TEXTILES/APPAREL: Suffering the death of thousands cut

To contact us Click HERE

Sharing lunch withthe dozen Cone Mills Corp. retirees who meet at the Golden Corral restaurant onLawndale Drive in Greensboro each month isn't a good idea for industryexecutives suffering from more bad news than they can stomach. "The futureof textile companies looks very, very bleak," says Ben Thrift, a ConeMills retiree. Another, James Patton, ad ds, "A few years from now, whenall the trade barriers come down, it is going to get tougher."
North Carolinatextile and apparel makers are scrambling to compete with cheap Asian importsby eliminating jobs, closing unprofitable factories and opening plants inMexico. "They are unfortunately having to move a lot of the production outof North Carolina," says former N.C. Commerce Secretary Rick Carlisle.Through the first quarter of 2000, textile and apparel employment stood at183,077, down 5.8% from the previous year.
In December, theHarnett County town of Erwin lost its nickname as "The World's DenimCapital" 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 andBurlington Industries Inc., Galey & Lord is expanding in Mexico to takeadvantage of cheap labor.
The North AmericanFree Trade Agreement, enacted seven years ago, has been a boon to trade, but ithasn't pulled the domestic textile industry from its prolonged slump. In fact,elimination of quotas and duties has encouraged Mexican companies to set upfabric mills, contributing to a surplus that makes it harder for U.S.manufacturers to compete, says Fernando Silva, managing partner at Kurt SalmonAssociates, an Atlanta-based consulting firm.
Consider denim.Mexico's annual production capacity has grown from 150 million yards beforeNAFTA to more than 450 million, and global oversupply has depressed wholesaleprices. Denim sells for about $2.20 a yard, down 27% from four years ago.
"Either weplay the game by looking at the most cost-effective way of production, or we goout of business," says Cone CEO John Bakane. For Cone, that meansinvesting an additional $108 million in Mexico by year end even as it closesTar Heel plants and cuts its domestic work force. It let 200 employees go as itclosed 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 deParras, Mexico's largest denim producer. Cone still makes denim in Greensboro -1,300 work in a 95-year-old factory.
Burlington closedits Mooresville denim mill two years ago in a restructuring that shed 2,900jobs, 17% of the work force. "To build in Mexico, we had to close onedomestic plant," says Ken Kunberger, executive vice president for casualwear. "Why increase total capacity when there is more denim in the world thancan 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, PresidentDouglas McGregor says. Still, it expects more losses on top of $523.7 millionin red ink last year. Global competition will only get tougher as quotas phaseout by 2005. The new U.S.Caribbean Basin Trade Enhancement Act, which easesquotas and cuts duties on garments produced from American-made cloth, couldboost sales - but raises odds foreign-owned companies will set up knittingmills there, Silva says.
That could hurtbattered Guilford Mills Inc., a major knitter. Last year, it announced 1,000layoffs and closed a Greensboro apparelfabrics mill. It plans to close anotherin March. Guilford employs 600 in Greensboro, making auto f home furnishingsand lingerie fabric. It will start making the latter in a Mexican factory thisyear.
The shift toMexico has left pieces to pick over. Lured by $200,000 in incentives,Montreal-based Gildan Activewear Inc. has reopened a closed Eden knittingplant. The T-shirt and sweatshirt maker pledged to employ 236 by next year. Italso agreed to buy $60 million a year in cotton yarn from Sanford-basedFrontier Spinning Mills Inc.'s Mayodan plant, where 500 work.
Greensboro-basedVF Corp., the world's largest apparel maker, will close unprofitableoperations, including a 220-employee Reidsville distribution center. VF hasagreed to pay $16 million for Cone's former headquarters and will move in nextyear.