By  on April 18, 2005

NEW YORK — After emerging from bankruptcy, Malden Mills Industries is moving forward with a new management team and major global expansion.

While it doesn’t intend to forget its roots, the Lawrence, Mass.-based company is preparing to grow its presence in Asia, open a New York office and launch its first major advertising campaign in five years.

The initiatives are part of new chief executive officer Michael Spillane’s blueprint to get the mill, which exited bankruptcy in October 2003, back on a growth track.

“We have to be global,” Spillane said in an interview. “Being a domestic fleece manufacturer is not a sustainable business model. Global means being able to provide a solution to our customers regardless of where they’re going to make the garment.”

The moves come as the firm next year will mark its 100th anniversary. Malden Mills made its first foray into China in 2002, setting up a joint-venture plant with Shanghai Challenge Textiles to produce its Polartec polyester fleece. Malden Mills brought its brand and intellectual property to the venture, while Shanghai Challenge provided the manufacturing platform.

Malden Mills is in final negotiations for another plant “in the Asian region” to open in the next few months, Spillane said. The next deal will follow the Shanghai model, with Malden Mills moving into an already operating fleece mill, rather than building its own plant, a strategy that “gives us a much faster solution in terms of getting up and running,” Spillane said.

“It also allows us to invest our intellectual property and capital in places where we really need to be, which is in our brand and in technology and innovation,” he said.

Malden Mills will likely continue to expand in the Far East. “Asia right now is obviously a place where the world is heading, and we will be there,” Spillane said.

When manufacturing chief executives talk about setting up shop in China, the employees at their U.S. plants tend to get nervous. But Spillane insisted that the company, which employs about 1,100 workers, remains committed to its New England roots.

“We will always have a manufacturing presence in Lawrence,” he said.He has a reason for that commitment: 15 percent of Malden Mills’ $175 million in annual sales are to the U.S. military, which by law is required to buy its uniforms and other supplies from domestic manufacturers.

Malden Mills also has one of the newest textile mills in the U.S. After a fire destroyed most of its operations in December 1995, former ceo Aaron Feuerstein, a grandson of the mill’s founder, invested about $450 million in rebuilding the plant, turning it into a state-of-the-art factory. While the plant was being rebuilt, Malden continued to pay the salaries of its then 4,000 workers through the Christmas season.

That move, which came when many U.S. textile plants were closing and moving to Mexico to take advantage of NAFTA benefits, catapulted Malden into the national spotlight and turned Feuerstein into something of a folk hero. It also saddled the company with more than $150 million in debt and set the stage for its November 2001 Chapter 11 filing. Feuerstein lost control during the bankruptcy and left Malden Mills in June 2004, a month before Spillane was named ceo. David Orlofsky of the turnaround firm Kroll Zolfo Cooper held the post in the interim.

Malden Mills is owned by a consortium of its former creditors, with GE Capital holding the largest stake. The company is “slightly profitable,” said Spillane, and carries $45 million in term debt.

Spillane, 45, acknowledged that the beloved Feuerstein was a hard act to follow.

“One of the first few things I had to do was get people comfortable with the fact that I wasn’t coming in there to shut the place down or move everything offshore,” he said.

In the long term, Spillane said he expected domestic manufacturing to continue to represent more than 50 percent of the mill’s capacity.

Malden Mills’ relationship with the military provides more than just a customer that needs to buy from a domestic supplier, Spillane noted. As warfare becomes more high-tech, generals are also looking for ways to improve uniforms. For example, the company is working on a fabric with wiring that could monitor the vital signs of front-line soldiers and communicate the data to officers.“The potential there is obviously great for the military,” Spillane said.

The idea grew out of a technology Malden Mills developed for electric blankets — knitting barely noticeable fine-gauge wires directly into the fabric, rather than running through a visible heating coil. It allows the blankets to provide heat without having the noticeable heft and lumpiness of a traditional electric blanket.

Once the company had a fabric with integrated wiring — completely washable — it was a small step to using the wiring to monitor sensors. Spillane said beyond the obvious military application, the sensor idea might also be applied to consumer uses, such as uniforms for high-school sports teams so that coaches can tell if they’re overtaxing their players or in infant pajamas to help parents concerned about sudden infant death syndrome.

Spillane said Malden Mills’ research and development budget is typically one of its largest annual expenditures. To make sure the focus on technology gets noticed, the company plans this year to spend in excess of $10 million on its first major advertising campaign for the Polartec brand in five years. The brand’s recent promotional efforts have been limited to co-op advertising.

The campaign, which will carry the tag line “Forward Fabric,” is intended to highlight the brand’s technological innovation. It is also an effort to better define Polartec to consumers.

“In the past, we were afraid of saying what we made because maybe we would license the brand name out, like to sunglasses, but we haven’t,” said Carol Valianti, a Malden Mills vice president who was a key player in developing the campaign. “We realized you need to clear up any confusion about what Polartec is.”

The ads have a split-screen style, showing a Malden scientist inadvertently helping an athlete. In one proposed spot, a researcher who is holding out her arm shields a runner from the rain. In another, a skier jumps off the end of a scientist’s clipboard.

The ads will primarily run in magazines and on billboards, and will break in the September issues of major publications, including Shape, Men’s Journal and Outside. There will also be some TV spots.Spillane, who held executive roles at Tommy Hilfiger, Jockey International and the defunct knitter Missbrenner before joining Malden Mills, said Polartec’s next goal is to begin building distribution outside its core customer base of high-tech performance apparel brands.

He intends to begin selling Polartec to major lifestyle brands.

“A better manufacturer that may not be classified as purely tech would probably perceive some value” in incorporating Polartec fabric — along with Polartec hang tags — in and on its garments, Spillane said. He is in negotiations with some major U.S. apparel brands, but declined to name them.

“We’re certainly going to be very selective in terms of who we choose to partner with,” he said.

With an eye toward expanding in the traditional sportswear market, the company within several months plans to open a showroom in New York, where it hasn’t had a major presence since 2000.

In addition to setting a growth strategy, Spillane has bolstered the mill’s executive ranks. In January, he named Edward Schade as chief financial officer and Jonathan Adelman as executive vice president of global sales. They report to him.

Spillane said that by keeping its focus on developing new, higher-performing fabrics, Malden Mills could help combat the overall price deflation that has plagued apparel and textile makers.

“Units are flat or increasing and dollars are going down,” he said. “Bringing something new to the table, something different, is really the only answer.”

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