Santa Didn't Deliver
James L. Lemons, Ph.D., Technical Editor
Strong consumer spending had offered some hope for the sluggish economy. However, consumers are preoccupied with the threat of war with Iraq and/or North Korea. The uncertainties in the economy have people worried about their jobs, as the unemployment rate climbed to an eight-year high of 6 percent. The Federal Funds rate now stands at 1.25 percent, leaving very little room for cuts to stimulate the economy.
The ball has been placed in Congress’ court to pass some type of economic stimulus package. President Bush unveiled his version, which emphasizes tax cuts and the elimination of the double taxation of corporate stock dividends. But most analysts don’t predict much improvement until September.
The stalled economy is certainly reflected in the current yarn market. As one spinner reported, “Our business has dropped off substantially in the past two months.” Despite fairly steady yarn prices, all the spinners contacted complained that margins are being squeezed even further as cotton prices and energy costs keep increasing.
New Business Models
A number of leaders in the sales yarn market feel now is the time for a more realistic look at their business. It requires a cold assessment to fully realize many firms are simply struggling for survival. Business decisions made in 2003 will affect a lot of communities where yarn manufacturing is the largest employer.
The time has come for old-line companies to embrace new business models that emphasize technology and niche markets. As one executive explained, “We simply grew too big and were too slow to adapt to changes in the market.”
A commercial loan officer at a large national bank indicated, “A lot of our textile customers continue to produce undifferentiated products. Their customers can’t distinguish one yarn from another except in price.”
Future survival strategies must incorporate new product development. One spinning executive said, “We tried to cut costs by eliminating R&D. In the long term, we now realize, research may be the key to our survival.” Another executive added, “We want to play to our strengths, which include knowledge of the markets and long-term relationships with our customers — however, product innovation has to be a part of our strategy.” One plant manager drove home the point by saying, “If we don’t change our way of doing business, lights-out-manufacturing is going to take on a new meaning.”
Unified Voice In Washington
A number of Southern congressional leaders who supported granting the Bush administration trade promotion authority now realize they have lost a lot of their leverage. They are faced with having to defend the administration’s proposal to the World Trade Organization that calls for the elimination of tariffs on imported textile products over the next 13 years. According to the American Textile Manufacturers Institute (ATMI), approximately 40 percent of all duties collected on foreign imports are from textiles and apparel.
For a number of years, leaders in the textile industry have pledged to speak with a unified voice in Washington. So far, there has been too much divergence to see this become a reality. Now may be the most critical time for action. Jim Chesnutt, president of the American Yarn Spinners Association (AYSA), has established unity as a central goal for AYSA during his tenure. Chesnutt has pledged that AYSA will bring to Washington a solid coalition that fairly represents the unique needs of the yarn manufacturers that serve the various segments of the industry.
Van May, chairman, ATMI, likewise has committed his organization to coming closer together. ATMI has done a commendable job of increasing the visibility of the textile industry at all levels in Washington. A united voice is the only way — the stakes are just too high this time!
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