At their peak, in 2002, Quaker Fabric Corp.’s sales reached $365 million. Last year, sales for the Fall River upholstery manufacturer were down to about $225 million. That is not an easy plummet to recover from, but the company is trying.
The problem can be spelled out in five letters: C-H-I-N-A. In the past three years, upholstery fabric imports have increased from about 20 percent to 60 percent of the U.S. market, said Larry Liebenow, president and CEO of Quaker Fabric.
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That increase was “largely a result
of China’s entry into the World Trade Organization” in 2001, he said, which gave the country access to the U.S. market it “didn’t have before.”
To add insult to injury, Chinese manufacturers make a micro-suede fabric that is successful in the U.S. market. Liebenow said U.S. manufacturers can’t compete with it because “it is produced in a way that, for environmental reasons, cannot be produced in the United States.”
Lloyd Wood, director of media outreach for the American Manufacturing Trade Action Coalition, in Washington, D.C., said “there’s no doubt” that upholstery fabric imports “are through the roof” – and Chinese government subsidies are fueling the industry.
“What you’ve got going on in China is they’ve got to create as many jobs per month as we need to create in a year to keep up with population growth,” he said. To help manufacturers, he added, the government offers tax breaks, subsidizes electricity and raw materials costs, and it provides interest-free loans.
To cope with Quaker Fabric’s loss of sales, Liebenow said the company is restructuring what will be manufactured in Fall River and setting up a strategic, long-term production agreement with manufacturers in China.
“We will continue manufacturing in Fall River,” he said. “But it will be more focused on specialized areas” – including the contract market, outdoor furniture, specialized yarns and upscale residential furniture.
The contract market involves hospital, office and hotel furniture. Quaker will develop and produce new lines of fabric for the contract and outdoor furniture markets, Liebenow said, and it will continue to sell specialty yarns to craft markets for knitting and to weavers of upholstery fabric.
And though Quaker has always developed upholstery for upscale furniture, it will be spending more time designing and marketing to that segment.
“The profit margins in that segment are higher,” said Cynthia Gordan, vice president and general counsel for the company. “That segment is less vulnerable to competition from inexpensive imported products.”
The segments of the market Quaker cannot compete in by manufacturing in the United States will move to Asia, Liebenow said.
In addition, the company is in the process of consolidating eight production facilities into six. Gordan said the two facilities being sold had been idle for six months and were sold to cut operating costs.
About 1,600 administrative and production jobs were cut as well, she said. Quaker employs about 1,400 people today, still ranking as one of Fall River’s largest employers, Liebenow said.
He said the layoffs and sale of facilities comes as a result of production dropping to half of what it was in 2002. Asked what could have prevented this from happening, he said the federal government needs to review of the subsidies being provided to manufacturers in China.
In addition, the U.S. government should ban imported goods that contravene copyrights of U.S. manufacturers, he said.
“What is happening to the product coming in from China is its largely copying our designs and the designs of other companies,” he said. “Theoretically we have copyright protection, but the economic costs and length of time it takes to protect the intellectual property rights is prohibitive.”
Despite the hard times of late, Liebenow said he doesn’t see the company, which is traded on Nasdaq, going under any time soon.
“It’s a long process,” he said. “But we’re confident that we’re on the right track both with respect to our specializing what we’re going to manufacture here in Fall River as well as our participating in the import market by the arrangement we have made with our partners outside of the U.S.”
