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Sun, May 11, 2003 - Page 12 News List

Investors are betting on US textiles, despite all of the naysayers

Many analysts view US textile-manufacturing as a doomed trade due to cheap labor costs in China and elsewhere, but a few high-rollers are making a stand

NY TIMES NEWS SERVICE , GREENSBORO, NORTH CAROLINA

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 claims of 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.

A few investors are singling out winners from losers and are moving in despite the doom and gloom. Sometimes, investors have offered to buy struggling giants just for their specialty products units.

Warren Buffett, the investor behind Berkshire Hathaway, recently offered to pay US$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 fabric finish that resists stains.

A judge rejected Berkshire's offer, in part because Buffett had asked to be paid US$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 US$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 US$835 million.

Buffett is not the only bullish investor. Heartland Industrial Partners, a private equity firm based in Bloomfield Hills, Michigan, and run by David Stockman, a budget director in the Reagan administration, put up US$225 million a year and a half ago for 44 percent of Springs Industries of Fort Mill, South Carolina 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 in 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 Owen Manufacturing of Swannanoa, North Carolina, and is expected to pursue Pillowtex of Kannapolis, North Carolina, whose brands include Cannon and Fieldcrest.

"There are a lot of companies who are not rolling over and playing dead," said 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, or about 13 percent of the sector's work force, according to the American Textile Manufacturers Institute. In the five months starting in November 2001, at least five major companies filed for bankruptcy: Burlington; Malden Mills Industries of Lawrence, Massachusets; CMI Industries of Columbia, South Carolina; 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 Feuerstein, said he hoped to raise US$92 million to regain control of the company, which makes the Polartec clothes brand.

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