U.S. Plant Layoffs Continue into 2008

New York — U.S. home textiles manufacturing will continue to consolidate and migrate offshore well into 2008, in much the same way it ended 2007.

The nation's two largest mills — Springs Global and WestPoint Home — have already notified government officials of their intent to close several plants in Alabama, idling nearly 1,200 workers.

In late December, Springs laid off several dozen white-collar sales and support staff, mostly from its Fort Mill, S.C., locations, formerly at the fulcrum of the company's operations. Fewer than 40 workers were involved, according to one person familiar with the situation.

Springs and WestPoint also issued 60-day WARN Act notifications to Alabama's Office of Workforce Development, disclosing its intentions to shut down three plants. The WARN Act — an acronym for Worker Adjustment and Retraining Notification — is a federal law requiring companies with more than 100 workers to notify state officials of planned layoffs a minimum of 60 days in advance, with some exceptions.

WestPoint will lay off 850 workers when it closes two plants in Valley, Ala., near the Georgia border. Springs will eliminate 325 jobs when it closes a yarn plant in Piedmont.

Earlier in December, yarn-maker Wellstone Mills closed its plant in Eufaula, costing 117 jobs. That came on the heels of a plant closing last summer where it eliminated another 125 jobs in the state.

At Springs Global, now firmly under the control and management of Brazil-based Coteminas, the layoffs and pending plant closings appear consistent with the company's stated plans to further consolidate many operations in its Sao Paulo headquarters.

Company officials in Brazil said last fall, for example, that it would probably make sense to consolidate some IT and accounting functions.

Speaking to HTT, Tom O'Connor, evp and president of sales and marketing for Springs U.S., declined to specify the number involved in December's white-collar reduction, but said, "We're continuing to focus on our three core businesses — bed, bath and basic — focusing on our brands and those key customers. We've realigned, we've made some changes and made some significant reductions."

"But if we had only one reduction, that would be significant," O'Connor stressed. "Even one person would be significant to me."

In recent weeks the company has also closed many of its outlet stores as it continues to refocus its business. Company ceo Josue Gomes da Silva said he expects Springs to return to profitability in the first quarter of 2008, following the shift of all major production out of the United States to Brazil, Argentina and Mexico. The company is also exploring a manufacturing footprint in Asia, including possibly Vietnam, as well as a deal in Europe.

During the third quarter of 2007, Springs reported a net loss of $55.1 million, more than double the loss in the year-ago period, on revenue of $477.1 million, which was off 25.6% (on a constant basis, net of currency fluctuations) — the result of the transition from U.S. production and disruption caused by the physical moves of equipment.

The nation's No. 2 legacy mill, WestPoint, controlled by activist investor Carl Icahn, reported a third-quarter operating loss of $36.8 million on volume of $183.4 million, a 22.3% sales decline from the year-ago period.