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Carpet Bombing

June 12, 2008
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BusinessTN Magazine – June 2008 - In a conference call with analysts last October, Mohawk Industries CEO Jeff Lorberbaum described the economic horizon as if he were at the front of a roller coaster about to crest a steep incline. "We have a limited forward view," he explained.

It was downhill from there. In late 2007, carpeting's top three manufacturers, North Georgia-based Mohawk, Shaw and Beaulieu, idled 1,000 textile workers in five plants. So far this year, Mohawk has shuttered three mills in the Georgia towns of Dalton, Armuchee and Dahlonega.

When the housing market imploded, the shock waves hit fast and hard in the 65-mile radius around Dalton, "the carpet capital of the world," which supplies some 80% of the U.S. market. Jim Bethel, CEO of Dalton-based J&J Industries, says his company has been lucky-because construction slowdowns impact residential first, his small commercial carpeting operation has avoided whiplash, reassigning workers to prevent layoffs. Still, it's been a scary ride for everyone. Dan Frierson, CEO of The Dixie Group in nearby Chattanooga, says the downturn is the worst he's seen in 25 years. (Dixie was set to trim head count by 8% last month.)

But tenacity and flexibility are woven into the fabric of the carpet industry. Manufacturers have constantly maneuvered over the past two decades to secure a seat in an ongoing game of musical chairs. When foreign competition threatened textile suppliers, carpet companies vertically integrated, buying up the small yarn-spinning plants dotting North Georgia. When the American consumer shunned soft-surface flooring, its manufacturers diversified. Mohawk, especially, has stayed profitable by making carpeting a smaller piece of its flooring offerings and by buying into international markets. Its acquisitions of Dallas-based Dal-Tile in 2001 and Belgian laminate company Unilin in 2005 have buffered the blows of both shifting market trends and a domestic recession.

Smaller companies have stayed viable by narrowing their focus. Originally a supplier of yarns and textiles, Dixie sold 26 spinning mills to concentrate on luxury carpeting, a niche Frierson is confident the mass producers can't touch.

Industry experts anticipate an economic upturn by 2010, and carpet manufacturers look like they'll survive the ride. But the same may not be true for manufacturing jobs. Bethel suggests the recession has simply hastened a long-term trend of increased automation and streamlining that has helped the industry deflect foreign competition, but which has decreased exponentially the need for labor. "We've got to find something else to be the capital of, in addition to carpet," Bethel warns, "so we can employ the children of our workers."

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