly greater than what is in existence today, toward addressing these serious and growing problems. Until the U.S. Customs service demonstrates that it can adequately handle its current responsibilities in this area, no further expansion of either the Africa or CBI bills should be contemplated.

• Andean trade preferences - No expansion of quota- and duty-free preferences for textile and apparel products manufactured in the Andean countries should be approved by Congress. Recently introduced legislation replicates certain serious problems associated with last years Africa/CBI bill. For example, the problems associated with dyeing and finishing of fabrics are carried over from the Africa/CBI bill to the Andean legislation.

The bill also grants special exceptions for regional knit fabrics. Extension of the preferences to the Andean countries would exponentially increase pressure to give these benefits to other South American countries. Such pressure would possibly result in the inclusion of major suppliers such as Brazil.

• Wool technical corrections - A set of non-controversial but very important technical corrections to Title V of the Trade and Development Act have been drafted and presented to both the Finance and Ways & Means committees. These corrections have been approved by all parties in the wool tariff dispute and should be added to the first vehicle moving through the legislative process.

Failure to adopt these changes will prove to be extremely detrimental to U.S. wool fabric and yarn makers.

• Berry Amendment - The recent controversy over the Army’s offshore sourcing of black berets provides a vivid example of the need to strengthen the Buy-American provisions of the defense procurement code known as the Berry amendment. We seek language that precludes a waiver of the Berry amendment unless there is a national security emergency. An existing loophole that exempts Buy-American requirements for purchases under $100,000 should also be eliminated.

NTA: Enough is enough

Week of Oct. 29, 2001

Congress should act now

PONTE VEDRA, FL - The Northern Textile Association (NTA) has called upon Congressional and Executive Branch officials to take immediate steps to stabilize the environment confronting the U.S. textile industry, particularly in light of the United States’ current military actions.

In a statement released during its 147th annual meeting here this month, the group said that no further unilateral trade liberalization for the industry should be granted at this time. NTA also issued an official position on several trade-related matters, including trade promotion authority (TPA), a new trade round, transshipment, Andean Trade preferences, wool technical corrections and the Berry amendment.

The “most severe crisis in (the industry’s) history” serves to undermine the critical contribution the U.S. textile industry makes to the United States’ national defense structure, according to the statement.

“The U.S. military sources thousands of textile and apparel products that allow our armed forces to remain the most modern and technically advanced fighting force in the world,” NTA stated. “The U.S. textile industry supplies everything from basic uniforms, tenting and parachutes, to sophisticated camouflage materials, advanced fibers necessary for missile and satellite guidance systems to protective clothing for chemical and biological warfare.”

“Obviously, the substantial downsizing of the domestic textile industry will result in the failure to maintain a reliable, U.S. source of needed materials in times of military conflict.”

NTA also elected officers and directors for the coming year. The theme of the meeting was “How to do business in the Caribbean and Central American region.” The program featured speakers from the Dominican Republic, Guatemala, Honduras and Jamaica, as well as U.S.-based speakers on the legal and financial aspects of Caribbean Basin trade.

Material World

Week of Oct. 29, 2001

Organizers: Trade show results positive

MIAMI - In spite of the attacks on America that occurred during the three-day Material World trade show at the Miami Beach Convention Center, organizers reported positive results of the exhibition geared toward the apparel industry.

“It is impossible to comment on the show without stirring thoughts and images of the tragic events of Tuesday, September 11,” said Tim von Gal, vice president of marketing and development for Urban Expositions, producers/managers of Material World. “It would be inappropriate and disrespectful to those who lost their lives and loved ones to ignore the national tragedy that marked the second day of our event.”

“So, in a very qualified way, we were pleased with the event and the many favorable comments from both attendees and exhibitors who are looking forward to coming back in 2002. Through Monday, we were tracking substantially ahead of our attendance from the previous year and the quality of our attending audience was equally strong.”

Exhibitors in the fledgling show said they were especially pleased with the major branded apparel companies, private label retailers and product development personnel from companies ranging from Eddie Bauer, Levi’s, Tommy Hilfiger, Vanity Fair, The Gap, JCPenney, Kellwood and others from manufacturing industries and retailing categories throughout North and Latin America.

“Material World is proud to have the most incredible collection of exhibitors and attendees any event could ever have - not only in the quality of their companies and products, but in the quality of their people,” von Gal said. “It is when times are difficult that one can see how a person truly is.”

“And at the very difficult times we experienced on Tuesday and Wednesday, we were extremely proud to be associated with every one of our exhibitors and attendees. Their compassion and thoughtfulness for each others’ well being in the face of such uncertainty and concern was overwhelming.”

Exhibitors reported strong sales and new business opportunities on Day 1.

“Opening day was very strong for us,” said Choice Johnson of Wellman, Inc. “We were especially impressed with the Caribbean contacts we made at the show. As a first-time exhibitor, we were pleasantly surprised and definitely plan to be back next year.”

“I was extremely impressed with the types of attendees I saw at Material World,” added Eric Hagen of Junior Hagen Ltd. “The quality of attendees was of a higher level than many other shows I’ve participated in.”

Howard Klein of Impala Industries said that people came to buy.

“We do active, swim and club and this show gave us a chance to reach a buying audience from the Southeast region, but we were also surprised to see buyers from Texas, Ohio and other parts of the country as well,” he said. “And none of them were browsers. They were all serious buyers.”

Added Heather Silber of Siltex: “The decision makers were definitely here.” In addition to exploring unparalleled international and domestic products and services from nearly 400 textile, trim and related product manufacturers, importers, exporters, mills, software, CAD and other service providers comprising Material World's exhibitor roster, attendees were also able to get an inside look at the trends and design directions for autumn/winter 2002/2003 showcased in the Fabric, Color and Trimming Pavilions. Developed to illustrate the seasonal theme and trend direction using selected fabric collections provided by Material World exhibitors, the Fabric Pavilion gave attendees a chance to touch and feel the fabrics while planning their buying process. Presented in conjunction with the International Colour Authority, the official color authority of the show, the Color Pavilion highlighted the first look into the most directional colors for the season. The Trimming Pavilion highlighted trends in trimmings by showcasing a host of textile trims, buttons, buckles, snaps, rivets and other items provided by exhibitors.

Visitors were also able to explore the extensive offerings from DuPont Apparel & Textile Sciences showcased in its 65-booth presentation featuring LYCRA Assured Accredited Mill Partners, Recommended Garment Vendors and Yarn Processors from all over the globe. Also on tap was a variety of educational programs, including the Cotton Incorporated Fall/Winter 2002/2003 Forecast presentation led by Kathryn Gordy-Novakovic, director of THE COTTONWORKS Fabric Library and a program co-hosted by the American Textile Manufacturer's Institute and Philadelphia University detailing the opportunities offered by the Caribbean Basin Trade Partnership Act (CBTPA).

Scheduled for October 7-9, 2002, the next Material World exhibition will feature an expanded exhibitor base and show management is already working on plans to continue building attendance from throughout the Americas and beyond.

“The October date will better serve the business needs of our attendees and exhibitors,” von Gal said. “And, these dates also position Material World as the U.S. debut point for the trends and design directions that will have just been unveiled at European shows held a few weeks prior.”

Gov. Easley meets with NEC chair

Week of Oct. 29, 2001

Governor thanks Bush in letter, urges key actions

In a letter to President Bush, North Carolina Gov. Mike Easley warned that several major textile/apparel companies in the state may not survive without support from the White House. Easley wrote the letter, dated Oct. 16, after a meeting with Larry Lindsey, chairman of the National Economic Council (NEC) the day before. The governor thanked Bush for “the opportunity to share my ongoing concerns facing our textile and apparel industry” with Lindsey, he wrote.

Lindsey is assistant to the president for Economic Policy and director of the NEC, which was established in 1993 within the Office of Policy Development and is part of the Executive Office of the President.

With textiles facing a “severe crisis,” Easley urged several key actions by the administration to “restore the vitality of our domestic textile industry,” he wrote. Support could come in the form of federal loan guarantees “to reduce the industry’s current 11 percent cost of capital to the 7 percent range and in extending the tax loss carryback currently under discussion in Congress as part of the stimulus bill,” the governor wrote. Easley urged the president to support enactment of a full 10-year net operating loss carryback extension for the industry.

“If the textile industry does not receive a 10-year tax loss carryback extension, we could see massive layoffs in the textile industry throughout the Southeast,” he wrote. “Furthermore, without this type of support from your administration, several major textile companies, such as Burlington Industries, Cone Mills, Galey & Lord, and Guilford Mills, may not survive.”

Easley also indicated that Lindsey was receptive to the need for increasing efforts to stop textile smuggling at the Mexican border and transshipment of Chinese products through other Asian countries.

“I hope that you will also take a serious look at initiating emergency surge controls and improving and strongly enforcing our antidumping rules,” Easley added. The governor also asked Bush to hold current textile and apparel tariffs steady in the next round of world trade talks and support the quota phase-out schedule agreed to in the Uruguay Round's Agreement on Textiles and Clothing.

“The Textile Belt is being ravaged with unemployment rates far above the national average,” he wrote in conclusion. “North Carolina lost about 4,300 jobs in the textile industry through this year’s second quarter. This is more than any other state in the Southeast. “Increased foreign competition and the current economic downturn continue to erode our textile employment. Your administration can make a difference by considering action on all of these items as you work to address the security and economic concerns currently facing the nation.”

The White House has been criticized for failing to meet with the governors of four textile-producing states to discuss the problems of the industry. In August, Easley, along with Govs. Jim Hodges of South Carolina, Roy Barnes of Georgia and Don Siegelman of Alabama had co-signed a letter to the president asking that he meet with them to discuss how the federal government could help with textile trade issues.

It is unclear how Easley's meeting with Lindsey came about.

Unifi to eliminate more than 100 jobs

Chipman Union closes another Georgia plant

Russell Corp. invests in Marmot Mountain

Charges hamper WestPoint

VF Corp. beats Street, warns of 4Q slowdown

Delta Woodside takes hit related to closing

News in brief

Week of Oct. 29, 2001

Unifi to eliminate more than 100 jobs

GREENSBORO, NC - Unifi, Inc. said last week it is eliminating 116 jobs, primarily through attrition, in North Carolina's Piedmont region. The polyester yarn producer said that 79 are wage positions that are vacant and will not be filled and 26 are wage positions that will be cut through attrition in the coming months. The other 11 are currently laid-off salaried employees.

Chipman Union closes another Georgia plant

GREENSBORO, GA - Hosiery manufacturer Chipman Union, Inc. has closed its Bryan-Scott Plant here. Combined with the closing of its plant in Union Point, GA, in August, the company has eliminated about 700 jobs. The 115-year-old manufacturer was forced to close the plant after losing major contracts with adidas and Odor Eaters, according to company officials.

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Russell Corp. invests in Marmot Mountain

ATLANTA - Russell Corporation announced last week that is has taken a minority investment position in Marmot Mountain, Ltd., a performance outdoor products company based in Santa Rosa, CA.

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Charges hamper WestPoint

WEST POINT, GA - WestPoint Stevens reported that net sales for the third quarter increased 5 percent to a record $513.1 million.

Earnings, however, plummeted to $3.6 million from $19.8 million, including excessive charges in both instances. The company recorded a $7.5 million non-cash charge in expense to adjust to market its basis in an unconsolidated limited liability corporation. WestPoint also recognized a $1.7 million charge net of taxes for the implementation of its restructuring program.

Improvement in sales to mass merchants and specialty stores, coupled with sales of the expanded Ralph Lauren Home license and new Disney Home license, led to the improved sales performance, the company said. Sales increased in all product categories, with the exception of towels.

“We were extremely pleased to see improvement in our business in the third quarter,” said Holcombe T. Green Jr., chairman and CEO. “Importantly, we continued to reduce inventories by $35 million to $397 million at the end of the quarter and reduced indebtedness under our Senior Credit facility by $54 million.” The company is in compliance with all of its financial bank covenants and has ample liquidity available, Green added.

“We are seeing the benefits of our Eight-Point Plan through increased market share and recent management changes will also serve to enhance our customer service capabilities,” he said.

Given the uncertainty of the retail environment for the rest of the year, WestPoint said it expects sales at the low end of the range of its prior guidance, which for the fourth quarter would be $480 million.

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VF Corp. beats Street, warns of 4Q slowdown

GREENSBORO, NC - VF Corporation barely beat analysts’ expectations for the third quarter but warned of slippage in the fourth quarter as a result of wary shoppers during the holiday season.

The apparel giant earned $103.6 million, or 90 cents a diluted share, compared to $103.4 million, or 88 cents, for the same period a year earlier.

Sales for the quarter slipped nearly 8 percent to $1.48 billion from $1.60 billion. “Clearly, business conditions were difficult before the September 11 tragedy, and they have continued to be extremely challenging,” said Mackey J. McDonald, chairman and CEO. “Given the economic shock our country has experienced, our third quarter results were excellent.”

The firm said fourth-quarter sales will remain under pressure as consumers continue to be cautious. VF said sales may decline by more than 10 percent, while earnings per share may dip by more than 35 percent.

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Delta Woodside takes hit related to closing

GREENVILLE, SC - Delta Woodside Industries, Inc. lost more than $8 million, or 35 cents a share, in its first fiscal quarter.

For the same period last year, the company made $2.9 million, or 12 cents a share. Sales were $37 million in the quarter, down from $63 million. Delta Woodside took an $8.7 million hit in costs related to the closing of its Furman Plant in Fountain Inn, SC, in the quarter.

“Although we have a long way to go in order to get our business in a healthy position, we have seen significant improvement over our fourth-quarter results,” said W.F. Garrett, president and CEO. “I am extremely encouraged by the results of our cost reduction program, which exceeded our plan for the first quarter.”

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Editorial

Week of Oct. 29, 2001

Hey, Washington: You’ve got mail

NOT TO HARP on the issue, but many have asked: Did our Textile South edition, which featured the cover story, “U.S. Textiles: Hanging By A Thread?,” make it into the hands of Washington lawmakers? Well, from all indications, yes they did – thanks to our fortuitous, just-in-time delivery system. By our calculations, the papers were sent enough days after September 11 to get noticed and enough days before “postal paranoia” to make it safely inside the Beltway. That is, they arrived B.A. - before anthrax. These days, of course, all mail to government officials is considered guilty until proven innocent. And that’s a good thing.

Efforts to reach several Congressmen and Senators - even through the germ-free e-mail system - have turned up futile so far. Of course, bigger issues are consuming their time, so we can understand their delay in getting back to us. We simply want to know if the papers arrived.

On a broader scale, of course, we would like to know if they were read and, if so, if they will help make at least a small difference in the fate of the domestic textile industry. The purpose of the edition was to better educate legislators, including President Bush and his cabinet, about the ugly state of the domestic textile industry, so that they will be better informed when it comes time to negotiate policy that affects U.S. textiles. And we turned to many of you – leaders of America's oldest manufacturing sector – to tell your stories of distress and offer your solutions to the problems.

As a newspaper, we aren't professional lobbyists - some even say we're treading into dangerous territory, from a credibility standpoint - but we, too, have a stake in this industry's future and we believe our role is important. We think we can contribute to the cause by doing what we do best - communicating, even at the risk of appearing to sacrifice a smidge of our objectivity. We hope you view this as a value-added service.

WILL OUR efforts make a difference? That’s a tough one. But we know one thing: Someone is doing some stellar work in Washington on behalf of the U.S. steel industry, which has been devastated by cheap imports and worldwide overcapacity - as textiles have been, only textiles’ woes have been on a larger scale.

Just last week, the U.S. International Trade Commission ruled that the U.S. steel industry has been “seriously injured” by low-price foreign steel since 1998, which sent steel prices to near 20-year lows. More than two dozen steel producers have filed for protection under Chapter 11 codes in the last three years. According to reports, that ITC ruling represented a major victory for domestic steelmakers and may have cleared the way for the president to raise hurdles to steel imports. Hello? Over here ... Earth calling Washington. Check out the plight of the textile industry, too.

SOME MAY SAY our endeavor is too little, too late - that this U.S. industry is a goner, regardless, and we’re in a state of denial to think otherwise. To which we say: poppycock. If you think that, you might as well pack it in. Go ahead and shut your plant, close your blinds, post a For Sale sign and put in a job application. But we still have faith that things will turn. We plan to continue to seek continual improvement and a means of differentiating ourselves so that we remain valuable to our comparable-thinking customers. If you doomsayers do happen to be right, we’ll turn out the lights when we leave.