TEXTILES/APPAREL: Suffering the death of thousands cut
Sharing lunch with the dozen Cone Mills Corp. retirees who meet at the Golden Corral restaurant on Lawndale Drive in Greensboro each month isn’t a good idea for industry executives suffering from more bad news than they can stomach. “The future of textile companies looks very, very bleak,” says Ben Thrift, a Cone Mills retiree. Another, James Patton, ad ds, “A few years from now, when all the trade barriers come down, it is going to get tougher.”
North Carolina textile and apparel makers are scrambling to compete with cheap Asian imports by eliminating jobs, closing unprofitable factories and opening plants in Mexico. “They are unfortunately having to move a lot of the production out of North Carolina,” says former N.C. Commerce Secretary Rick Carlisle. Through the first quarter of 2000, textile and apparel employment stood at 183,077, down 5.8% from the previous year.
In December, the Harnett County town of Erwin lost its nickname as “The World’s Denim Capital” after New Yorkbased Galey & Lord Inc. closed its denim mill, elimi nating 740 jobs. It moved some of the production to Hidalgo, Mexico, where it bought 50% of a denim factory. Like Greensboro-based Cone and Burlington Industries Inc., Galey & Lord is expanding in Mexico to take advantage of cheap labor.
The North American Free Trade Agreement, enacted seven years ago, has been a boon to trade, but it hasn’t pulled the domestic textile industry from its prolonged slump. In fact, elimination of quotas and duties has encouraged Mexican companies to set up fabric mills, contributing to a surplus that makes it harder for U.S. manufacturers to compete, says Fernando Silva, managing partner at Kurt Salmon Associates, an Atlanta-based consulting firm.
Consider denim. Mexico’s annual production capacity has grown from 150 million yards before NAFTA to more than 450 million, and global oversupply has depressed wholesale prices. Denim sells for about $2.20 a yard, down 27% from four years ago.
“Either we play the game by looking at the most cost-effective way of production, or we go out of business,” says Cone CEO John Bakane. For Cone, that means investing an additional $108 million in Mexico by year end even as it closes Tar Heel plants and cuts its domestic work force. It let 200 employees go as it closed a fabric-printing factory in Marion, S.C.
Cone is building a $90 million plant to make denim in Altamira, its second denim mill in Mexico. It’s spending $18 million to expand another it owns with Compania Industrial de Parras, Mexico’s largest denim producer. Cone still makes denim in Greensboro – 1,300 work in a 95-year-old factory.
Burlington closed its Mooresville denim mill two years ago in a restructuring that shed 2,900 jobs, 17% of the work force. “To build in Mexico, we had to close one domestic plant,” says Ken Kunberger, executive vice president for casual wear. “Why increase total capacity when there is more denim in the world than can be consumed?” Last fall, Burlington slashed 12,340 more jobs, including 130 in its headquarters.
This year, Burlington will focus on reducing debt and improving cash flow, President Douglas McGregor says. Still, it expects more losses on top of $523.7 million in red ink last year. Global competition will only get tougher as quotas phase out by 2005. The new U.S.Caribbean Basin Trade Enhancement Act, which eases quotas and cuts duties on garments produced from American-made cloth, could boost sales – but raises odds foreign-owned companies will set up knitting mills there, Silva says.
That could hurt battered Guilford Mills Inc., a major knitter. Last year, it announced 1,000 layoffs and closed a Greensboro apparelfabrics mill. It plans to close another in March. Guilford employs 600 in Greensboro, making auto f home furnishings and lingerie fabric. It will start making the latter in a Mexican factory this year.
The shift to Mexico has left pieces to pick over. Lured by $200,000 in incentives, Montreal-based Gildan Activewear Inc. has reopened a closed Eden knitting plant. The T-shirt and sweatshirt maker pledged to employ 236 by next year. It also agreed to buy $60 million a year in cotton yarn from Sanford-based Frontier Spinning Mills Inc.’s Mayodan plant, where 500 work.
Greensboro-based VF Corp., the world’s largest apparel maker, will close unprofitable operations, including a 220-employee Reidsville distribution center. VF has agreed to pay $16 million for Cone’s former headquarters and will move in next year.
Copyright Business-North Carolina Feb 01, 2001
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