NY Times article this past Sunday mentions GMIL:
A Bet on Textiles, Despite the Doomsayers
By JANE TANNER
REENSBORO, N.C.
PINCHED by a retail sales slump, low-cost imports and the prospect that import quotas will be lifted at the end of next year, the dwindling number of American textile and clothes makers could easily be written off as another dinosaur industry waiting to die.
But the domestic textile industry's demise may be exaggerated. Certainly, Asian and Latin American suppliers of clothing have trounced domestic apparel makers in all but a few niches. On the other hand, many American textile makers, with their technologically sophisticated factories, innovative fabrics and robust operations outside of garments, have staying power.
Advertisement
A few investors are singling out winners from losers and are moving in despite the doom and gloom. Sometimes, investors have offered to buy uncompetitive giants just for their specialty products units.
Warren E. Buffett, the investor behind Berkshire Hathaway, recently offered to pay $579 million for Burlington Industries, which is reorganizing under Chapter 11 of the bankruptcy code. Burlington's chief attractions are divisions that make carpets and highly engineered fabric finish that resists stains.
A judge rejected Berkshire's offer, in part because Mr. Buffett had asked to be paid $14 million if the deal fell apart after his bid was accepted. But Berkshire is likely to be among the bidders again when Burlington, based in Greensboro, goes on the block this summer, analysts and others said.
Early last year, Berkshire completed a $2.1 billion purchase of the world's largest residential carpet maker, Shaw Industries of Dalton, Ga. Last spring, Berkshire took over Fruit of the Loom, which was in bankruptcy, for $835 million.
Mr. Buffett is not the only bullish investor. Heartland Industrial Partners, a private equity firm based in Bloomfield Hills, Mich., and run by David A. Stockman, a budget director in the Reagan administration, put up $225 million a year and a half ago for 44 percent of Springs Industries of Fort Mill, S.C. The founding Close family holds the other 56 percent of the company, which makes bed and bath linens and window dressings under labels like Springmaid and Wamsutta.
Heartland Industrial focuses on undervalued American manufacturers that it considers to be in industries ripe for consolidation. Springs has been buying up weaker rivals for the last 18 months, including the window and bedding division of Burlington. Last week, Springs bought one of the world's largest blanket makers, Charles D. Owen Manufacturing of Swannanoa, N.C., and is expected to pursue Pillowtex of Kannapolis, N.C., whose brands include Cannon and Fieldcrest.
"There are a lot of companies who are not rolling over and playing dead," said A. Blanton Godfrey, dean of the College of Textiles at North Carolina State University.
An industry shakeout peaked in 2001, when 116 American textile plants closed, wiping out 67,000 jobs, about 13 percent of the sector's work force, according to the American Textile Manufacturers Institute. In five months starting in November 2001, at least five major companies filed for bankruptcy: — Burlington; Malden Mills Industries of Lawrence, Mass.; CMI Industries of Columbia, S.C.; Guilford Mills of Greensboro; and Galey & Lord of New York.
Burlington expects to emerge from Chapter 11 protection after it is auctioned off on July 21. Creditors led by G.E. Capital took over Malden Mills in March; the chairman, Aaron M. Feuerstein, said he hoped to raise $92 million to regain control of the company, which makes the Polartec clothes brand.
CMI is liquidating its woven and elasticized fabrics operations. Guilford Mills jettisoned all apparel plants and emerged last fall as an automotive upholstery maker owned by its senior lenders. Citigroup Venture Capital now owns 47 percent of Galey & Lord, a leading maker of corduroy, denim and other fabrics that continues to operate under Chapter 11 bankruptcy protection.
Skeptics say textile and apparel makers may stagger on until the start of 2005, when international trade agreements are scheduled to eliminate all import quotas, opening the way for even more inexpensive imports. Many say they expect China to swallow the domestic industry whole.
But David Weil, an economist and researcher with the Center for Textile and Apparel Research at Harvard, rejects that conclusion. "So many people are acting like everything that has not yet gone to China will the minute the quota protection comes off," he said. "We continue to find this an implausible reading of what is going on."
The future is more nuanced, Mr. Weil said: Some segments will depart the United States on one-way tickets. Many will rely on a mix of domestic and international sources. And some innovations will play out their initial stages on American soil.
Part of Burlington's appeal, for example, is its 51 percent stake in Nano-Tex, a company in Emeryville, Calif., that has developed a fabric finish that repels water and stains. Burlington sells the process to Eddie Bauer, Lands' End, Levi Strauss and the Gap, among others. Simmons applies the finish to children's bedding.
Burlington expects to take Nano-Tex public before long, said Reneé DeLack Hultin, who is in charge of business development at Nano-Tex.
Other so-called smart fabrics are heading for the market. Among them, according to the trade journal Textile News, are car seats to wake up drowsy drivers, bed sheets that monitor health, and cold-weather vests with emergency beacons that trigger if a wearer is suffering from exposure. |
