The cuts will leave the company with three apparel fabric manufacturing facilities in the U.S., as well as its operations in Mexico and India.
As a result, Burlington said it expects to take “substantial restructuring charges” in the first and second quarter of fiscal 2002. For the first half of 2001, the company recorded a $15.9 million net loss on sales of $725.7 million.
George Henderson, chairman and chief executive officer, said in a phone interview that the company needed to close plants because of declining demand for fabrics in the U.S.
“It’s an overall reduction in capacity to meet the market demand,” he said. “For the most part, the capabilities that we have in terms of synthetic and wool and denim, we’re keeping those capabilities. It doesn’t mean we’ll make every product we make now. We have to cut back a little bit, but we will have the capability to make just about every product we can make today. We’ll just be making some of them at different plants.”
The facilities to be shut are two denim mills, in Mount Holly, N.C. and Stonewall, Miss.; two wool and synthetics mills, in Clarksville and Halifax, Va., and the jeans cut-and-sew facility in Aguascalientes, Mexico. The closings will be completed over the next three months.
Burlington will now make synthetic and wool fabrics in North Carolina, Virginia and Mexico. It will make denim in Mexico and India, but not in the U.S.
About 2,800 job cuts are expected in the U.S., with another 1,200 in Mexico. Burlington currently employs about 10,000 workers in the U.S. and 4,000 in Mexico. Since 1996, the mill has cut more than 5,500 jobs, mostly by closing domestic mills.
The latest round of cuts will leave Burlington’s domestic workforce at less than half the 14,500 employees it had in early 1999. The large Mexican workforce is a more recent development; the company started opening mill in that country in 1999.
WWD first reported on Dec. 14 that Burlington was looking to get out of the jeans-making business. In the late Nineties, in an effort to offer full-package garment production services like their Asian rivals, a number of U.S.-owned mills decided to establish cut-and-sew operations to extend their reach up the apparel supply chain.
Many mills, with the notable exception of Greenwood, have found it difficult to make a profit on these ventures and Burlington last fall decided to close its Mexican tailored-pants factory. By this past summer, company officials had advised the financial community that they were not satisfied with the results of the jeans business, either.
“The market has gotten very competitive and the margins have shrunk considerably since we started in that business,” Henderson said Thursday of the jeans operation. “It was not giving us the return that we wanted.”
Burlington also said it is consolidating all its apparel-fabric operations into one division, Burlington Worldwide, headed up by a Hong Kong-based president, Peter Liu, who reports directly to Henderson.
Liu joined Burlington this summer, after working at Hong Kong-based Textile Alliance Apparel Ltd., according to a Burlington spokeswoman.
In a realignment of personnel and operations, Burlington has also named seven apparel fabrics executive vice presidents from within the company. They are: Ken Kunenberger, sales; Jeff Peck, synthetic and wool products; Mike Moody, cotton products; Nelson Bebo, activewear and barrier products; Joel Futterman, product development for synthetics and wool; Kathy Barton, product development for cotton, and Lou D’Lando, new business development.
Creation of the Worldwide division marked one of the most significant strategic shifts Burlington has made in the past few years. In addition to selling fabrics made by company-owned mills, the division will seek to sell products made by other companies in lower-cost foreign nations.
Henderson said the Worldwide division has begun showing fabrics made by about 20 outside mills from India, China, South Korea, Taiwan and Indonesia.
The Worldwide division will also sell fabrics made by Burlington-owned plants. Last month, the company merged its Casual Wear and Performance Wear divisions into a new unit called Burlington North American Fabrics. The operation has now been made part of the Worldwide unit.
The new Worldwide division is a distinct entity from the Hong Kong-based Burlington Worldwide Ltd. subsidiary, which was not included in the parent firm’s Chapter 11 filing on Nov. 15.
The new unit will also sell the apparel fabrics developed by Nano-Tex, a Burlington subsidiary that develops nanotechnology enhancements to fabrics. That subsidiary also licenses out technology. Recently, Lee Co. said it would start selling nanotechnology-enhanced khakis made from Galey & Lord fabrics.
Henderson said Nano-Tex “will be an important ingredient in our strategy going forward.”