Business: THE TEXTILE INDUSTRY

Caught Between Stagnation & Progress

The textile industry, one of the oldest in the U.S., is also one of the sickest. For many a company the depression started three years ago—and it has got steadily worse. As a result, a great wave of mergers is sweeping through the industry, bringing a realignment of some of the oldest textile mills. Burlington Mills spent $33 million to buy Pacific Mills and Goodall-Sanford (TIME, July 26). M. Lowenstein & Sons bought control of famed old Wamsutta Mills. Mergers are now pending between Botany Mills and Daroff & Sons, and between Textron Inc., American Woolen and Robbins Mills. The mergers are either to put money-losing companies on a better competitive footing or to make profitable companies stronger for further rough times ahead. But few textilemen believe that in bigness alone there is strength. The industry is hampered by too many other problems, such as overproduction, bad management and labor troubles.

The troubles began to crop up before World War II, when great technological advances in spindles and looms elbowed antiquated New England plants into obsolescence. In normal times these plants would have been forced to shut down. But World War II kept the demand climbing, and every plant hummed with war orders. At war’s end the pent-up demand from abroad brought a new flood of orders, and the Korean war also gave it a short-lived boost. Thus, for more than a decade, the demand for textiles has been artificially high.

Readjustment to a shrunken, peacetime market was further complicated by a drop in exports as war-torn nations got back in the markets again. Result: U.S. exports of cotton goods, which totaled 1.5 billion square yards in 1947, were down to 600 million square yards last year.

As in other industries, textilemen were faced with rising production costs. But their problem was worse. Featherbedding was suffocating the highly organized mills of New England. For example, some union contracts specified that a millhand could tend no more than six looms, even though workers in unorganized factories were tending 18 or more. Thus many of the high-cost New England plants became marginal producers, or lost money heavily. Instead of shutting down marginal mills as demand fell off, most of the industry kept them going, often at a loss, in a vague hope that business would improve.

Every problem in the factories was matched by problems or poor management in the executive offices. For example, American Woolen Co., which earned as much as $21 a share, paid out most of it in dividends, built up little reserve for modernizing equipment and building new plants. Furthermore, as synthetics became popular, some producers did almost no research on new weaves and styling to meet the new competition.

The great flight of mills from the North to the South (where only 15% of mills are unionized v. 75% in the North) saved many a faltering company. Not only were labor costs cheaper in the South, but the new mills were far more efficient. The South has other advantages, e.g., it is closer to such raw materials as cotton and cellulose, and taxes are lower. But concentration of the industry in new areas is creating new problems for textilemen. So many companies have gone South that rising wages in some areas are almost as high as in New England. The cost of building schools and streets for new mill communities is forcing taxes up.

Despite the closing of Northern mills, the industry is still saddled with too many antiquated, marginal mills. The Census Bureau’s 1950 count still showed more than 10,000 textile mills operating in the U.S., 73% of them with fewer than 100 employees each, compared to 6,400 mills in 1940.

Nevertheless, amid all the troubles, some companies are showing the way out. Deering, Milliken & Co., Inc. has pioneered in combining synthetic and natural fibers and has found profitable new markets. Cone Mills has profitably boosted denim for men’s suits, curtains, etc. For many other companies mergers are probably the answer. Although it was profitably producing synthetics. Burlington Mills bought up Goodall-Sanford and Pacific Mills to diversify its cotton-and wool-producing facilities, thus have a hedge against the ups and downs in both the synthetic and natural fiber markets. Despite their troubles, textilemen believe that long-range prospects are good, since per capita consumption of textiles in the U.S. has been steadily climbing for more than 30 years, and there is every indication the trend will continue. But production is still outstripping sales. Thus things will probably get worse for the marginal producers—who may be forced to merge, shut down plants or go out of business—before they get better for the entire industry.