This industry includes establishments primarily engaged in manufacturing woven, tufted, and other carpets and rugs such as art squares, floor mattings, needle punch carpeting, and doormats and mattings from textile materials or from twisted paper, grasses, reeds, coir, sisal, jute, or rags. Coverage includes aircraft and automobile floor coverings, except rubber or plastics; bathmats and sets; dyeing and finishing of rugs and carpets; and Wilton carpets.
314110 (Carpet and Rug Mills)
In 2003, 80 percent of the world's carpet was manufactured within 50 miles of Dalton, Georgia. Carpet mills specialize in producing carpet backing, as well as carpets and rugs. In 2001 the value of shipments totaled $12.1 billion, up slightly from $12 billion in 2000. The industry posted gains each year since 1991 and has been dominated by sales of tufted rugs and carpets, which accounted for 92 percent of the industry's revenues. Woven carpet and rugs totaled just 4 percent. All other varieties (primarily needle punch) totaled 6 percent.
During the early 2000s the industry's growth slowed due to weak economic conditions. Confidence in the future of the economy ran low, causing consumers to put off nonessential purchases, including new rugs and carpets. However, low interest rates created a robust new housing market, which sustained demand in the otherwise sluggish economic environment.
In the mid-1990s, 238 of America's 383 manufacturing plants were located in the state of Georgia. Carpet mills specialize in producing carpet backing, as well as carpets and rugs. Intense competition in the 1980s led forward-looking companies to acquire both manufacturing and retailing operations in an effort to cut costs.
Tradition, profits, and consumer preferences, more than a specific management approach, have historically dictated the organization of the carpet industry. The product flows to residential and contract clients primarily via the following two methods: directly from mill to client or from mill to dealer or wholesale distributor, then to a retailer who sells to a client. If manufacturers in the industry continue to follow the lead of Shaw Industries, Inc., the contemporary industry leader, the industry's organizational mode may be revamped. According to analysts, Shaw's acquisition-based growth coincided with the company's novel management approach. First the company hired aggressive, no commission, straight salary sales representatives. Next, in another cost savings move, Shaw signed shorter, more flexible agreements with retailers and in the process eliminated distributors, a long standing entity in carpet promotion. Whether this strategy is adaptable industry wide remains to be seen; however, carpet manufacturers foresee several outcomes. For example, retailers are expected to begin buying most carpet directly from the mills. Secondly, total industry recovery will require the development of strategies to create more unified partnerships between manufacturers, retailers, and cleaners that would allow them to serve and sustain customer confidence.
The first carpet mill opened in Philadelphia in 1791. Until the mid-1800s, carpet manufacturing in the United States was a tedious process using hand operated machines. High quality, artful appeal, and high cost described the carpets of this period. However, during this period and continuing over the next century, several events changed the manufacturing and utility of rugs and carpets. Much of the impetus for industrialization of the carpet industry began when Erastus B. Bigelow, known as the "Father of the Modern Carpet Industry," obtained a patent for his invention of a power driven loom. As power looms became more refined and functional, carpet manufacturing became a profitable venture.
The next milestone in the carpet industry came with changes in the composition of carpet. Originally all carpets were made entirely of wool because it insulated against cold and repelled water. Because of these characteristics, wool was declared an essential commodity during World War II and, consequently, carpet production was severely curtailed in favor of war goods production. This setback served as an incentive for researching wool substitutes, which in turn led to the development and upgrade of new natural and synthetic carpet fabrics. By the 1960s, E.I. DuPont de Nemours and Co.'s man-made continuous filament carpet nylon and Chemstrand's acrylic fibers were supplying most of the fibers for broadloom carpets in the industry. Today, nylon accounts for 67.8 percent of the fibers used in carpet manufacturing, followed by 22.2 percent polypropylene, and 9.4 percent polyester, with wool constituting a little more than 0.6 percent of the total.
Weaving, needle-punch, and bonding and tufting are the principle carpet manufacturing processes, with the tufting method accounting for 95 percent of all carpets currently produced and sold in the United States. Tufting differs from weaving and other processes in that yarn is pushed through a previously manufactured backing material, while weaving produces the carpet backing simultaneously as the carpet is being manufactured. As tufting became popularized as a faster and more economical alternative to the traditional weaving process, carpet manufacturers discovered several other cost and labor advantages. Utilization of the tufting process produced broadloom eight to ten times faster, required less fined-tuned weaving skills, and ultimately lowered prices sufficiently to attract lower and middle income groups. Nearly 63 percent of the industry's tufting mills were located in the South due the area's abundance of low-cost labor and excellent water supply.
The impact of these milestones solidified the "homing" of the carpet industry. Between 1950 and 1968, U.S. production of residential and commercial broadloom carpet and rugs rose from 85.7 to 435.0 million square yards, with tufted carpet shipments topping woven Axminster, Wilton, velvet, chenille, and knitted carpets by more than 81 percent in 1968. Price, aesthetics, and utility changed the image of carpet from a luxury item to an essential accessory for every home. By the 1980s, consumer carpet selections included an enormous variety of colors and patterns suitable as indoor/outdoor floor or wall coverings. Moisture repellents and stain resistant treatments increased the life spans of some carpets by as much as 10 years and allowed manufacturers to extend carpet warranties. Residential or "home use" carpet, one of the industry's major markets, comprised 76 percent of all residential floor coverings, 55 percent of which was used for remodeling and replacement purposes, and 45 percent in new home construction in the early 1990s. Carpets for commercial or contract use formed the next primary market and represented the preferred floor covering for 73 percent of all commercial space in offices, schools, hotels, hospitals, airplanes, and other heavily trafficked public areas.
Ironically, just as the "homing phase" of the carpet appeal became entrenched in American living, both residential and commercial users began voicing concerns regarding health and environmental hazards attributed to carpet. In 1987, the Consumer Product Safety Commission received more than 130 complaints about carpeting, mostly focusing on eye and throat irritation beginning after installation of new carpet. One such incident occurred at the Environmental Protection Agency (EPA), where employees complained of flu-like symptoms within days after a new carpet was installed. Specific causes of the illnesses were never identified, but several areas were investigated. No toxic chemicals were found in the carpet, but questions remained regarding toxic ingredients in the carpet adhesives. Another theory postulated that noxious fumes resulted from carpet deterioration. Later tests, so named the Anderson tests after the testing company, Anderson Laboratories Inc., introduced the possibility that carpet emissions capable of killing mice could also produce adverse effects on human life.
Despite disclaiming some of the hazards, the carpet industry vowed to reassess its overall manufacturing process, including the type and quality of raw materials used, the use of pesticides, microbiological contamination, and carpet installation and maintenance processes. Consistent with the industry's objectives to improve consumer confidence, the Carpet and Rug Institute, the industry's trade association, launched a labeling program listing various characteristics of carpet. The institute is also collaborating with the EPA in the development of indoor air quality guidelines for carpet.
Because consumers remained unconvinced of the carpet industry's intent to alleviate the health hazards of carpet, a consumer lawsuit was filed in 1993 against several carpet manufacturers. Consumers involved in the suit were seeking monetary compensation and other rewards from manufacturers accused of promoting misleading claims regarding carpet air emissions hazards and so-called environmentally friendly carpets.
In the early 1990s, many homeowners took advantage of falling interest rates and refinanced their mortgages. This allowed homeowners to spend more money on remodeling expenditures and new carpeting. A stabilized real estate market with increased new housing starts and greater turnover in home sales would also have a positive impact on carpet sales. As businesses recovered from the recession, contract carpet dealers sought increased business with hospital, health care, and retail facilities. Schools were also seen by many in the industry as a potential growth market.
Carpet and rug sales totaled $9.5 billion in 1995 on volume of 1.6 billion square yards. As they had throughout the postwar era, tufted carpet and rugs continued to dominate, with 87 percent of volume and more than 90 percent of revenues. More than 85 percent of tufted carpet yardage sold was in roll goods. More than two-thirds of all tufted floorcovering yardage was made with nylon face yarn, while about 20 percent were made from polypropylene and another 6 percent was constituted of polyester.
During the 1980s and 1990s, one consistent indicator of this industry's condition has come from tracking real disposable income—as it rose or decreased, so did carpet and rug sales. The 1996 edition of Manufacturing USA: Industry Analyses, Statistics, and Leading Companies forecast total U.S. carpet and rug production to grow to $12.5 billion by 1998. Some observers expected the industry's consolidation to bring increased prosperity by eliminating overcapacity. Increases in residential construction and consumer confidence also seemed to bode well for the industry.
During the 1990s, the majority of industry establishments were located in Georgia, which shipped a total of $7.17 million, according to census data, and employed 31,600 people. By 1996, the industry had shipments totaling $11.18 million. According to The Carpet and Rug Institute, an industry organization, shipments in 1997 totaled $10.3 billion with a $15.7 billion retail value. Worldwide, the U.S. occupied 45 percent of the carpet market. Among all floor coverings, carpet occupied 65 to 70 percent of the market share. Market share of fibers used in the industry in 1997 included nylon (59.3 percent), Olefin (33.7 percent), polyester (6.6 percent), and wool (0.4 percent). The majority of U.S. carpet imports in 1997 came from India (45 percent), followed by China (25 percent); imports totaled $961 million. Exports totaled $858 million and the largest markets included Canada, Mexico, Japan, and the United Kingdom. The industry was projected to ship $12.74 billion by the year 2000.
In 2001 the economy began to show signs of weakness. As the industry prepared for a minor downtrend, the terrorist attacks of September 11 threw the nation into economic and emotional turmoil. On the heels of September 11 came the near-overnight erosion of consumer confidence. The U.S. war against Iraq in 2003 kept consumers in a state of unease. Because rugs and carpets fall within the category of nonessentials, consumers postponed purchases. Carpet and rug sales remained flat during 2002, which, considering the economic environment, was viewed as being relatively positive.
During 2002 the carpet industry was helped by robust new housing construction that was the result of extremely low interest rates. Hopwever, overall purchases were stagnant. The hardest hit sector of the rug industry was high-end offerings, which fell off significantly. On the other hand, low- to mid-priced rugs were up. Although significant change is not expected until at least 2004, rug and carpet manufacturers are hoping that continued sales of low- and mid-range products will sustain the industry until recovery occurs.
Although bigger does not necessarily mean better, it appeared to be very helpful for several manufacturers in the carpet industry. Companies undergoing a consolidation or merger found that infusion of capital frequently meant new equipment and expansion of research and development. Such organizational changes represented the norm for the carpet and rug industry in the early and mid-1990s. Acquisitions within the industry created a new crop of mega-mills with Shaw Industries, Inc. topping the list.
Founded in 1967 by brothers Robert Shaw and J.C. Shaw, Shaw Industries, Inc. has long utilized acquisitions to carve out a profitable niche in the carpet industry. In fact, it entered the market via the acquisition of a Georgia carpet mill. The 1987 purchase of West Point-Pepperell Inc. pushed Shaw's revenues over the $1-billion mark and made it the world's largest carpet manufacturer in 1987. Growth via acquisition merely accelerated from that point. By 1995, the company had garnered more than one-fourth of wholesale carpet sales.
Having achieved its goal of establishing a worldwide niche in each important aspect of carpet manufacturing, it began to acquire carpet retail chains with hundreds of outlets, including Carpetland USA Inc., The Carpet Exchange, and New York Carpet World. Shaw's sales increased at an average annual rate of 15.3 percent during the early 1990s, from $1.6 billion in 1991 to $2.9 billion by 1995. But rising raw materials prices slashed the company's net from $127 million in 1994 to $52.3 million in 1995. At that time, the Dalton, Georgia-based company employed 25,000 workers. The company's plans to acquire several British carpet manufacturers also backfired, and in 1999 Shaw sold the British holdings and 275 carpet stores in order to win back the favor of its retail customers.
By the end of 1999, Shaw had lost $200 million on its efforts to diversify. The company redirected its focus toward manufacturing and wholesaling; including purchasing Queen Carpet Corp. for $470 million. This acquisition gave Shaw a U.S. industry market share of 35 percent in 1999, up from a previous 27 percent share. Claimed Robert Shaw, "We are better for having learned more about our customers and the retail business." By 2002 Shaw's sales reached $4.33 billion, making it the world's leading carpet manufacturer.
Calhoun, Georgia's Mohawk Industries, Inc. placed second to Shaw, with 31,780 employees and sales of $4.52 billion in 2002. Founded in 1878, Mohawk found itself scrambling to keep up with its much younger, but larger, competitor in the early 1990s. Following a public stock offering in 1992, the company made four acquisitions in two years, including Horizon Industries Inc., Karastan-Bigelow Inc., and American Rug Craftsmen Inc. In 1994, Mohawk merged with highly profitable Aladdin Mills Inc. The purchases catapulted Mohawk from eleventh in the industry to number two, increased its sales from $761.0 million in 1992 to $1.6 billion in 1995, and multiplied its market share from less than 4 percent to 19 percent in 1997. The company boasts three of the industry's most recognizable brands: Mohawk, Karastan, and Bigelow. Notwithstanding its impressive growth, Mohawk Industries struggled to cut costs and thereby raise its profitability. By 1998, net income for the year had increased 58.2 percent for a total of $107.6 million. Mohawk continued to focus on its niche markets: household rugs, laminated and tiled flooring, and office carpet.
While high-level mergers raised eyebrows regarding anti-trust issues, many analysts noted the negative impact of these mergers on smaller companies. Smaller companies have more limited pricing options. Therefore, attempts by small manufacturers to duplicate the cost cutting strategies of the mega-mills generally threaten their profitability and ultimately their survival.
Having risen to 55,000 in the late 1980s, carpet and rug industry employment declined to less than 50,000 in the early 1990s before rebounding to 55,200 in 1994. In 2001, employment was 49,015. More than half of those workers were employed in Georgia, "The Carpet Capitol of the World." Production workers, who averaged $11.54 per hour, made up approximately 83 percent of the workforce.
While machine operators constituted the industry's largest employment category, computerization of carpet manufacturing was changing job functions and requirements. Machines for tufting, shearing, and many other functions connected to computers were expected to eliminate many low-skilled jobs. The industry was expected to require higher skilled laborers to operate the sophisticated machinery.
By and large, the majority of the industry's production employees had low literacy levels and were unable to interpret computer feedback. Without upgrading the literacy skills of their production workers, manufacturers stood to lose the potentially high returns from converting to a high-tech environment. With more than one-third of their 560 employees deficient in these literacy skills, Collins & Aikman Corp., a Georgia-based carpet mill, developed programs combining remedial education and computer training on company time.
In the early 1990s, the United States accounted for more than half of the world's carpet consumption. According to the U.S. Census of Manufactures, imports to the United States constituted less than 6 percent of the quantity of carpeting purchased and less than 10 percent of the value in 1995. As Shaw Industries CEO Robert Shaw noted in a 1996 interview for Textile World, "We have no foreign competition for all practical purposes." China and Iran were historically the largest importers, but with an embargo against Iran since 1979 and China's Most Favored Nation status under question in the 1990s, carpet and rug importers turned to India, the Philippines and Vietnam (after the Clinton Administration lifted an embargo against that nation in 1994) for supplies. Exports from the United States made up slightly more than 7 percent of the quantity and value that year. Several factors constrain international carpet and rug trade, among them quotas and duties, high shipping costs, and the influence of America's leading carpet makers, who are often able to price imports out of the market. Most of America's carpet exports go to Canada. While Americans attributed their spectacular performance in this neighboring market to Canada's lack of competitiveness, Canadians viewed the growth as unfair competition. American carpet companies were accused of "dumping" their goods in Canada at unfairly low prices. The resulting failure of scores of Canadian carpet businesses prompted the Canadian government to institute recovery measures by imposing a permanent duty averaging 12 percent on all American carpets. Although the "dumping" issue had strained relations between Canada and the United States, Canada was expected to remain an important export market.
In the future, outcomes of other trade issues may well expand or reduce opportunities for U.S. manufacturers to create a global presence. Carpet mills downplayed the impact of the North American Free Trade Agreement (NAFTA), which merged Canada, Mexico, and the United States into one market. The European Community Agreement (EC), another international trade agreement affecting the textile industry, was also expected to enhance international opportunities in textile production.
In the early 1990s industry leaders were aggressively pursuing international trade, though not necessarily through export. Shaw Industries entered both the Australian and Mexican markets via joint ventures. If finding an international niche meant physically relocating to a lucrative market, more companies could be expected to follow the example of Belgium's Beaulieu Group, which established a facility in Georgia as part of its objective to diversify and penetrate the American market.
Research and technology for the carpet industry has focused on producing high quality and environmentally-friendly products, and responding to contemporary customer needs. To these ends, several innovations were in progress in the early 1990s. New backing materials were being developed to replace the environmentally-unfriendly latex. As a secondary backing bond to tufted and needle punched carpets, hot melt adhesive films produced no fumes inside or outside the mills, offered between 70 percent and 80 percent energy savings, and resulted in a 50 percent reduction in backing application time. Waste reduction and reclamation were also key issues under study. Some in the industry campaigned to reduce carpet trim waste, which not only cost U.S. carpet companies an estimated $25 million per year, but also generated tons of useless material destined for landfills. Other ideas being studied for waste reduction included reducing widths of backings and developing pure synthetic backings to match face fibers, which would allow burning or recycling of the whole carpet. Many, including industry leader Shaw Industries, adopted the goal of "zero manufacturing waste."
Recycling programs focused on recycling or converting packaging materials like PET bottles and used carpet into everything from floor tiles to concrete reinforcement material and highway guard rails, to like-new carpet fiber. While these solutions required a concerted industry-wide effort, a few company initiatives showed some merit. DuPont maintained a joint program with Sonoco Products Co., which involved reclaiming cardboard drums used to deliver its fluorochemical products. Hoechst Celanese Corp.'s introduction of a new environmentally friendly carpet not only eliminated latex and the usual odor connected with indoor air quality problems, but it also totally eliminated carpet waste because it was made of 100 percent recyclable polyester.
Another area of research addressed utilization of carpet to reduce physical stress, injuries, and fatigue in a variety of environments. While carpet's nonslip, pliant properties remain favorable, biomechanical studies could lift the carpet industry's sales by measuring how the human body reacts to subtle differences in floor surface properties. Research at the University of Pittsburgh's Medical and Engineering Schools is currently studying body reactions to different carpet and cushion combinations in different facilities, such as high- and low-impact aerobic exercise settings.
One industry company took the challenge seriously to work toward making carpet manufacturing more environmentally friendly. Owner Ray Anderson of Interface Inc., a billion dollar carpet company, began changing his operations after he read The Ecology of Commerce, by Paul Hawken in 1994. Since then, Anderson reduced scrap (and saved $67 million), reduced operations energy by using less nylon in carpet tiles, and introduced plans to lease carpeting so that old carpet didn't end up in landfills. Interface converted one of its plants to solar energy in 1999 and introduced a product that looked like carpet but could be mopped like vinyl. Anderson also planned to host an environmental summit in mid-1999.
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