To many American textile executives, Leslie H. Wexner has long been Public Enemy No.1. His crime: building The Limited Inc. into one of the nation's top clothing chains by selling lots of goods imported from Hong Kong, Taiwan, and other low-wage countries.
The tension escalated to all-out warfare on Jan. 13, when Wexner, who is also chairman of the Retail Industry Trade Action Coalition (RITAC), used a retail convention speech to lambaste U.S. textile makers and call for the elimination of costly import tariffs and quotas. Wexner complained that U.S. mills simply don't offer the same quality, styling, or flexibility as offshore competitors. "The problem with U.S. textile mills," Wexner told BUSINESS WEEK, "is that they don't make what we want to buy."
Wexner's fighting words come at a vulnerable time for U.S. textile makers. While imports have risen to nearly 40% of U.S. textile and apparel consumption (chart), textile profits have plunged--from $1.9 billion in 1987 to $600 million last year. Meanwhile, during the past 11 years, more than 400,000 U.S. textile and apparel workers have lost their jobs, says the Bureau of Labor Statistics.
U.S. textile makers figure the worst may be yet to come, because of a government proposal to phase out textile quotas. "We've got the most modern technology in the world, but we're being clobbered by people like Wexner who import textiles and apparel," says Roger Milliken, chief executive of Milliken & Co., the country's largest mill.
MISSING LINK. To fight back, Milliken and other mill owners are pouring money into their Crafted with Pride in the USA Council Inc. Designed to encourage U.S. consumers to buy American-made clothing, the group's 500 members have spent $100 million on "Made in the USA" advertising and promotion. The council's most recent spot, aired just before Christmas, showed a long line of unemployed textile workers. Says Milliken: "We want consumers to understand the link between imports and lost jobs."
If the industry wants to save jobs, Wexner snaps, it should make products he can sell. Consider the case of the terry-cloth bathrobe. Wexner wanted a velour-type terry cloth to fill an order for The Limited's Victoria's Secret Stores division. He figured this would be a good chance to buy fabric from a U.S. mill, since many make terry cloth for towels. But none of the mills Wexner contacted make the cloth. Nor would any of them do a special run. Wexner is still looking for a source.
Donald G. Fisher, chief executive of The Gap Inc., echoes Wexner's gripe. He says he had to go to Korea to fill an order for sweatshirts when a U.S. manufacturer refused to make a 90% cotton blend. "The textile manufacturers in this country are an arrogant group of people who put a line together and say, `This is what we'll sell you,"' Fisher says.
Much of the problem lies in economies of scale. U.S. mills usually produce huge amounts of basic fabrics, such as denim and sheeting. It's easy for them to efficiently supply jeans manufacturers and such retailers as Wal-Mart Stores Inc., which relies on basics. But they often can't deliver small amounts of fashion fabrics profitably.
Textile executives say they're working to become more flexible and point to the $20 billion the industry has spent over 10 years to improve quality and productivity. And they say their mills are implementing quick-response and just-in-time manufacturing systems to quicken deliveries.
`FUZZY.' To bolster their arguments, U.S. mills are learning their way around Washington. Last year, the industry persuaded Congress to pass a bill that would have boosted textile and apparel quotas, which President Bush vetoed. This year, the American Textile Manufacturers Institute is lobbying actively against a General Agreement on Tariffs & Trade proposal to phase out the multifiber agreement--which governs most textile and apparel quotas.
The industry's new activism has left some textile makers disillusioned. Springs Industries Inc. in Fort Mill, S.C., known for its antiprotectionist stance, recently pulled out of the Crafted With Pride campaign. "The line of demarcation between Made in the USA promotion and import legislation promotion became a little fuzzy," says a spokesman. Greenwood Mills Inc. in Greenwood, S.C., also ended its membership. "We think our money is better spent improving quality for our customers," says President W. Matt Self.
Retailers are determined to fight the mills' protectionist efforts, couching their arguments as consumer advocacy. Wexner cites an Institute for International Economics study that says quotas and tariffs add an extra $558 to the average household's annual clothing bill. Retorts Milliken: "That's a figure he pulled out of the air."
The debate is bound to hit an even higher pitch as retailers and textile makers argue their way through the recession. But when all the shouting has died down, mill owners may find that the best way to fight imports is to give customers such as Wexner what they want.