Springs' CEO Crandall Close Bowles didn't envision imports would be as devastating as they have been to the S.C. textile company her family started 120 years ago.
She thought U.S. factory workers would be crucial to meeting customer demand for speedy shipment and filling unexpected orders. But in June, the company announced the closing of its last S.C. factories. Now, its sheets and towels will be mostly made in Brazil and other lower-wage countries, although the company still has some U.S. plants.
"The pace of change ... has surprised me," Bowles told the Observer last week. "I would not have thought that we could have gotten to this point as quickly as we have."
Bowles' comments follow last week's start of trading in Springs Global stock on Brazil's largest stock exchange. The company, based in Brazil, is the product of last year's merger between Fort Mill's Springs Industries and its Brazilian supplier Coteminas. Bowles, 59, has been co-CEO. She will retire next month, ending decades of family leadership.
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Documents detailing the stock offering provide a rare look at privately held Springs' steep losses prior to the merger. The company, once one of the Carolinas largest employers, had remained profitable despite growing imports that helped push two major competitors into bankruptcy court. But the Jan. 1, 2005, end of decades-old import limits unleashed competition that even Springs couldn't fend off.
The documents also raise the question of whether Bowles and other Springs officials intended to slash Carolinas jobs and close factories when they announced the merger in October 2005. At the time, the company acknowledged worsening import competition but said it would need both foreign and domestic production.
The documents said one goal of the merger completed last year was to reduce manufacturing costs "by moving capacity from the United States to Brazil, Argentina and Mexico."
Factory wages are about $1.40 an hour, including taxes, in the Brazilian plants, the documents said. That's about twice the rate of textile workers in China and India, but Brazil is much closer so shipments reach store shelves faster.
Springs' S.C. factory workers make about $15 an hour.
Bowles said last week that her Brazilian partners "were eager" to shift manufacturing to their Latin American plants to cut costs, but that there was not a plan at the merger's start for the radical shutdowns that occurred.
"Things have changed and moved faster," Bowles said. "I definitely don't believe that we felt at the time that it was a foregone conclusion that we would move everything."
She blamed rising imports, saying that's what drove closures not the merger.
"The financial results were overwhelming," Bowles said. The jobs losses are "a sad thing for me, but it was inevitable."
The deal helped Springs survive. "There was not another opportunity like Coteminas anywhere in the world," she said.
Road to the merger
Coteminas, Brazil's largest home-textiles maker, became a Springs supplier in 2001 as the company sought lower cost goods to compete with imports. Initially, the strategy worked well, Bowles said. Lower costs helped land sales Springs otherwise would have lost.
The stock-offering documents, dated July 11, provide the first look at Springs financials since 2001 when Bowles led a $1.2 billion bid to take the company private. The documents analyze the financial woes of the Springs operations that merged with Coteminas, mostly its sheet, towel and bath accessories businesses.
In 2004, Springs' sales topped $3.37 billion. That's well above sales of $2.28 billion in 2000, the last full year Springs was a publicly traded company.
Springs picked up sales following the Pillowtex closure. But despite that, the company's sheet and towel businesses lost nearly $17 million in 2004, according to the documents. In 2000, the company earned $67.1 million.
Late in 2004, Springs and others already were having trouble booking orders at profitable prices. Customers were moving to foreign suppliers, anticipating the end of import limits. On Dec. 1 that year, Springs said it was closing two S.C. plants.
In a videotaped messaged to employees, Bowles forecast a difficult year in 2005. She also acknowledged employees' worries about the future, but offered hope, saying Springs' strategy "will enable us to emerge from the current challenging industry transition as a strong and growing company."
Seeking end to losses
In 2005, the average prices paid by Springs customers dropped 20 percent, the documents said.
Springs losses grew to nearly $96 million as the end of import-limits freed 40 countries, including China, to ship unlimited quantities of many textiles to the U.S. Imports of sheets, for example, leapt 49 percent in 2005, according to federal trade statistics. Towel imports rose 36 percent.
The quick delivery of Carolinas and other domestic production could no longer offset price differences. The company had about 4,000 Carolinas workers that October, when it announced the Coteminas merger. With the most recent closures, Springs will have less than 900 Carolinas employees, few in factories.
Springs' intensifying woes shifted ownership in the merger. The deal originally called for a 50-50 partnership between Brazilian and U.S. investors, which included Bowles' family and a Connecticut investment firm.
By the time the deal closed in January 2006, the Brazilian team held a stake of nearly 62 percent, according to the documents. The new partners understand the angst of cutting jobs but didn't have Bowles' personal attachment born of her family's long involvement. Still, she said, the plant closures came down to finances for her, too.
The merged company lost money last year and in the first quarter this year, in part because production slowed as it moved equipment to factories in Brazil and elsewhere. By the end of this year, Springs Global will have only one U.S. towel finishing plant, which is in Georgia. The company also has U.S. factories making such products as pillows, mattress pads and bath rugs.
The shift abroad "will allow us to combine large scale, high efficiency, state-of-the-art facilities with competitive labor and energy costs, and gives us access to low cost raw materials," the documents said.
The company also plans to expand sales in Europe and Asia. Planned investment of $160 million during the next two years includes factories in Asia. That won't necessarily be in China, Bowles said. Vietnam, for example, is in the running.
Bowles will remain a director of the company in which her family retains a stake of about 5 percent.
"It's the best possible outcome, aside from the impact here," she said. "It'll be an ongoing, global textile company. I'm very proud of that part of it."