Trouble With Plastic

he consumer has been the one bright spot in the shrinking economy. However, massive
layoffs and dealing with bulging credit card debt are beginning to have their effect. Mills were
producing against orders earlier this summer as a result of retailers replenishing inventories. Low
interest rates helped to spur consumer spending on new cars and homes. However, it seems the
consumer has been tapped out. Data released by the Department of Commerce indicate consumer
spending has taken a downturn. Even Wal-Mart has lowered its sales forecasts for the next quarter.

As a spinner explained, “Our business just hit a wall.” Another sales executive said, “There
is an awful lot of indecision. There is no clarity as to where our business is headed.” This
retreat by the consumer has affected all segments of manufacturing, as reflected by the decline in
the Purchasing Managers’ Index for the month of September.

Margins continue to be squeezed by retailers demanding deep price cuts that are ultimately
passed on to the spinner. As one textile executive said, “The American consumer wants cheap stuff
and they don’t care where it comes from.”

Several spinners reported they were not going to chase unprofitable business and planned to
trim some capacity in this quarter. A return to profitability does not seem to be in the cards
anytime soon for many spinners.

Report Receives Mixed Reviews

Secretary of Commerce Donald Evans just released a 20-page report to the Congressional
Textile Caucus detailing what the Bush administration has been doing to help the industry. The
report outlines efforts in a number of areas including trade agreements, market access and

Spinners gave this report very mixed reviews. The CEO of one company said, “They want a pat
on the back for enforcing the rules.” Another spinner complained, “The export markets that have
been closed to us are still closed.” Another contended, “This report is nothing but political — how
many mills have closed since they started the working group?”

Others were more optimistic. A vice president of manufacturing indicated, “At least this is
a beginning.” One executive said, “These commerce officials are meeting with us and listening to us
— a big improvement from past administrations.” One executive said, “This is a work in progress —
if we want to remain a priority, we’ve got to keep the pressure on them.” Good idea!

Politicians Invited To The Party

September and October have been busy months for textile trade and professional association
meetings. A number of these associations have striven to remain nonpolitical in nature. However, a
resounding theme at recent meetings includes inviting key politicians at the state and federal
levels to attend as special guests or featured speakers.

The industry has long recognized that a central cause of job losses and plant closings has
been international trade practices such as currency manipulation and transshipments. The message
seems to be reaching members of the legislature and administration that are in a position to help
the beleaguered industry.

For example, Grant Aldonas, undersecretary of commerce for international trade, was a
speaker at the annual meeting of the American Yarn Spinners Association (AYSA). Aldonas told AYSA
members the media has portrayed the textile industry as being practically dead. He said senior Bush
administration officials were shocked to learn textiles are still the largest employer in
manufacturing. Exposure to the leadership of the industry as a result of this type of meeting has
helped Aldonas and his agency realize the importance of textiles to the economy. Several spinners
in attendance said they were cautiously optimistic about the future support from the Bush
administration as a result of the opportunity to meet with Aldonas.

Many spinners said special attention should be given to members of state legislative
delegations at future textile association meetings. Textile-producing states are facing a severe
budget crisis. As a result, their legislatures will be looking for additional or new sources of
recurring revenue. These politicians must develop legislation to replenish depleted unemployment
insurance funds through additional payroll taxes.

As one spinner put it, “For the industry to be heard, now is the time to invite politicians
to the party!”

November 2002