Cahill: Consumers
dictating rules of game

Nov. 11, 2003

By Devin Steele
Industry consultant Neil Cahill explains new business model.

HARRISBURG, NC - Adapt or dissipate.

Neil Cahill, retired senior-level executive with the Institute of Textile Technology, made that message loud and clear in his remarks during the Textile Quality Control Association's (TQCA) Fall Conference at the Lowe's Motor Speedway Club here last month.

That advice was sent to U.S. textile companies still trying to find their way in this newfangled, transfigured world of economic supply. And he later offered remedies - which continue to change - to survival in this new business model.

"You are either going to adapt to the new business realities or you will dissipate," said Cahill, now an industry consultant who spent 27 years at ITT. "There's no in-between. A lot of companies have already been dissipated. A lot will be dissipated."

Closing a full-day's program of speakers, Cahill spent about an hour outlining a report of those new business realities that he had put together for a retailer. His basic premise: That customers, the rules of the game and the pipeline have all dramatically changed over the last decade or so. Trouble is, he said, many U.S. product providers have failed to respond to these changes.

"(These changes) have so complicated our world of manufacturing that after seven years, almost 10 years now, we haven't figured it out," he said. "We have not redesigned the pipeline. The time has come for us to do that and it's not going to be easy."

Under the traditional model, Cahill noted, textile manufacturers were basically parts suppliers (i.e. yarn, fabric, dyed product, etc.) who provided mass-produced, comparable commodity goods that competed on price. And those products ended up in a long distribution channel - known as a "push pipeline." But being an industry populated by parts producers today is a "fatal flaw," he added.

"They were killing each other because it's all commodity, so they were shoving all of this stuff into the pipeline," he said. "And the pipeline was relatively long. It was also big. On one end we had the retailer and, in the old world the retailer acted as distributor. They just pumped out what came through that pipeline. And all of a sudden they just shot this product flow into this general population."

Cahill was told by the retailer with whom he worked that the textile industry generally suffers from "sameness," which leaves those companies with nothing more than price from which to compete.

"And that's the game we're trapped in because that's the world we came from," he said. "But the world is different now."

Today, the system has is evolving into a "pull pipeline," which is shorter and is dictated by the industry's customer - now the end user, the consumer, as opposed to the next stop in the distribution channel, according to Cahill.

"Even if we have to go kicking and screaming, we're going to have to move into this model because we don't have any choice," he said.

Consumers are now dictating what products they want from the pipeline and when they want it, he said. "All of a sudden there is a message coming from way, way down the pipeline called the customer, and they are telling the retailers, 'I want this and I want that and I want it novel and I want it this color.'

"Retailers, in turn, feed it through the pipeline to us. And here we are, parts suppliers. They're dealing with garment manufacturers and garment manufacturers treat us, the textile industry, as just bunch of substrate providers, a bunch of parts manufacturers. And we all know, there's not a big profit in being a parts manufacturer. They guy who sells the parts makes the money."

Because consumers are dictating the game, retailers have transformed from distributors into gateways, Cahill continued.

"And a gateway is a bi-directional valve," he said. "And consumers are going to shoot their expectations through this gateway, which is the retailer, through a very short pipeline, and it's going to back up on the manufacturer. And now the manufacturers are not all little stand-alone entities. These manufacturers have now been formed into product networks."

He then warned: "If you're not vertically integrated and you are not in a product network, then you're not going to make a buck in this industry because you're going to be a substrate provider. You're going to be a parts manufacturer. And parts don't sell."

Operating under this "pull" mentality, suppliers to consumers should be wary that customers are 1) fashion fickle; 2) sensitive to trends; and 3) want product now. As such, the days of four-month product development cycles are over, he added.

"Because we live in a customer-driven world, we have to see the world as the retailer does, because they happen to be the mirror of the customer, the consumer," he said. "Any time demand is customer-driven, it is subject to time degradation. The dilemma is that we as suppliers must provide a rapid replenishment rate, another requirement we have to meet if we're going to service this new industry."

Customers also refuse to pay for sameness, he continued.

"And what are we doing? We're producing mass production commodity products," he said. "Because we live in a customer-driven world, we have to see the world as the retailer does, because they happen to be the mirror of the customer, the consumer," he said. "Any time demand is customer-driven, it is subject to time degradation."

Cahill later explained the importance of creating quality products - a given in this new model - before he concluded with some cold, harsh food for thought:

"This is the world we're living in, and we've got one foot in it," he said. "American manufacturers are going to have to vertically integrate, which we can't afford to do, or create partnerships.

"If we give away the whole business, it's no one's fault but our own."

Bipartisan support
shown for China safeguard

Nov. 11, 2003

WASHINGTON, DC - During a Capitol Hill press conference on Oct. 29, members of the Congressional Textile Caucus announced that 139 U.S. Representatives and 26 U.S. Senators signed letters urging the Bush Administration to invoke the special textile China safeguard.

The letters also asked the White House to not include exceptions, such as tariff preference levels (TPLs), in the Central American Free Trade Agreement (CAFTA) that would allow China and other free-rider foreign suppliers to benefit from agreements designed to promote trade and investment between signatory countries.

In addition, other U.S. Senators and U.S. Representatives sent individual letters to the administration supporting implementation of the China safeguard.

The united textile/fiber coalition filed China safeguard petitions on knit fabric, brassieres and dressing gowns on July 24. If the U.S. government approved the petitions, it could limit the growth of Chinese imports to 7.5 percent over current trade.

Congressmen Howard Coble (R-NC), John Spratt (D-SC), Virgil Goode (R-VA), and Bill Pascrell (D-NJ) sponsored the House letter. Senators Lindsey Graham (R-SC) and Ernest F. Hollings (D-SC) sponsored the Senate letter.

"The united textile/fiber coalition would like to thank the Senators and Representatives who signed these letters," said Allen E. Gant, Jr., CEO of Glen Raven, Inc., Glen Raven, NC. "These letters show there is a strong bipartisan, geographically diverse coalition on Capitol Hill supporting the industry's China safeguard petitions. The time for the administration to act on the textile industry's China safeguard petitions is now."

China's exports of the products on the safeguard petitions have increased dramatically, according to the coalition. Since 2001, exports of dressing gowns from China have increased by 905 percent, exports of brassieres by 382 percent and knit fabric by 28,000 percent.

Overall, Chinese exports to the U.S. textile and apparel market more than doubled in 2002, growing by 117 percent. China's exports surged in 2003, up an additional 75 percent through August.

"We are gratified that members of Congress from 36 different states, representing every region of the country, have joined in urging the administration to take these actions," said Jim Chesnutt, CEO of the National Spinning Co., Washington, NC, and vice chairman of American Textile Manufacturers Institute (ATMI). "When elected officials from three-fourths of the states are sounding the alarm, it sends a powerful message about the impact trade policies will have on the 2004 election for Congress and the White House.

"And if we don't get the actions we need from our own government, I would expect that the American textile industry, which has embarked on a massive voter registration drive to get our workers to the polls, will be looking for new leadership," he added. "We need public officials who will make sure we have an American trade policy that promotes American manufacturing first and foremost."

Steve Dobbins, CEO of Carolina Mills, Maiden, NC, and chairman of the American Yarn Spinners Association (AYSA) added: "The 60-day window for the U.S. government to approve or deny the industry's China safeguard petitions closes on November 17. Any delay beyond that date in making a decision will be viewed as continued indifference to the economic plight of the U.S. textile industry. A timely and correct decision on all three China safeguard petitions is critical to the health of the industry."

Many textile and apparel companies have engaged in letter-writing campaigns and voter registration drives to drive home their concerns over the surge of low-cost imports flooding America's shores.

"Milliken & Co. associates actively have lobbied their Congressmen, Senators and President Bush in support of the textile industry's China safeguard petitions and have encouraged their friends and families to do the same," said Roger Milliken, CEO of Milliken & Co., Spartanburg, SC, and co-chair of American Manufacturing Trade Action Coalition (AMTAC). "These combined efforts have resulted in the transmission of about 30,000 e-mails and letters to Washington, DC. Milliken & Co. has also begun a company-wide voter registration drive."

William Giblin, CEO of Tweave Inc. and chairman of the National Textile Association, said that textile companies in the Northeast have been hit just as hard as the Carolinas by the surge of low-cost imports.

"Recently, there have been announcements of major plant closings in Massachusetts and Maine," he said. "The crisis in the textile and apparel industry isn't regional; it's national. That's why members of Congress from California to Maine have signed letters released today."

Geoff Schofield, president of Drake Extrusion, Inc. and Executive Committee member of the American Fiber Manufacturers Association (AFMA), added, "China continues to flaunt accepted norms for competition in international trade. The manipulation of its currency is an attack on American manufacturing and this alone calls for immediate use of quota safeguards."

In related news, Cass Johnson, acting president of ATMI, criticized the U.S. Treasury Dept. for its refusal to cite China for currency manipulation, which would have required the government to begin formal negotiations with the Chinese to end the practice.

"The administration has ducked a chance to aggressively pursue China within the full force of U.S. law," Johnson said. "This 'soft-stick approach' will ring hollow with manufacturing workers whose jobs are being shipped to China on a daily basis."

Ross gets approval
to buy Burlington

Nov. 11, 2003

Gorga

NEW YORK - WL Ross & Co. LLC, headed by Wilbur L. Ross, announced Oct. 22 that creditors had voted overwhelmingly in favor of its purchase of Burlington Industries upon its reemergence from Chapter 11 reorganization, now targeted for Nov. 10.

Ross & Co. also announced that several senior managers, including Chairman and CEO George W. Henderson III, will be leaving the company to "pursue other opportunities."

The new management structure will consist of Ross as chairman and Joseph L. Gorga as president and CEO.

Also on Oct. 22, bankrupt Cone Mills Corporation announced that is board had formally approved a definitive buyout agreement with WL Ross & Co. Ross's $90 million bid sets a floor for other bids and is subject to higher or better offers, Cone said.

In a conference call with reporters, Ross would not say whether he plans to merge the two companies if he acquires Cone, but did say they have "logical synergies" that "would fit together."

In July, Ross agreed to buy Burlington for $620 million.

Other Burlington senior managers leaving the company include John D. Englar, senior vice president of Corporate Development and Law; Charles E. Peters Jr, senior vice president and CFO; Judith J. Altman, senior vice president of Global Operations Support and CIO; Robert A. Wicker, vice president and general counsel; and James M. Guin, vice president of Human Resources and Corporate Communications.

Ross also announced that Burlington's Nano-Tex LLC affiliate has now had its stain repellent, NANO-CARE®, accepted nationwide for pants and shirts by Gap and Old Navy Stores and by Brooks Brothers for a variety of programs, and NANO-DRY® enhanced fabrics adopted by Nike, Inc. for Tiger Woods golf pants.

He added that Burlington has entered into a new licensing arrangement with Kayser Roth Corporation, the leading U.S. producer of footwear for a series of new items under the Burlington B™ label.

"With these encouraging developments and under Joe Gorga's leadership, Burlington will enhance its already powerful brand name and will continue to develop textile applications for cutting edge technological innovations," Ross said. "He also will manage the operations to make the company more cost competitive."

Gorga, 51, joined Burlington last year as executive vice president of North American operations. Previously he had been general manager for the automotive and elastic fabrics businesses for Milliken and Company, as well as CEO of CMI Industries, Inc.

He has served previously as vice chairman of the American Textile Manufacturers Institute (ATMI) and chairman of the Northern (now National) Textile Association (NTA), where he currently serves as a director.

Gorga holds a B.S. degree in textile engineering from Philadelphia University and an M.S. in textile engineering from the Institute of Textile Technology in Charlottesville, VA.

"I am excited by the challenge of leading Burlington back to success," Gorga said. "Despite the fiercely competitive nature of the global textile industry, the Nano-Tex progress and Kayser Roth opportunity both suggest, positive momentum in that direction already is building."

With operations in the U.S., Mexico and India and a global manufacturing and product development network based in Hong Kong, Burlington Industries is one of the world's most diversified marketers and manufacturers of soft goods for apparel and interior furnishings.

Under the agreement with Cone, WL Ross & Co. will purchase substantially all of Cone's assets for $46 million in cash and the assumption of the company's outstanding debtor-in-possession loans and selected other liabilities. The agreement provides for a closing no later than December 31. WL Ross & Co. would receive a $1.8 million breakup fee if a higher bid for the company is accepted.

Brazil show billed as
hemisphere's largest; claim refuted

Nov. 11, 2003

Ricardo Haydu, director presidente of Revista Textil, addresses media.
Photo by Devin Steele

By Devin Steele

BIRMINGHAM, ENGLAND - During the International Exhibition of Textile Machinery (ITMA) here on Oct. 27, Brazilian organizers unveiled plans for a trade show in 2005 that they are billing as "the largest fair of textile machines of America."

Alcantara Machado and Revista Textil , planners of ITMEX-Americas, were caught off guard, however, during a press conference of worldwide textile journalists after a press release from co-sponsors of the American Textile Machinery Exhibition-International (ATME-I) had made the rounds that day.

In the release, the American Textile Machinery Association (ATMA) and Textile Hall Corporation (THC) declared that "interests in Brazil must cease and desist misleading the world textile community" with "exaggerated claims" of the show in Brazil being the largest in the Americas."

The U.S.-based groups instead touted their own shows - ATME-I 2004 in Greenville, SC, and successor event MegaTex 2006 in Atlanta - as being "the largest and the established textile machinery event of the Americas."

"The attraction of additional, concurrent affiliated events in 2006 will reduce in the Americas the need for more events and also will reduce costs to exhibitors and attendees," ATMA and THC said in the release. "To disrupt or attempt to fracture these exhibition developments for America's textiles is insensitive to the conditions and needs of the apparel and textile sectors of the Americas," they added.

Asked for a response to the release during a Q&A, Ricardo Haydu, director presidente of Revista Textil, said, "I have not seen the release so, therefore, I cannot comment on it." Later, he also refused comment after having read the release.

In response to a question, Haydu said ITMEX-Americas organizers had had collaborative discussions with CEMATEX, which runs the ITMA shows, and ATMA prior to the formation of the Brazil show. Harry W. Buzzerd Jr., management counsel of ATMA, denied such discussions occurred, saying that the Brazilian organizers had refused to respond to repeated requests to meet.

ITMEX-Americas, successor to the defunct Bitmex show, is scheduled for Feb. 21-25, 2005 in São Paulo. The last edition of Bitmex occurred in 2001, also in São Paulo, registering more than 480 exhibitors and drawing about 40,000 visitors, organizers said.

A consolidated ATME-I show is set to take place Sept. 13-17, 2004 in Greenville, SC. In 2006, ATME-I will co-locate with the Industrial Fabrics Association International (IFAI) Expo and the International Conference & Exhibition of the American Association of Textile Chemists & Colorists (AATCC) in Atlanta. That show will be called "MegaTex."

Freudenberg's Kehl
keynotes INTC event

Nov. 11, 2003

CARY, NC - More than 450 nonwovens industry professionals recently visited Baltimore for the annual international Nonwovens Technical Conference (INTC), making it the largest gathering of the industry's technical community of the year.

Hundreds of attendees were treated to four days of technical papers - including a keynote presentation by Freudenberg Nonwovens Managing Director Thomas Kehl - as well as networking opportunities with their colleagues among dozens of table-top displays from many of the industry's leading suppliers.

INTC is a joint technical conference co-sponsored by INDA, Association of the Nonwoven Fabrics Industry, and TAPPI, Technical Association of the Pulp and Paper Industry.

The 2003 version marked the expansion of the event three days to four and featured two new sessions on nanofibers and insulation.

"The INTC Committee, chaired by Tom Ryle of Clopay, discovered so many excellent papers on nonwovens technology that expanding the conference to a four-day format was the only solution," said Cos Camelio, technical director of INDA. Seventy technical papers were presented, Camelio said. added.

"INTC is truly a leading global technical conference for our industry and the ability of the INDA and TAPPI staffs and committees to work together to put on such an event is an indication of the vitality and spirit of technical cooperation in the nonwovens industry," he said.

In his keynote presentation, Kehl, based in Germany, praised events such as INTC in his speech entitled, "Speeding Up the Process from Development to Market."

"Conferences such as INTC are of paramount importance in this accelerated process of developing and marketing new nonwoven products," Kehl said.

Among other highlights was the presentation of a number of special awards from both TAPPI and INDA:

• INDA Lifetime Technical Achievement Award - D.K. Smith, Smith, Johnson & Associates;
• TAPPI Nonwovens Division Leadership & Service Award - TM Singh, TM Consulting;
• TAPPI Nonwovens Division Technical Award and Mark Hollingsworth Prize - Ricardo Herrera, retired; and
• TAPPI Nonwovens Division Outgoing Chairperson Award - Peter Wallace, Borden Chemical.

In addition, the Best Paper Awards from INTC 2002 were presented to:

• James Barry, Creare, Inc., "Computational Modeling of Protective Clothing";
• Behnam Pourdeyhimi, Nonwovens Cooperative Research Center, North Carolina State University, "In-Plane Liquid Distribution in Nonwoven Fabrics";
• Randall Bresee, University of Tennessee, "Fiber Formation During Meltblowing"; and
• Stephen Michielsen, Georgia Institute of Technology, "Surface Modification of Fibers via Graft-Site Amplifying Polymers."

Editorial

Nov. 11, 2003

Firing squads unrelenting

NUMB. CALLOUS. JADED.

Call it what you like, but that anesthetized feeling we experience every time news of another textile plant closing or another mass layoff crosses the desk is hard to shake - even for news personnel trained to grow a thick outer shell. We do our best to remain sensitive to the harsh realities of the world of global business, but maintaining an empathetic facade is becoming next to impossible when the machine-gun-pace pelting begins to penetrate. And lately, the bad news rat-tat-tat has picked up to an almost melodic, hypnotic tempo, lulling us into a state of listlessness. It's like white noise in the background that, were it to stop, it would be difficult to concentrate.

Truth be told, though, we just want that sound to go away. As much as any of you, we want this industry to turn the corner. We want to report record-breaking sales, modernization projects, staff hirings, groundbreaking ceremonies (in the U.S.!), et al. For all of our sakes, we want, if not a return to the "good ol' days," at least lasting vestiges of better times.

BUT ARE WE just fooling ourselves? What we may be witnessing is a case of Dead Industry Walking. After all, speaker after speaker keeps telling us that those glory days are over, that those jobs will never return to America. You want to talk "numb?" With so much bad news, that's how we're beginning to feel regarding the whole situation. Indeed, our boundless optimism is being tested to the max, naysayers be damned.

Still, we empathize with your plight. We see the hurt in your eyes after you are forced to tell loyal employees that their services are no longer needed. We could certainly sense the pain in Dan S. LaFar III's eyes as he shook hands with a soon-to-be-displaced Bowling Green Spinning Co. employee on a local TV news segment recently. But while stepping in your emotional footsteps, we try our best to remain positive, to maintain hope that things will change.

That said, it's imperative that you keep your eyes on the ball. The future is there to be had, but only if you continue to work together, to put up a united front against those forces that are even more jaded to your suffering.

You are shaken, but not broken.

NO DOUBT, we have seen movement to mobilize in this industry in recent months. We have witnessed better involvement by affected companies and industry leaders. And we have seen apathy turn to action and patience turn to ire.

Yet, the bloodletting continues, its pace quickening, through no fault of your own. What is so frustrating is that the powers that control your destiny - the U.S. government - seem impervious to your predicament. Sure, there's been a lot of talk, but few results. It's equally frustrating that this rapid razing of a once-proud industry could be avoided, if those trump card-holders would let it. This industry erosion certainly isn't part of some sort of natural selection. That should be enough to keep you purpose driven through this hailstorm of negative dispatches that are dismantling your industry one piece at a time.

November 17, the 60-day window for the U.S. government to approve or deny the industry's China safeguard petitions, looms large. Whether any action to stem the tide of Chinese imports in three textile/apparel categories is taken then should tell you plenty about where your future lies in the government's grand scheme.

Otherwise, we understand if you become numb, callous or jaded, too.

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