Carpet pushing flooring recovery

Carpet pushing flooring recovery

February 27th, 2010 by Mike Pare in News

After the worst economic downturn in decades, the floorcovering industry is showing signs of recovery with carpet helping lead the way.

Carpet, which had lost market share since the 1990s as hardwood floors and ceramic tile were fashionable, is expected to help drive the industry during a challenging 2010, according to experts.

"It's the most economical floorcovering," said Dan Frierson, chief executive of Chattanooga-based Dixie Group. "It has ceased losing market share. The economics really favor carpet."

The floorcovering industry -- the largest employer in Northwest Georgia and one of the biggest manufacturing industries in the Chattanooga region -- is starting to rehire some of its thousands of workers laid off over the past three years.

Staff Photo by Allison Kwesell/Chattanooga Times Free Press Maria Jacobs cuts uneven ends of carpet on a tufting machine at Beaulieu of America, a carpet factory in Dalton, Ga. The company, which is open 24 hours a day, seven days a week, ships carpet all over the United States and abroad.

The Carpet and Rug Institute, the Dalton, Ga.-based industry group, estimates that floorcovering businesses shipped more carpet than a year ago in two of the past three months.

Industry leaders say they are hopeful 2010 will be a better year for floor product shipments. But they concede that changing consumer tastes, new technologies and economic shifts mean that not all of the lost jobs are coming back.

As the housing bubble burst, floorcovering sales followed. Industry experts said production is at levels not seen since the 1990s.

"We have just been through the most difficult economic decline we have ever experienced in the flooring industry," Mohawk Industries Chief Executive Jeff Lorberbaum told industry analysts Friday.

Kim Gavin, executive editor of Floor Covering Weekly, said the industry has experienced billions of dollars in lost sales over just the last three or four years.

"The new home construction market is significantly down," she said.

Kemp Harr, publisher of Floor Focus magazine, said the industry experienced 26 quarters of decline in production volume, but it finally is looking at the bottom of the trough.

Demand for carpet backing is up for the first time in three years and "you can't make carpet without backing," Mr. Harr said.

Ralph Boe, chief executive of Dalton-based Beaulieu of America, said carpet is one of the lower-cost flooring materials on an installed basis, especially compared to ceramic and wood.

"People are looking to keep costs down," he said. "Builders are putting in more carpet, and that bodes well for (market) share."

As the housing market undergoes lots of foreclosures, those residences need to be put into resale condition, Mr. Boe said.

"Carpet is a quick fix-me-up," he said.

INVESTMENTS

While officials expect a slow recovery in the economy and the industry, companies aren't standing still as they ready for an upswing.

Mr. Lorberbaum said the fourth quarter began to show signs of improvement "and continued growth is expected in 2010."

By closing more than a half dozen of its oldest mills, trimming management ranks and investing in new machines, Calhoun, Ga.-based Mohawk and other carpet manufacturers insist they are better positioned for the future.

Mr. Frierson said his company has invested in tufting machines unique to the industry that allow it to introduce new products.

"Nobody has the technology," he said. "One machine is a quantum leap. One is more sophisticated."

Mr. Frierson said Dixie also is increasing its wool offerings.

"In the day of green and natural things, it's an excellent carpet fiber," he said.

Mr. Boe said Beaulieu also is investing in new equipment. He said the aim is to boost efficiency and respond to changes in product demand that occur over time.

INDUSTRY JOBS

In metropolitan Dalton -- the self-described "Carpet Capital" -- the unemployment rate tripled from 2005 to 2009 to the highest level of any metropolitan area in Georgia.

The economic decline cut employment in metro Dalton by 11,200 jobs over the past three years, including 5,000 lost manufacturing jobs, from the 2006 peak. The 13.8 percent drop in the number of jobs in Dalton in the past three years is more than twice the U.S. average.

Combined with shifting consumer tastes for hardwood floors and technology changes at local mills, the carpet industry and Northwest Georgia are undergoing an transformation, according to Dalton/Whitfield County Chamber of Commerce President Brian Anderson.

The importance of the floorcovering industry to Dalton is far greater than other industry clusters in other cities.

Houston, Texas, for instance, may be America's oil capital.

"But carpet is 10 times more important to Dalton than energy is to Houston," Mr. Anderson said. "The density of the industry is very strong in Northwest Georgia."

Mr. Frierson said new hiring is dependent on business activity, though he doesn't see Dixie making more job cuts.

"We have begun hiring some people," he said.

In terms of employment, Mr. Boe said that when business dropped off, Beaulieu put into place a rolling furlough initiative that helped save jobs.

"It has put us in a position to respond readily to changes in demand," he said.

Werner Braun, president of the Carpet and Rug Institute, said industry leaders "see a rather long, protracted, slow recovery.

"Everybody has an expectation that some day we'll get back to where we were, but it may take two or three years," Mr. Braun said. "There is so much continued uncertainty about what is going on in Washington, D.C., right now over health care, cap-and-trade energy legislation and the housing industry that there is a lot of caution."

ELEMENTS

The carpet count

* 56,000 -- Number of people employed in the carpet industry in Georgia

* $14 billion -- Annual value of carpet sales at mill level

* $4 billion -- Carpet industry annual employee wages

* 80 percent -- Share of U.S. carpet supplied by mills in Northwest Georgia

* Four -- America's biggest carpet companies with headquarters in Dalton area

Source: Carpet and Rug Institute

While recovery comes, experts don't expect to lose share to overseas competitors due to a variety of factors, including the tufting technology based in the United States and the critical mass the industry has in Northwest Georgia.

"There's very little incursion ... from India or China," Mr. Boe said.

Mr. Harr added that carpet is in part a fashion business.

"Americans know how to style for Americans," he said.

Still, changing consumer tastes, economic headwinds and new technologies are likely to prevent the industry from regaining all of the jobs it once had, experts say.

"Coming out of this, there will be some different fibers, products and processes used that will require less people," Mr. Anderson said. "We know that even when production ramps back up after housing comes back this will be our most important industry, but it probably won't have as many jobs as in the past.

"Our retooling efforts as a community have to be to replace those jobs lost due to the productivity," he said. "So we're doing more proactive economic development in this community than we ever have in our history."