Originally created 03/28/04

Samsons - A Textile Survivor



Burlington. Cone. Pillowtex. WestPoint Stevens.

Each textile operation is an industry casualty that Ric Lichtenberg recounts in a tone reminiscent of a funeral dirge. The names tell the story of a sector that's the dead man walking in American manufacturing.

In the current malaise, mere survival for Mr. Lichtenberg's family-owned curtain and drapes business, Samsons Manufacturing Co., may be lauded as a success. Not carrying any debt has helped the Waynesboro, Ga., manufacturer, as many peers have gone bankrupt because they couldn't make payments.

But steady profit and growth each year - in large part because of a close relationship with retailing giant Wal-Mart - points to a company that has made it big, the biggest of its kind, by going against the grain in the textile world.

When many in the industry flocked south of the border to get their garments cut and sewn by low-wage labor after a free trade pact a decade ago , Mr. Lichtenberg and his two cousins in New York, who co-own the company, kept their people in Georgia.

And when it's politically popular to bash China and the cheap goods it makes as anathema to American jobs, Samsons is poised to partner with a plant in Qingdao, between Beijing and Shanghai, half a world away from the facility it has run since 1965.

"This will give us more control over a product we're already importing. We won't be importing any more or less this way," he said.

Samsons' imports have swelled from next to nothing a decade ago to 70 percent today, with finished and unfinished products coming in from China, Turkey and France.

"Most of the mills we used to buy from in the U.S. no longer exist," said Mr. Lichtenberg, whose grandfather started Samsons' parent company, S. Lichtenberg & Co. Inc., 71 years ago.

Mr. Lichtenberg flatly denies rumors that the partnership is a first step to closing the facility and moving to China.

His workers' concerns wouldn't be unfounded at a time textile companies are hemorrhaging jobs and heading abroad. Case in point: More than half the 500,000 positions that existed when the North American Free Trade Agreement rolled out in 1994 have vanished. The lifting of textile quotas with China come Jan. 1 is expected to unleash a new wave of layoffs and closures.

The NAFTA pact that opened the Mexican and Canadian borders to unrestricted trade was hailed as an answer to China's growing market share in textiles and other labor-intensive industries. Makers of everything from sneakers to automotive upholstery saw a chance to compete. Makers of fabrics, yarn and polyester saw the pact leading to more customers to buy their raw materials.

MR. LICHTENBERG, HOWEVER, saw the beginning of the end.

He and other manufacturers moved to Southern states such as Georgia because of cheaper overheads and, he said, would move again for even cheaper locations if given the chance. After the cut-and-sew jobs were gone, others would follow and mark the domestic industry for death.

"Everything follows the needle trade," he said, explaining that his company withdrew from the Georgia Textile Manufacturers Association in protest when it backed NAFTA.

Industry figures show the devastation on the cut-and-sew sector when companies such as Grovetown's Augusta Sportswear shut plants and shifted jobs to Mexico. The association's latest statistics show the cut-and-sew industry employed 9,000 last year, down from 55,000 in 1994.

Lewis Gossett, the president of the South Carolina Manufacturing Association, said there are so few cut-and-sew jobs left in his state that his group stopped keeping track. Pandora's box opened wider when Asian countries such as China began manipulating exchange rates to make their exports cheaper. Compounding problems, China reportedly is propping up its textile companies with illegal subsidies and tax breaks.

"I don't blame Mr. Lichtenberg or any other businessman for doing what they have to do to stay in business," said Cass Johnson, trade specialist for the American Textile Manufacturers Institute, a Washington lobby group. "I blame a U.S. government policy that doesn't enforce the rules and forces them to do this."

The issue is sure to be a political hot potato during this election year, he said, with roughly 15 percent of the 2.8 million manufacturing jobs lost coming from textiles. In the Augusta area, plants owned by Alabama's Avondale Mills and the Spartanburg, S.C., Milliken & Co. together employ more than 3,500, accounting for the single biggest number of private-sector jobs.

"Even if China stops cheating on trade, textiles will still be a tough sector to compete in," said Lloyd Wood, a spokesman for the American Manufacturing Trade Action Committee in Washington. "Our government must decide how important manufacturing is and which sectors we must support to remain a world power."

While Samsons has weathered the turbulence, the manufacturer hasn't been immune to layoffs and closures. At its peak a little before the NAFTA pact, Lichtenberg & Co. had about 900 workers on payroll. Today's there's about half that, as new technology and global competition have forced it to be leaner.

Late last year, the company closed its Cadet Manufacturing plant in Louisville, Ga., which had been there since 1975. A little more than half its 140 employees were offered work in Waynesboro, while the rest were let go. Lichtenberg & Co. is also closing a distribution warehouse in California.

LICHTENBERG & CO.'S cozy relationship with retail juggernaut Wal-Mart also suggests that a move overseas isn't out of the question. Mr. Lichtenberg can't rule it out entirely.

In it's bid to spur on America's love affair with cheaper goods, Wal-Mart has been said to pressure its suppliers to cut costs by going abroad. The company accounts for about $1 of every $10 in items imported from China - the country with which the United States runs its biggest trade deficit.

Samsons not only sells to the Supercenter a few hundred yards away across the Waynesboro bypass but it also supplies the chain's more than 2,500 stores across the country - making it Wal-Mart's biggest supplier of curtains and drapes.

Wal-Mart is by far Samsons' biggest customer, though Mr. Lichtenberg wouldn't say how much of his business is tied to the company. The relationship goes deeper than a buyer/seller dynamic in that Lichtenberg & Co. has a contract to analyze and manage Wal-Mart's home furnishings division. Other customers include J.C. Penney, Kmart and Bed Bath & Beyond.

As a savvy businessman, Mr. Lichtenberg is well aware that he can stretch the roughly $10 an hour he pays his workers into a full day's wage in Mexico, and a full week in China. Still, he says, Wal-Mart has been supportive.

"They have never told or asked us to leave. They have worked with us on a number of occasions to help us keep production of a specific item here," he said. "But it's true we are always looking for ways to cut costs, and that means cheaper overheads. So we can never say never."

For the time being, Samsons isn't going anywhere.

Home Textiles Today, a trade publication, ranked Lichtenberg & Co. No. 1 in its sector, recording 2000 sales of $125 million. The privately held company doesn't disclose its finances, but Mr. Lichtenberg said shipments grew nearly 30 percent last year.

A $3.5 million investment in 2002 to buy the empty Globe Business Furniture plant next door and convert it to a state-of-the-art warehouse shows Samsons is serious about trying to stay by cutting costs and improving efficiency. Mr. Lichtenberg made a more personal investment when he put his 24-year-old daughter, Jennifer, in charge of running the warehouse.

For him, mixing personal and business matters is normal. "I grew up in the business with many of these people and we have an obligation to them to do the best we can in the future," he said, adding that about half of Samsons 400 workers have been with the company more than 15 years. "We are thankful for their loyalty and will work to stay."

STATE JOB LOSS FORECAST

The American Textile Manufacturers Institute expects the following job losses to occur by 2006 after Chinese trade quotas are lifted Jan. 1:

STATEJOB LOSSES

North Carolina85,000
California81,000
South Carolina42,000
Alabama30,000
New York29,000
Georgia25,000
Total630,000
SOURCE: American Textile Manufacturers Institute