Sales Plummet; Companies Close
Jim Phillips, Contributing Editor
"We were happy with what we had for most of 2008," said one spinner. "We have worked for a long time to get into markets where we had a competitive advantage. Things were going well - not great - and then, the bottom fell out. Everybody just quit buying."
For some, the collapse in sales during the fourth quarter was just too much. R.L. Stowe Mills, for example, announced in January that it would cease operations in March, ending more than 100 years of continuous production.
"The signs of a recession appeared for us when we didn't get the spike in sales we would normally expect for the holiday season," a spinner noted. "Retailers stopped replenishing inventory, and they aren't buying anything now they absolutely don't have to. We had hoped to see a little bit of a surge early in the year as stores restocked, but it hasn't happened - at least, not yet."
Current projections have the US economic recession lasting at least through most of 2009. In an industry that struggles to be competitive even in boom times, many likely will need to make hard decisions in the coming months.
In lean economic times, the first reaction for many companies is to make wholesale cuts, said an industry observer. "But knee-jerk reactions often cause more problems than they solve. For example, in cost-cutting mode, many companies begin by eliminating their higher-paid people. From a bottom line standpoint, that might make short-term sense. From a long-term competitive standpoint, it might be suicide. They need to be careful not to eliminate the technical expertise, product knowledge and institutional equity that made them successful to begin with. Otherwise, they may find that they save a few dollars in lean times but are completely unprepared to take advantage of the market surge that inevitably follows recession.
"Certainly, companies have to react and do whatever is necessary for survival," he continued. "But, as the old saying goes, don't throw the baby out with the bath water. When sales are hard to come by,
I think the first priority is to protect the core business and assets that will keep an enterprise solvent. Then, realize there are opportunities in bad times because so many other companies are cutting back. I often advise companies to be as aggressive as possible about earning new business. Market share you gain in bad times because others are cutting back in service is business likely to stay with you when an upturn comes."
Man-Made Fibers - Slow But Optimistic
For man-made fiber and yarn producers, business has been up and down for the last year.
"If you are still making the 1.5 x 1.5 fiber, it is going to be a struggle," said one executive. "Most of the customers have gone offshore. But there are plenty of opportunities still out there for niche markets."
Said one specialty manufacturer: "We cover a gamut of fibers, particularly those that are not made by other producers. We make fibers with different additives. We make colored fibers and eco-friendly fibers. We do solution-dyed fibers that go into things like Under Armour® shirts. We make fibers that go into heather blends. All of these have been going well."
Like the rest of the industry, the man-made fiber business took a hit during the fourth quarter, he said. "We noticed orders slowing late in the year. But, we don't have many big customers. We have a lot of small and medium-sized customers. And we've been able to move along with those.
"We expect apparel and automotive to be down for most of the year. But we have opportunities in such areas as government contracts. We're going to focus on the part of our business that does best for the next three to six months and wait for the others to upturn again. I think we will see that by the end of the year."
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