Apparel Sourcing Intelligence - Worldwide

Why has Fruit of the Loom sold its US spinning mills?

There is nothing in the announcements about Fruit of the Loom (FOTL) selling its US spinning mills to Parkdale that explains why.

I can imagine why there isn’t: FOTL used to be part of the NCTO-sponsored Stop Exporting American Jobs lobby group, the publicly-accessible parts of whose website still tell us that “Protecting American textile and apparel manufacturing jobs starts with you!” Buried deep within Berkshire-Hathaway, with very little need to discuss its affairs with anyone other than its  owners, workers and customers, it’s pretty clear why FOTL doesn’t want to provoke too many questions about precisely when it decided that  protecting American textile and apparel manufacturing jobs starts with someone else: not with FOTL.

But over the past six months or so, FOTL has moved its Kentucky-based knitting to Honduras, and is now moving out of its US spinning mills – leaving its US operations what  we call 3D – direction, design and distribution. This is no crime, and may be in the best interests of everyone (including the people moving from the FOTL payroll to the Parkdale one):. For example

  • Parkdale may be more prepared to spend the right amount upgrading the former FOTL mills – and may do a better job
  • FOTL may be able to do a more effective job of expanding the business armed with the proceeds of the sale
  • FOTL may prize the geographical flexibility Parkdale’s multi-country operations offer it

Pulling two complete stages in garment production out of the US hardly indicates deep confidence throughout Berkshire-Hathaway in the competitive advantages of manufacturing textiles is the US . Warren Buffet may be sceptical the coming fracking boom really will drag America’s energy prices down, Parkdale might just have been so anxious to get a functioning mill they made him an offer he couldn’t refuse, or FOTL may have decided the spate of new mill announcements made an upgrade needed they just couldn’t get past Mr Buffet’s hard nose. It’s not really any of our business, and we may never know.

The move does, however, closely follow revelations that Santana’s new mill in Texas is running substantially behind schedule. The problem appears to be funds not materialising from Santana’s Argentine business, and may tell us more about the unrealism of the original finance plan than about the business case for building a mill in Texas. Many of the spinning plants announced a year ago were supposed to be funded by Asian businesses – and in the past month we’ve seen Texhong pull back from plans in Turkey and Shandong Ruyi abandon plans in Pakistan.

The one lesson I think is undoubtedly clear is that investing in spinning and weaving doesn’t come cheap, and in times of uncertainty businesses need levels of confidence to make them that quickly look foolhardy.  I wouldn’t hold my breath waiting for all the mills announced in 2013 to come on stream