After WPS, Ross Goes Shopping
July 26, 2005-- Home Textiles Today,
NEW YORK -- About a week after ceding the auction and court decision for WestPoint Stevens to investor Carl Icahn, Wilbur Ross and his wife went shopping. They bought a new comforter, some cocktail napkins and searched for a few other textiles deals, which happened to include a number of joint business ventures.
They were in Hanoi on a 12-day trip across Vietnam, China and Hong Kong, and Ross was exhibiting newfound interest in the small, still reconstructing nation of 82 million -- a mere fraction the size of China.
“I think it’s where China was 20 years ago,” Ross said last week in an interview, just a couple of days after his return.
Wages are about half those of China, Ross noted, the people have good work habits and dexterity -- many of the same characteristics that led him to find China so appealing years ago. The government is not quite as progressive yet, but the country imports about 70 percent of its textiles products -- there’s little in the way of indigenous textiles manufacturing.
That’s why he was invited to begin joint venture talks with Vinatex, the government-owned textiles company, a $1 billion garment producer seeking to expand its operations beyond apparel.
While in Asia, Ross also led the groundbreaking of a $100 million denim plant in Jiaxing, a suburb of Shanghai, where he’s co-venturing with retail investor Silas Chou.
It’s likely this trip would have also served as a fact-finding venture for WestPoint, had he succeeded in acquiring the bankrupt mill. Instead, many of his efforts were on behalf of his International Textiles Group, the surviving combination of Burlington and Cone Mills. And despite his continuing interest in Asia, he’s still also shopping textiles in the States, but wouldn’t identify any likely candidates, other than the current moves he’s making for Collins & Aikman.
“The opportunities are found in getting as far out in front of the trends as possible,” Ross explained back in his office. “The opportunities are in Vietnam -- not instead of China, but in addition to. Our general strategy is every place where people are going to be making finished products out of textiles, we think we should be making textiles. We don’t think our task in life is to tell our customers where they ought to source. We think our task in life is to be where they wish to source -- to try to become the first truly global and enlarged textile company.
“Globalization is here to stay. It may very well become the driving economic force over the next 20 to 30 years,” he opined.
Across his steel and coal holdings, then telecom and now textiles, globalization is the Ross mantra. And in his embrace of the strategy, he’s built an empire and made a fortune across a spectrum of fading American industries and companies many have left for dead. Ross sees opportunity there. And while often it’s not a pretty sight in the early go -- most of his prizes derive from bankruptcies and result in companies that are mere shadows of their former lives -- he’s also often credited with resurrecting the nearly dead into functional and profit-making entities once again. To him, at least, the global strategy is a no-brainer.
“Our idea is to not just do the sourcing but to be a principal because I don’t believe the sourcing model is a sustainable model,” he said. “I think the textiles industry is going to devolve into a much smaller number of very large companies. I think the logical corollary of globalization is a concentration of industry, but on a cross-border basis.”
And if you are in a commodity-type business -- and large segments of the home textiles business are commodity-driven -- it’s imperative to be a lowcost producer, he said.
National borders simply don’t matter in the global business world -- except insofar as governments get in the way, Ross said. Simple economics drive economically sound business decisions. That’s how he’s structured ITG, shedding most of its North American hard assets, with the exception of some limited production he believes needs to be sustained here, all while building up its foreign presence as an owner of offshore manufacturing.
The pitch to customers: You want to be global; we’re already there. We’re well capitalized and we’re going to be around. It’s simply intelligent to give us your business, rather than fighting old suppliers still resisting the global imperative.
“To some degree that resonates,” Ross said. “They won’t give you a nickel more a yard but our customer universe likes the idea that we’re trying to be responsive to their needs.”
To be sure, Ross acknowledges -- and to some degree shares -- the concerns that the United States is becoming a nation that no longer makes anything. Manufacturing jobs are the highest paying in the middle class and as they are lost, serious questions need to be asked about the sustainability of the American standard of living.
But he also has his cures for those ills, not by closing our borders, but by addressing what he sees as the core issues affecting U.S. competitiveness: a value-added tax that’s rebated on exports, national funding of health care (taking it out of the private sector), and an end to defined benefit pension plans, replacing them with defined contributions.
“I think instead of China bashing, the people in the Congress should be saying what the factors are that are making us uncompetitive and how do we deal with them,” he argued.
The old systems worked perfectly, as long as the sales focus remained within U.S. shores.
Drawing on his steel industry experience, Ross said, “As long as U.S. Steel and Bethlehem Steel had the same labor agreement, it didn’t matter. It didn’t matter if wages went up; the guy you’re competing against has the same contract that you have.
“Now that you’re in the world of globalization, it’s a different thing … Now you’ve got to worry about your cost structure relative to Shanghai, relative to Guangdong, relative to Ho Chi Minh City.”
Policy makers are failing to understand those fundamental issues, Ross complained. At least they’re not dealing with it. And he worried aloud about later generations.
“I don’t believe that an economy that’s based on flipping hamburgers, trading stocks and suing each other … can sustain a high standard of living,” he said.
Related Content By Author
Industry Related Content
Online Moves From Afterthought To Main Thought For Textiles Suppliers