NEW YORK — After concluding that a year’s worth of negotiations had bogged down, fiber maker Unifi Inc. has scrapped plans to form a polyester joint venture in China and now plans to go in on its own.
President and chief executive Brian Parke said Wednesday that he and vice president and chief financial officer William Lowe had spent the last two and a half weeks in Guangdong province meeting with executives at Guangdong Kaiping Polyester Enterprises Group in an effort to conclude the talks the companies began in July.
In a conference call with investors, Parke said he made “a determination that a closing with Kaiping could not take place at an appropriate time period for Unifi.” He said the Greensboro, N.C.-based company needed to be able to start producing in China as soon as possible.
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“Our immediate preoccupation is to get on the ground with product and be in a position to supply product within the next 12 to 18 months,” he said.
The system of quotas that has regulated the apparel and textile trade among World Trade Organization nations is set to expire at the end of this year. At that time, China’s market share is expected to grow explosively.
Unifi is currently shipping fibers made in the U.S., the U.K. and at a Thailand joint venture to Chinese customers. Parke said Unifi now wants to build its own plant in China, which would be equipped with idled machinery from the company’s other facilities around the world.
Officials at Kaiping, which is owned by the Kaiping city government, could not be reached for comment.
George E. Williams, managing partner of the Shanghai-based consulting firm Novasia, said gathering information about potential Chinese business partners presents a significant hurdle for U.S. companies like Unifi. “China is not a transparent business environment,” Williams said. “You do not have a credit rating system in China. Much of your due diligence is going to be word-of-mouth, and that presents challenges.”
Parke said Unifi has done extensive research into the Chinese market over the last few years, which has made the company much more comfortable with the idea of building its own plant there.
Unifi shares plummeted in New York Stock Exchange trading, falling 35.3 percent to close at a new 52-week low of $2.70.