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Pillowtex

North Carolina has traditionally been home to many of the nation’s largest textile companies. One such company was Pillowtex, once the nation’s number three ranking textile company, based in Kannapolis, North Carolina. Pillowtex was perhaps best known for its Cannon, Fieldcrest and Royal Velvet brands. The company produced items such as sheet, towels, rugs, and other goods for the home. A range of different issues, including the effects of globalization, led to the July 2003 closing of the company. More jobs in North Carolina were lost from the bankruptcy of Pillowtex than any other single event.

Job Loss

Pillowtex operated a number of different plants in the United States and Canada. Sixteen will close. All total, more than 7,000 people lost their jobs without warning. The vast majority of these jobs, approximately 5,500, were located in North Carolina. On top of this, almost 5,000 of these jobs were clustered in a two county area (Martinez, 2003). Unemployment statistics in these counties doubled after the Pillowtex. In addition to laying off the most people in North Carolina history, the Pillowtex closing led to one of the greatest job losses ever in the American textiles.

What Went Wrong

Pillowtex was not just a fly by night company. In fact, it had been in operation for over one hundred years. Of the many reasons for the company’s closing, the relatively inexpensive cost of imported goods is typically considered the primary reason. Additionally, simple business and database activities can now be completed abroad by workers who receive drastically lower wages. Pillowtex simply could not compete. However, internal difficulties also contributed to the collapse. The company had previously gone bankrupt in 2000, their acquisition activities were not successful, and equipment could not be replaced at a pace that could keep up with the rest of the world.

Effect on Employees

Employees of Pillowtex were tremendously affected by the layoffs. Without warning, they no longer had health insurance. Furthermore, many employees were not paid for work they had already completed. In order to offset the effects to employees, a number of assistance measures have been taken. Shortly after the closings, Gov. Mike Easley was working to make sure that federal aid would be available for affected workers as part of the Trade Adjustment Assistance Act. This program allow affected individuals to receive extended benefits on income and health insurance. Also, a resource center was created at the site of the main plant in Kannapolis to help former employees find new jobs. In fact, almost $20 million in grant money has been set aside to help these individuals enter the work force again and pay for health insurance. Part of this sum has gone to the Rowan-Cabarrus Community College. Located in the heart of the layoffs, RCCC has enrolled 1,500 of the 7,000 plus former employees (Glassberg, 2004).

Effect on North Carolina

The closing of Pillowtex affects more than just the employees. North Carolina’s economy will suffer as well. First of all, the job losses will obviously impact the state’s unemployment rate. It is possible that the rate could rise one-tenth of a point from the Pillowtex closings alone. Additionally, economic growth will be hampered and an additional $400 million in benefits could have possibly been reaped, according to N.C. State University economist Michael Walden. On the other hand, other companies will beaffected by Pillowtex’s closing. Some companies exist simply to distribute and manage the manufactured goods. Even lawyers, financial advisors, and consultants of the company will be affected by a significantly decreased amount of work.

Cone Mills and Burlington Industries - The Merger

Financier Wilbur Ross is leading the merger of Burlington Industries with Cone Mills. He is creating the International Textile Group. The newly formed ITG will have revenues of around $900 million. The completion of the transaction took place in March 2004. Both companies had been struggling. Burlington had already declared bankruptcy in 2001. Cone Mills has also declared bankruptcy. The primary operations of both companies are located in Greensboro, NC, making the merger geographically ideal. If the city provides economic incentives, ITG will not move the headquarters to another location.

The Two Companies

Burlington Industries is approximately eighty years old. It is no newcomer to the apparel industry. In fact, at one time, the company employed more individuals than any other textile company. Today, Burlington Industries is still one of the nation’s largest sources of apparel and fabric, but employment stands around 5,000. Burlington Industries once employed almost 80,000 workers. The company has taken steps to keep with the seemingly "smaller" and more globalized world. For example, the company has operations in the United States, Mexico, India, and Hong Kong.

Cone Mills produces products similar to those of Burlington Industries and is over one hundred years old. It, too, has operations in Mexico. Cone Mills produces more denim goods than anyone else in the world.

Consolidation

One of Ross’s primary desire’s is to consolidate businesses within the textile and apparel industries. Smaller companies simply do not have the financial power to compete with overseas production of the same goods. By consolidating, the company will have an increased ability to produce goods at a reduced cost. Ross has repeatedly stated his intention to minimize lay offs. Traditionally, the textile and apparel industries have not been dominated by a handful of large firms. Instead a number of medium-sized and smaller companies operate. However, with the increase in offshoring, consolidation may be necessary if the industry is going to survive, much less thrive, in the United States.

The Future

Burlington Industries and Cone Mills have been indispensible parts of the textile and apparel industries for many years. Consumers have come to recognize the company names. Although, the two will now work from one headquarters, they will still produce many of the same goods they did before. They will even continue some of the production under the same manufacturing label.



© 2004. last updated: April 28, 2004
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