FLORENCE — Italian yarn executives have a new solution to handling the pressure coming from the strength of the euro versus the dollar. More companies are extending their manufacturing reach into China, which allows them to cut costs and deal directly with their primary competitors.

That was a key development at the Pitti Filati trade show that wrapped up a three-day run on Thursday at Florence’s Fortezza da Basso trade grounds.

Coming off a year in which its sales dropped 18 percent to 115 million euros — about $143 million at the average 2004 exchange rate — Lineapiù teamed up with clients to build a new yarn mill in China. The venture is called Topline Yarns Manufacturing Co. Ltd., located in Ningho, near Shanghai.

“It’s a difficult market, which is why we have looked to other solutions,” said Lineapiù vice president Lola Coppini. “We will be ready to show our first collection in July and we’ll show it at Spin Expo and the next edition of Pitti Filati.”

Another fancy yarn producer, Filpucci, is also ramping up production at its first Chinese mill. President Leandro Gualtieri said in a few years that venture could boost his company’s output by about 20 percent.

Not all executives agreed that moving production out of Italy was the way to go. Stefano Borsini, president of Igea, said a plant his company opened in Poland a few years back “has relatively small advantages” over his Italian mills.

Still, Gualtieri attributes the motivation behind many of the moves to “the weakness of the American dollar.”

The dollar on Monday was trading at 78 euro cents, about even from last year’s level, but down from 92 cents two years ago. The dollar’s weakness and fears that it will fall made pricing a tricky topic. Vendors were reluctant to quote firm prices for yarns slated for spring-summer 2006 retail goods without knowing how fluctuating exchange rates would effect their margins.

“It’s a complete disaster, the buyers don’t say anything, we just mumble that the prices are indicative and hope to hell the dollar regains something when this yarn is bought in October,” said Igea’s Borsini.

This story first appeared in the February 8, 2005 issue of WWD. Subscribe Today.

High prices compared with Asian competitors have long been a problem for European mills and the pain has worsened with the dollar’s slide.

“The dollar is all everyone is talking about; less numbers are being mentioned but we hope the second half of the year the dollar gets a little stronger,” said Giacomo Festa Bianchet, president of Loro Festa. “The answer is just to invent new products with new prices.”

While trade show attendees expect to see new products each season, vendor executives said they were stepping up their introduction of them to avoid the impression of raising prices on traditional styles. They said buyers were more willing to consider fresh products with properties that cost a little more, than to accept price boost on goods they had ordered before.

“We can’t sit around and wait for the dollar to increase in value,” said Massimiliano Zegna Baruffa, chief executive officer of Zegna Baruffa.” We have to propose new products with other prices to push the market on. It’s about repositioning the product.”

The fresh products on display included blends of cotton and cashmere, as well as silk and fine-gauge linen. Zegna Baruffa offered linen mixed with rayon and cashmere in a brightly colored line including shiny and matte yarns. Filpucci blended linen with nylon to create a yarn with a silky feel and a lustrous look.

Zegna Baruffa also blended its Shamir ultrafine cashmere with Lurex metallic fibers to create a shimmery, slippery yarn.

Loro Festa showed West Indian sea island cotton in taupe, while Emilcotoni offered it in orange.

“This cotton yarn feels like cashmere,” said Loro Festa’s Bianchet.

Buyers said they were pleased by the mill’s efforts to develop new yarns.

“I’m pleasantly surprised by this show,” said Caroline Desjardins, women’s knitwear designer for The Carlisle Collection. “Normally, I come here and get sick of looking at viscose…but this season there are interesting novel yarns mixed with silk and great linen blends that give linen new life.”