Businesses Strategize Survival Amid U.S. Dollar Drop and Rising Oil Costs
August 27, 2008
COMO, Italy – With the U.S. dollar falling against the euro to record lows in recent months, textile manufacturers have been hard pressed to conduct business as usual and are forced to focus efforts on streamlining business practices and concentrating on their most successful markets. Companies from Europe contend that business with Americans has depleted, but for the most part, they aren't worried because they have found niche ways to combat economical problems.
In town for May's annual Proposte and Scoperta trade fairs, textile companies from Holland, Germany, Belgium, UK, India and more said that an increased attention to high-end and contract products has been an effective response to America's wavering economy as well as to the vast increase in price for oil and raw materials.
Ervin Yildiz, export manager at Spandauer Velours, exhibited at Scoperta, which was held in Chiasso, Switzerland near the Proposte fair in Cernobbio. Spandauer Velours is a licensed partner of Crypton® in Europe and has its own Crypton finishing facility on site so it can produce water-proof, nano and anti-stain finishes for its fabrics. The company also has an exclusive contract with the German railway system to fabricate all the seats in the second and first class trains, according to Yildiz.
When asked about the issues his company has dealt with in regard to differences between the dollar and the euro, Yildiz said, "It's a very serious problem." According to him though, Spandauer Velours is more concentrated on the contract market and high-end products where there is a higher profit margin; an approach he thinks will help the company fight the problem. He also mentioned that an approach many companies are taking is to increase "consignment shippings." As part of this process, manufacturers package and ship goods together to reduce prices.
According to an article published in the New York Times in April of this year, the euro rose to an all time high against the dollar, reaching $1.60. It's now settled around $1.58. The same article also reported that oil prices rose to around $120 a barrel – which has been superseded by the price of around $147 a barrel, as of July 11, 2008 – only three short months after it had weighed in at $120.
Even large-scale companies that have a monopoly over raw material supply have been grappling with rising oil prices and have come out much below anticipated profit margins. The Associated Press (AP) reported in late May that the Dow Chemical Company, based in Midland, Michigan, USA, is raising its prices by up to 20 percent to offset energy cost increases. Dow Chemical makes products ranging from propylene glycols used in cosmetics to acrylic-based products used for wastewater treatment. The company supplies crucial ingredients used in the manufacturing of paints and textiles and sells its products in more than 160 countries. According to the AP, Dow Chemical's chairman, Andrew N. Liveris, said that the new costs are forcing "difficult discussions with customers" who are undoubtedly facing their own financial crises without having to allot more investment money to such necessary products.
Wouter Hof, commercial sales manager at PinTail®, a wholesaler in the Netherlands, said that his company has felt the effects of the dollar and is looking to places other than China for further business. "Prices are going up and up in China because I'm paying in the dollar," he said. "They don't want to argue with me every month about pricing. The dollar was the worldwide currency, but I predict the euro will become the number one currency. What's happening in the U.S. economy is very bad. The euro is very strong. Millions of Europeans are going to America. China is more willing to sell to Europe than America and the costs in China are constantly increasing." With many fabric purchasers moving away from China, which requests foreign purchases to be made in dollars, countries like India and Vietnam have become bigger contenders in the marketplace.
"I'm getting more orders and more designs are being developed in my factory," said Rajnish Arora, president of Dicitex Furnishings in India. "People prefer to do business in India with reference to the euro increase."
"But it has hit us in terms of investment," he continued. "The same machines are more expensive this year. I have to think twice now before investing." This is a serious consideration for Dicitex since the company has been investing in new machinery every month in preparation for a new 35,000-sqaure-foot factory which is set to be operational this month.
"What's really hitting us is the oil issue," Arora continued. As a dying/finishing house that's driven by oil, Arora noted that prices for normal operations have skyrocketed. In response, the company is changing over some of its boilers in the dying house to coal energy. "Initially, the investment is more, but the day-to-day costs will be less," said Arora. "In today's textile world, people are paying a lot of attention to energy conservation. You have to see which machines are drawing more power. The next project of mine would be to consider [starting] a small power plant."
Another European company exhibiting at Proposte who had concerns about the American economy issue was Delius Textiles. "We're strongly affected by the American market," said Friedrich Delius, managing partner. "It's become difficult because of exports. It doesn't affect us in Europe. But in the Middle East, lots are buying in the dollar. In the Far East, business is quite strong."
Delius anticipates more difficulties from the dollar, despite the company's ability to thrive in the market in recent years.
"With this rate we can live for a while," he said. "Where yarn is concerned, we can only compensate a little bit because the product is high quality and we want to keep our level."
"It's not a German thing, it's a European thing; we all work together and have an understanding," said Delius export manager, Hendrik Ober, in reference to how he and the company have been dealing with the failing dollar. "American customers have a harder time."
Like many fellow European suppliers, Delius has placed most of its focus on its contract business, specifically honing in on flame retardant niche with its Trevira CS offerings. These ranges in addition to the company's high-end options, are what the company believes will set it apart and allow it to thrive.
Representatives at Morton Young & Borland (MY&B), a more than 100-year-old weaver of high-end decorative fabrics, said that they have witnessed definite problems in the textile industry with regard to the dropping dollar and the rising prices of oil and materials. However, they too feel they have found a way to avoid the crisis by catering to an elite echelon of clientele.
"The low to mid-market are more affected by the issue," said Scott W. Davidson, managing director of MY&B. "We're in more trouble against the euro because we buy a lot of raw materials from Europe. For example, if we were buying yarn at 8£ a kilo, it's now 10£ a kilo. But the Americans wholesalers and editors are the most affected. Normally the big guys price our goods at $2 to the pound anyway. We're in the top end market. It's only people who have the money to afford it that are buying. People who have $140 for a yard are always going to have $140 for a yard."
"American agents for European mills suffer most," added John Glenn, sales director for MY&B. According to him and Davidson, the company is unlikely to suffer as much as some of its competitors simply because its product is of a much higher quality and caters to customers that are already willing to pay very high prices for the product. With 12 meter looms, MY&B manufactures cotton-based laces and sheers that are sold to American wholesalers like The Robert Allen Group. Davidson and Glenn stated that the wholesalers in the UK and Europe are aware of the situation and aware of the fact that the pound is the best against the dollar – which puts their company at an advantage. They also contended that as a product of the dollar drop, U.S. wholesalers are going to stock less.
In town for May's annual Proposte and Scoperta trade fairs, textile companies from Holland, Germany, Belgium, UK, India and more said that an increased attention to high-end and contract products has been an effective response to America's wavering economy as well as to the vast increase in price for oil and raw materials.
Ervin Yildiz, export manager at Spandauer Velours, exhibited at Scoperta, which was held in Chiasso, Switzerland near the Proposte fair in Cernobbio. Spandauer Velours is a licensed partner of Crypton® in Europe and has its own Crypton finishing facility on site so it can produce water-proof, nano and anti-stain finishes for its fabrics. The company also has an exclusive contract with the German railway system to fabricate all the seats in the second and first class trains, according to Yildiz.
When asked about the issues his company has dealt with in regard to differences between the dollar and the euro, Yildiz said, "It's a very serious problem." According to him though, Spandauer Velours is more concentrated on the contract market and high-end products where there is a higher profit margin; an approach he thinks will help the company fight the problem. He also mentioned that an approach many companies are taking is to increase "consignment shippings." As part of this process, manufacturers package and ship goods together to reduce prices.
According to an article published in the New York Times in April of this year, the euro rose to an all time high against the dollar, reaching $1.60. It's now settled around $1.58. The same article also reported that oil prices rose to around $120 a barrel – which has been superseded by the price of around $147 a barrel, as of July 11, 2008 – only three short months after it had weighed in at $120.
Even large-scale companies that have a monopoly over raw material supply have been grappling with rising oil prices and have come out much below anticipated profit margins. The Associated Press (AP) reported in late May that the Dow Chemical Company, based in Midland, Michigan, USA, is raising its prices by up to 20 percent to offset energy cost increases. Dow Chemical makes products ranging from propylene glycols used in cosmetics to acrylic-based products used for wastewater treatment. The company supplies crucial ingredients used in the manufacturing of paints and textiles and sells its products in more than 160 countries. According to the AP, Dow Chemical's chairman, Andrew N. Liveris, said that the new costs are forcing "difficult discussions with customers" who are undoubtedly facing their own financial crises without having to allot more investment money to such necessary products.
Wouter Hof, commercial sales manager at PinTail®, a wholesaler in the Netherlands, said that his company has felt the effects of the dollar and is looking to places other than China for further business. "Prices are going up and up in China because I'm paying in the dollar," he said. "They don't want to argue with me every month about pricing. The dollar was the worldwide currency, but I predict the euro will become the number one currency. What's happening in the U.S. economy is very bad. The euro is very strong. Millions of Europeans are going to America. China is more willing to sell to Europe than America and the costs in China are constantly increasing." With many fabric purchasers moving away from China, which requests foreign purchases to be made in dollars, countries like India and Vietnam have become bigger contenders in the marketplace.
"I'm getting more orders and more designs are being developed in my factory," said Rajnish Arora, president of Dicitex Furnishings in India. "People prefer to do business in India with reference to the euro increase."
"But it has hit us in terms of investment," he continued. "The same machines are more expensive this year. I have to think twice now before investing." This is a serious consideration for Dicitex since the company has been investing in new machinery every month in preparation for a new 35,000-sqaure-foot factory which is set to be operational this month.
"What's really hitting us is the oil issue," Arora continued. As a dying/finishing house that's driven by oil, Arora noted that prices for normal operations have skyrocketed. In response, the company is changing over some of its boilers in the dying house to coal energy. "Initially, the investment is more, but the day-to-day costs will be less," said Arora. "In today's textile world, people are paying a lot of attention to energy conservation. You have to see which machines are drawing more power. The next project of mine would be to consider [starting] a small power plant."
Another European company exhibiting at Proposte who had concerns about the American economy issue was Delius Textiles. "We're strongly affected by the American market," said Friedrich Delius, managing partner. "It's become difficult because of exports. It doesn't affect us in Europe. But in the Middle East, lots are buying in the dollar. In the Far East, business is quite strong."
Delius anticipates more difficulties from the dollar, despite the company's ability to thrive in the market in recent years.
"With this rate we can live for a while," he said. "Where yarn is concerned, we can only compensate a little bit because the product is high quality and we want to keep our level."
"It's not a German thing, it's a European thing; we all work together and have an understanding," said Delius export manager, Hendrik Ober, in reference to how he and the company have been dealing with the failing dollar. "American customers have a harder time."
Like many fellow European suppliers, Delius has placed most of its focus on its contract business, specifically honing in on flame retardant niche with its Trevira CS offerings. These ranges in addition to the company's high-end options, are what the company believes will set it apart and allow it to thrive.
Representatives at Morton Young & Borland (MY&B), a more than 100-year-old weaver of high-end decorative fabrics, said that they have witnessed definite problems in the textile industry with regard to the dropping dollar and the rising prices of oil and materials. However, they too feel they have found a way to avoid the crisis by catering to an elite echelon of clientele.
"The low to mid-market are more affected by the issue," said Scott W. Davidson, managing director of MY&B. "We're in more trouble against the euro because we buy a lot of raw materials from Europe. For example, if we were buying yarn at 8£ a kilo, it's now 10£ a kilo. But the Americans wholesalers and editors are the most affected. Normally the big guys price our goods at $2 to the pound anyway. We're in the top end market. It's only people who have the money to afford it that are buying. People who have $140 for a yard are always going to have $140 for a yard."
"American agents for European mills suffer most," added John Glenn, sales director for MY&B. According to him and Davidson, the company is unlikely to suffer as much as some of its competitors simply because its product is of a much higher quality and caters to customers that are already willing to pay very high prices for the product. With 12 meter looms, MY&B manufactures cotton-based laces and sheers that are sold to American wholesalers like The Robert Allen Group. Davidson and Glenn stated that the wholesalers in the UK and Europe are aware of the situation and aware of the fact that the pound is the best against the dollar – which puts their company at an advantage. They also contended that as a product of the dollar drop, U.S. wholesalers are going to stock less.
