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ATMI Evolution

Incoming President Chuck Hayes: Free-Trade Champion

Jim Phillips

  Incoming President Chuck Hayes vows to make ATMI a free-trade advocate. Chuck Hayes is a man leading transition within both his company and the trade association he is poised to head. Greensboro, N.C.-based Guilford Mills, the billion-dollar company he built from a one-plant operation to rank among the worlds great knitters, is in the midst of repositioning itself according to the demands of a global marketplace that values responsiveness more than quantity. Two plants that were for years the backbone of Guilford Mills are in the process of shutting down. More than 1,000 people in Greensboro, many of whom have dedicated their entire adult lives to the profitability of Guilford Mills, have been told they will no longer have jobs. Hayes feels the weight of each one of these people on his massive shoulders as he hobbles around his office, his foot still bandaged from recent surgery. Its the hardest thing Ive ever done, he said about the ordeal of announcing the plant closings to the employees. These people are like family to me, and Greensboro is my home. Its just terrible. 

As terrible and painful as it is, Hayes is a realist. The two plants in Greensboro were tooled for mass production of commodity fabrics. Guilford spent millions of dollars trying to save the plants, but the company eventually realized that the short, customer-responsive production runs necessary for profitability were just counter to the 40-year-old culture that had been established at the older facilities. So, before too long, they will join a growing list of various textile plants throughout the United States that, ultimately, just couldnt keep up with the times.Hayes, however, is adamant fist-pounding adamant that the remainder of Guilford Mills and the rest of the U.S. textile/apparel complex will not suffer the same fate. Later this month, at the organizations annual meeting in Washington, he will become president of the American Textile Manufacturers Institute (ATMI), the first knitter in history to be elevated to such a position. Telling It Like It IsHayes is a flamboyant figure large, boisterous and physically imposing. He is Sinatra in the textile industrys version of the Brat Pack. If he has something to say, he is going to say it clearly and with no punches pulled. He is a man who has clearly defined the challenges that confront his industry, and he is positioning himself to lead the industry through the beginnings of what promises to be a dynamic transformation. The only real question is whether the industry is prepared to follow where Hayes leads.Hayes sees himself as the catalyst who will transform ATMI from an organization steeped in protectionism to one that espouses and embraces free trade. He seeks to bring all elements of the textile/apparel complex together with a strong, unified voice. And he is determined to return the destiny of ATMI to the hands of its membership.ATMI is evolving, and it is going through tremendous changes, he said. These changes are needed and they are called for. We have to adjust ourselves to the 21st century and to identify who we really are and what role we play in representing our industry as its number-one advocate.Hayes, who is bringing a term as first vice president of ATMI to a close, is perhaps in a better position than many to objectively judge what that role should be. Guilford Mills is not a long-time member of ATMI. It wasnt until the North American Free Trade Agreement (NAFTA) negotiations were underway that Hayes felt compelled to cast his lot with the trade organization. It wasnt until then that I realized the impact ATMI could have on the industry. I realized that ATMI was one of the best-kept secrets of the decade. Thats going to change. People are going to know of the impact of this organization, of what it can do when it represents a united industry.ATMI has been a force in the industry since its inception shortly after World War II, he said, but the focus has always surrounded the major corporations. Its never evolved downward to the smaller corporations, to the heart and soul of the textile industry the medium and small-sized companies. Working For The Greater GoodIts time that members of all sizes begin looking upon ATMI for the impact it can have for the total industry not just the giants. I believe whats good for the industry is good for each of our individual companies. We must not put what is good for individual companies above what is good for the industry as a whole. Thats the creed with which I take on the presidency of ATMI.As you well know, from the mid-1980s on, ATMI worked diligently to protect the textile industry and the loss of jobs. We got through Congress three major bills (protecting the U.S. industry from inexpensive foreign imports) and the respective Presidents vetoed all three. We had a lot of clout on The Hill, but we never had the clout where it really counted, with the President who had the veto power. At that time, I dont know that anybody in ATMI realized that the whole world was starting to move towards free trade. The effort of protecting the textile industry, while looking great in the congressional voting districts, was not really what the elected officials wanted to have for the future of our country. They wanted free trade. They saw the benefits of free trade. Through all those protectionist deals, where we had busloads of people going to Washington and every other doggone function imaginable, we had the great feeling of winning, of turning out en masse to battle for the survival of the textile industry. But underneath it all, we were beaten every damned time we made a move.The constant defeats left a bitter taste in ATMIs collective mouth and engendered the first major division among the ranks, Hayes said. People like Mr. (Roger) Milliken, who is both a great protectionist and a great leader, stayed the course, while others of us felt the best direction was to join the free-trade philosophies that had been proposed by the executive branch of government. We were obviously unable to deter the respective administrations from their course of free trade, so we felt we would be in a better position to serve the interests of the industry by joining that movement rather than continuing to fight it. The Tide TurnsThe advent of NAFTA in the early 1990s was the beginning of the turning point for ATMI, he said. NAFTA was truly the first free-trade agreement that benefited us in the textile industry. It was clear and simple. It was cheap labor in Asia versus cheap labor in Mexico and not for the production of yarn or fabrics. Everyone seems to make such a big deal out of labor costs in yarn and fabric production, but, in reality, labor only accounts for 10 percent or less of the total cost. Whether youre paying $2 per hour or $20 per hour, it is insignificant in the grand scheme of things. Where we were really losing our base was in the manufacturing of the garments, where 30 percent or more is in labor. So there it became extremely significant what you were paying. Therefore, we were losing all the cut-and-sew business to the Far East as fast as it could get out of here. It became as obvious as the day is long that, if we in the fabric and yarn business were ever going to exist here, we had to save the cut-and-sew business.So, at the behest of ATMI, representatives from those countries interested in participating in NAFTA began meeting in private, away from the prying eyes of the media and the controlling hand of government. People from Canada, the United States, and Mexico came together, he said, in a spirit of cooperation heretofore unseen. 
The Secretary of Commerce told me the textile part of NAFTA was anticipated to be the toughest to negotiate, but it turned out the be the easiest and served as the model from which the rest of NAFTA the automotive industry, the steel industry, the telecom industry was built.The ease with which the textile segment of NAFTA was negotiated convinced Hayes that ATMI could, indeed, be a forceful and effective advocate for the industry if its energies were properly channeled. That was really the beginning, the very beginning, of ATMIs role as an advocate for free trade in the Americas.Hayes continued: Out of this has come the development of what, essentially, will become the three trade blocs of the world: the Asian bloc, the European bloc and the bloc that comprises the Western Hemisphere. I am totally in favor of free trade among these blocs. This will become an increasingly important political issue over the next five years. The unions and the remnants of protectionism will make up one faction in this issue and those of us who believe in free trade for the world will make up the other.There are those, however, who would point out that the benefits of NAFTA and other trade agreements supported by ATMI are not as real as figures released by ATMI and the U.S. Department of Commerce would indicate. The textile elements of NAFTA were intended, in part, to provide a North American outlet for U.S.-made fabric. In 1995, for example, 90 percent of apparel produced in Mexico was made from U.S. fabric. By 2000, that figure had dropped to approximately 60 percent. In Caribbean nations, use of U.S. fabric peaked in 1997 and has been spiraling downward since. NAFTA and Caribbean Basin Initiative (CBI) critics claim that these trade agreements have resulted in increased foreign fabric production capacity to the detriment of the U.S. industry. The final result, said one observer who requested anonymity, is that less and less American fabric is being used in Mexico each day and even less in the Caribbean. Domestic fabric production has remained stagnant. The only reason it looked as if there was an increase is because a substantial amount of fabric has been attributed to U.S. production merely because it was cut here. A Focus EvolvesThe real issue, regardless of which side is right, is how the industrys premier trade association will play the role of aggressive advocate in a new climate of change and compromise. Among the challenges the organization faces is one with which almost every CEO in America has been confronted: how to become more effective with less money, especially after the departure of Milliken and several other marquee names. Milliken left ATMI several months ago under conditions that are not completely clear. ATMIs position is that the organization and Milliken had divergent views about the agenda ATMI should pursue. Others have stated that the company believed the ATMI staff did not aggressively and efficiently pursue the agenda and policy decisions established by the ATMI Board of Directors. The bottom line for ATMI, however, is a decrease in financial resources.ATMI has, historically, had a very large budget. Mr. Milliken was a prime player in that budget. He decided that his philosophies and those of ATMI were not the same. In life we have choice. Thats what makes us a great democracy. The choice of ATMI differed from that of Mr. Milliken. We chose to take a middle-of-the-road path that would advocate free trade on a level playing field with our competition in other countries. Knowing that the WTO is going to take all quotas off in 2005, we chose to concentrate our efforts on maintaining what we have left and that is tariffs. There has to be preservation of tariffs in 2005 in order to be fair and to prevent the ruination of the textile industry as we see it today. Over a period of time, they, too, may diminish, but not today. We have to fight for this. So ATMI now takes on a whole new theme, a whole new mission statement. We no longer fight against free trade; free trade is here. But what do we do to preserve the industry that we so well cherish here in the United StatesIts not a case, necessarily, of enacting new laws or agreements, said Hayes, but of enforcing the ones already in place. The laws are written. We have to make sure they are enforced. Were not going to get the WTO repealed. Were not going to have protectionism. We dont have a single thing like that anymore. So we must make the best use of those tools we do have to ensure a level playing field for all competitors.To make this field as level as possible, all aspects of the textile/apparel complex must work together. To facilitate this, the direction and stance of the major trade organizations have to be determined by the Board of Directors and the memberships of the respective organizations. There have been too many instances in the past where the staffs of the trade organizations have been empowered to make too many autonomous decisions actions that have, in fact, been detrimental to the industry as a whole. Those of us who run companies must determine the conditions under which we run our businesses, not the execs of the trade organizations. They are there to follow the directions and the mandates provided by the Boards of Directors of their respective organizations. Period. Different TangentsAs an example, Hayes pointed in particular to the position of the yarn spinners with respect to CBI, in which the organization proposes moving knitting, dyeing and finishing operations offshore. He said much of the disagreement between ATMI and the American Yarn Spinners Association (AYSA) was created by trade organization staff members acting without sufficient input from their respective leaderships.The knitters, the dyers, the finishers in the United States were their customers, Hayes said, pounding his fist on his desk for emphasis. What in heavens name were they thinking CBI is much needed. Every organization in the United States related to textiles needed to pass a good CBI bill, one that would be fair to all parties involved and would allow garment manufacturing to come back into the Western Hemisphere. But, at the same time, we needed an avenue through which we could, to some extent, preserve the knitting, dyeing and finishing of cotton fabrics here in the United States. That was the mission. 
But heres what took place, and it was a horrible thing. And to this day, I really havent been able to get to the bottom of where it happened. But all of a sudden, this great unity for which we had strived so hard began to fall apart. AYSA decided that they needed to protect the spinning industry. They embarked upon a lobbying effort to convince legislators that knitting, dyeing and finishing should all be done in the Caribbean. There were a lot of internal debates between factions within ATMI and AYSA. There were numerous discussions. Some took place between the staff executives of the two organizations and did not always include, I believe, the input of the managements of those respective organizations. As a result, we both went off on different tangents. Why not have a phase-in, of having this happen over a period of five years or so This became a tremendous argument. During these discussions and I was very much a part of those discussions we came upon a compromise. Certain goods should be knitted in the Caribbean and should be finished in the Caribbean. That was all right with me. It would still allow us to dye and finish here in the United States, ship to the Caribbean and still enjoy duty-free treatment.As well, he said, it would give the Caribbean nations the opportunity to create the infrastructure to do the knitting, dyeing and finishing of all the products that were going to be produced in the Caribbean. We fought hard for the compromise. This compromise was printed in the bill and we all shook hands. Unbeknownst to me, it was not but a few days before AYSA went back to the Hill and demanded that all knitting, dyeing and finishing be done in the Caribbean and, in essence, negated an agreement that we thought we could take before Congress and get passed into legislation. Suddenly, where we had once had unity, we had divergence. Where we had compromise, we had disagreement. The only thing accomplished was that it took away the effectiveness of ATMI and AYSA. Instead of projecting unity, we looked like a couple of squabbling kids. We cant even get to first base because people in our industry forgot the basic tenet that what is good for the industry is good for the individual segments and companies. Give And TakePeople have to realize that nothing is going to be just one way any longer. You have to give and take. Compromise. Compromise. Compromise. We are totally into a world market and not the individualistic marketplace we had for 50 years. If we cant compromise and work together, we wont survive.Somehow, some way, we must have unity. We are working hard to build a new textile alliance, which is made up of 14 different organizations, including KTA (Knitted Textile Association), AYSA, ATMI, state associations, distributors and others. The purpose is to prevent any further deviation from what we all agree on. Right now is a crucial point in which the whole textile industry must develop as one. When youve got China and WTO coming on board like a steamroller, we must act in a unified way. We must stay together and act in what is the collective best interests of the entire industry in our hemisphere.It is my dream that this alliance will somehow come together and form a new organization it doesnt have to be called ATMI so that we could have a much better, more cohesive and united voice for all of the textile industry.In other issues, Hayes decried the attempts by the Clinton administration to further open U.S. markets to goods from developing Asian countries. In some ways, it seems the textile industry is just a pawn for the government. The United States was built on the textile industry, and now it seems were trying to build other third-world countries in the same way often to the detriment of our own industry.As far as the status of the textile industry in the United States, Hayes cautions the naysayers who predict its impending demise to take heed. The U.S. textile industry is the most productive, most innovative and most responsive in the world. No doubt we need to change the way we do business. In fact, were already doing that. With our partners in Canada, Mexico, Central America, the Caribbean and South America, we will continue to be a vital and dynamic part of the worlds production of fabrics and garments.Charles A. Hayes was born December 19, 1934, in Gloversville, N.Y. His various achievements include being named the 1984 Textile Man of the Year, Psi Psi Fraternity, North Carolina State University. In addition, he has won numerous distinguished service awards from the University of North Carolina at Greensboro, the Greensboro Chamber of Commerce and the United States-Mexico Chamber of Commerce. He is a past president of the North Carolina Textile Manufacturers Association. Editors Note: Charles A. Hayes, chairman of Guilford Mills in Greensboro, N.C., ascends to the presidency of the American Textile Manufacturers Institute (ATMI) at that organizations annual meeting in Washington later this month. In January, Hayes, recovering from foot surgery, sat down with ATI Executive Editor Jim Phillips to discuss his agenda for the coming year, his viewpoints about the overall effectiveness of ATMI and other trade organizations, and the direction of the textile industry as a whole.

March 2001