DUPONT RETHINKING NYLON GAME
Byline: Scott Malone
NEW YORK — Despite DuPont’s recent decision to scale back spending in its nylon enterprise and pull back from some of its Asian ventures, the company remains committed to that fiber and believes it has room to grow in the Western Hemisphere, according to DuPont executives.
Noting that nylon produces 20 percent of DuPont’s annual revenue, with apparel fibers alone contributing $1 billion a year, David Rea, vice president and general manager of Tactel apparel and nylon technology, said the fiber “is a big business and an important business for DuPont.”
“Our mission really is to produce growth in the markets we compete in and to produce cash to fund expansion in nylon and the rest of the DuPont organization,” Rea added.
In an interview here last week, he said DuPont’s plan to trim its capital spending budget over the next 10 years from $600 million to $300 million would have only a “slight” impact on current revenues, but would mostly result in a trimming of the venture’s growth projects scheduled for later in the coming decade.
While the company, which is based in Wilmington, Del., believes that Far Eastern economies are recovering, it nonetheless will be “taking a selective path in Asia” from now on, according to Rea.
He said DuPont believes demand in the region will be back to pre-crisis levels by next year and that Asian economies will resume growth, though not as quickly as before the economic collapse.
Nonetheless, Rea said, “It is challenging today and it will continue to be a challenge: How do you make money in Asia?”
The company is in talks with some of its five Asian nylon joint-venture partners, but cannot yet say which ventures it will be exiting, he added.
“We will remain a small player in Asian nylon apparel,” he said.
Still, the return of any Asian demand for fiber, textiles and apparel can only be good news for Western Hemisphere producers. Over the past two years, they have had to face fierce competition from Far Eastern companies that, having built new factories to serve local demand that disappeared suddenly, focused their energies on selling more to the U.S.
With Asian producers again able to sell to local consumers, DuPont believes demand for nylon in North America will grow.
“Although this business has been flat in the last decade, we believe the market is going to increase,” said Bob Pruyn, business director of nylon apparel for North America.
Pruyn said he believes that overall nylon consumption is likely to experience modest growth of 1 to 2 percent a year over the decade ahead. He expects much of that growth to come in the Western Hemisphere, as production of garments in Mexico and Latin America continues to rise.
Pruyn revealed one step the company has taken to encourage Mexican apparel making: For two years it quietly has been running a venture called Sportswear Enterprises, a full-package garment production operation based in Guadalajara, Mexico.
That marks the second time DuPont has tried its hand at apparel production. With modest fanfare, the company in 1994 launched Initiatives Inc., which was to make private label apparel for retailers. The idea was met with a mixture of enthusiasm and skepticism, but the company had difficulty adapting to the new business and shut it down after 16 months.
While the DuPont executives were reluctant to compare the new venture with the old one, Pruyn admitted that “we learned a lot from that.”
DuPont is taking a much more focused approach in Sportswear Enterprises. Currently, the venture is making nylon men’s athletic shorts, selling them to branded makers of sporting apparel. In its first full year of operation, it sold more than $8 million in goods, according to Pruyn, and, he said, is set to double that figure this year.
“There is a demand for it,” said Pruyn.
DuPont is being cautious in choosing the products the venture makes — Pruyn said the company would like to make windsuits for running, but does not yet feel it has the right staff at the factories it contracts with.
The business owns no production facilities.
But if DuPont has been cautious in its efforts so far, it does have high hopes for the venture.
“Its only limitation today is infrastructure,” said Pruyn. “I could see it growing ten-, fifteen-, twentyfold.”
But confronted with the same dilemma facing mills that have gotten into apparel production — the danger of seeming to compete with customers — the company says its primary motivation in getting into full-package production is to make a point.
“Our interest is to demonstrate that this business can be done in North America, can compete with Asia, so that we as an industry can take share from the Asians,” Pruyn said.
The full-package operation is not DuPont’s only recent investment in its nylon business in the Americas. The company upped its stake in a joint venture with Alfa Group to 50 percent, from 40 percent.
The additional investment is helping that venture to double its capacity for producing nylon 6 at its Monterrey, Mexico, plant. DuPont primarily manufactures nylon 6,6 but wants to increase its capability to make the other variety to serve other markets.
The company is also building a new nylon plant in Chattanooga, Tenn. That plant, which will have an annual capacity of 28 million pounds and will produce both varieties of nylon, is due to begin operations in February.
In general, nylon 6,6 is somewhat stretchier than nylon 6, making it more suitable for garments that require that quality. Most of the demand for nylon fiber around the world is for the 6 variety, which is more commonly used in Asia and South America.
DuPont hopes that offering both varieties of nylon will enable it to sell to more markets, according to Rea.
Nylon, he said, “is a very competitive business on a global basis, but it has a lot of opportunity.”