Carpet pioneer Shaw blazes back into industry after brief retirement

Carpet pioneer Shaw blazes back into industry after brief retirement

December 11th, 2011 by Ellis Smith in Business Around the Region

Bob Shaw, former head of Shaw Industries, came out of retirement and is chairman of Engineered Floors.

Photo by Angela Lewis/Times Free Press.

Golf got boring for Bob Shaw, godfather of the carpet industry, after he sold the company that bears his name to billionaire Warren Buffett and stepped down in 2005.

"I built a golf course and played a lot of golf, but eventually your knees start to hurt and your score goes up," said Shaw. "You get bored."

So in 2010 he decided to re-enter the industry in which he first made his fortune, stealing a few glances at his old playbook and writing new chapters on how to manufacture flooring in North Georgia.

It's paid off.

No stranger to carpet manufacturing, the 80-year-old Shaw has a few tricks up his sleeve that he says already have allowed him to twice double the size of his company, Engineered Floors, to more than $100 million in revenue out of the gate.

As the entire industry contracted in 2011, laying off thousands of workers and closing dozens of plants, Engineered Floors has been hiring workers and building new plants, one of which will come online in the first quarter of 2012.

By the end of 2012 he'll employ about 1,100 workers under the Engineered Floors banner including more than 500 in Calhoun, Ga., and between 600 and 700 at the new Dalton, Ga., plant, said company President Danny Freeman.

"People I meet around town come up to me and hug me around the neck and thank me for giving them their life back," Freeman said. "North Georgia is [Shaw's] home, so we're going to support North Georgia."

TIMELINE

2000 - Warren Buffett buys Shaw Industries from founder Bob Shaw

2005 - Bob Shaw steps down as head of the company at nearly the height of its success

2007 - Recession strikes the housing market, causing demand for carpet to drop in the single-family home market.

2009 - Bob Shaw breaks ground on a new plant in Calhoun, Ga., for Engineered Floors, his new company, targeting the multi-family market.

2010 - First full year of operations for Engineered Floors.

2011 - Engineered Floors breaks ground on a second plant in Dalton, Ga, which will have the capacity to expand to 1 million square feet

Source: Engineered Floors


ENGINEERED FLOORS AT A GLANCE

• Headquarters: The historic city hall building in downtown Dalton, Ga.

• Chairman: Bob Shaw, former head of Shaw Industries

• Employees: 500 currently, with plans to add 250 more by the end of 2012

• Plants: Calhoun, Ga, Dalton, Ga [under construction]

• Square footage:

Calhoun Plant: 510,000 sq ft expanding to 650,000 sq ft by end of 2012

Dalton Plant: 215,000 sq ft when completed

• The Environment: The company doesn't use water to color its fiber, savings millions of gallons per year.

Source: Engineered Floors.

Outside of employment, there's a good business case to be made for his expansion. Despite what Shaw calls a "depression" in the industry brought on by the national housing collapse, there's always money to be made for savvy operators.

"They thought the best years of the carpet industry were over with, but I see opportunity here," he said.

The plan is to focus on the only growing segment in the flooring industry: mid- to low-range carpet designed for rental units, what's known in the industry as "multifamily."

"If you think floor covering is not a commodity, you're wrong," Shaw said. "I have yet to make a lot of money off rich people."

It's a tightly contested market, but his competitors are working with higher transportation costs and aging equipment that is expensive to refurbish, he said.

In fact, much of the equipment used to manufacture carpet in the U.S. dates back to the 1980s, when companies like Shaw Industries began to expand by buying other companies instead of building new plants, said James Lesslie, assistant to the chairman at Engineered Floors.

Engineered Floors, on the other hand, is rushing to finish its second completely new plant in as many years, as builders in Dalton haul state-of-the-art extruders, yarn spinners and heat setters into the 215,000-square-foot building that the company could expand to up to 1 million square feet.

"There hasn't been greenfield carpet construction since 1980," Lesslie said. "The carpet coater we installed [in Calhoun] in 2010 was the first one installed since then."

Starting with nothing but a cotton field and a good idea of how to run a carpet company, Shaw simply built everything from scratch to cut out parts of the manufacturing process that technology has rendered obsolete, he said.

To simplify matters, Engineered Floors essentially makes one type of carpet - solution-dyed polyester - and at less cost than its competitors, Shaw said.

Solution-dyed differs from regular carpet in that the fiber is dyed during the extruding process, giving it a solid color throughout, like a carrot, instead of a coating that can wear off.

"The fewer things you do, that was Henry Ford's philosophy: you can have any color, as long as it's black," Shaw said. "In this industry, to not confuse yourself, you have to put your blinders on and focus on one thing."

The polyester fiber Shaw uses, more widely available than the commonly used nylon, gives the company better buying power and doesn't force Engineered Floors to compete with larger players for supplies, he said.

But outside a discussion of the growing regulatory burden that carpetmakers face, or the relative merits of the three most popular petrochemicals, Shaw is just having a good time being back in the driver's seat.

The simple answer to the question of "Why, at 80 years old, am I getting back into this," is that he wants to see North Georgia prosper again, he said.

"My mother taught high school here before I was born. I was raised in Dalton," he said. "We're still in the ballgame."

His goal is to "be number one," a feat he's already accomplished once in his lifetime as head of Shaw Industries, and he feels that he's on track to do it again in the same market.

"You don't go into a game hoping that the other team doesn't score too many touchdowns," Shaw said. "You go in it to win."