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The U.S. textile industry has endured several tremendous challenges over the past two decades. During the 80's and 90's, investment in technology cut production costs to unprecedented levels as the industry prepared itself for global competition. And most recently, the industry has painfully endured massive job losses due to unfavorable currency exchange rates and the unrelenting low cost competition that has flooded domestic retail markets. U.S. textile companies that have survived this incredible attrition must now determine how to compete in the future and how to finance their business strategy.

Although securing financing for the future may seem like a relatively simple proposition, U.S. textile firms are being virtually ignored by most traditional financial markets for a number of reasons. First, the intense foreign competition that has challenged U.S. firms over the past few years has eroded industry margins and cash flow and made it difficult for many firms to service their existing debt loads. As a result, there have been numerous Chapter 11 and Chapter 7 bankruptcy filings in the U.S textile industry over the past few years. Second, equity markets have been equally unkind to U.S. textile firms, with many firms seeing common share prices at historical lows, rendering it virtually impossible for these companies to secure cash through the issuance of additional equity. And most importantly, financial institutions recognize that the U.S. textile business is undergoing some potentially devastating changes.

It is widely known in the financial community that in 2005, the U.S textile industry will be subjected to more intense global competition as textile and apparel import quotas are eliminated as specified under GATT. Furthermore, most financial analysts believe that China's acceptance into the WTO will only exacerbate the competitive pressures on U.S. firms. Moreover, the U.S. firms that survive this onslaught will most likely be forced to service a larger customer base composed of mainly Mexican and Caribbean customers via NAFTA or CBI, rather than their traditional customer base dominated by U.S. customers. Unfortunately, U.S. banks have historically believed that foreign textile customers produce increased credit and collections risk and as a result, U.S. firms are typically not allowed to borrow against these outstanding foreign receivables. In short, we have an industry that will be tested by more intense competition and likely suffer a strain on working capital due to a change in customer demographics.

Against this backdrop, U.S. textile companies must carefully and precisely map out their strategy for the future. First, each and every U.S. textile firm must determine how it will address 2005, China, and the chaos that may follow, so that it can demonstrate to the financial community its plan for profitability. This is very important because banks are unlikely to provide new term financing to textile companies without a well-designed plan for addressing these issues and a strategy that demonstrates a sustainable core business. Second, U.S. firms should continue to seek foreign joint-venture partnerships using existing textile equipment as an equity investment in plants that can utilize inexpensive labor and survive post-2005. Most of the equipment that U.S. firms purchased in the 90's still has tremendous value when coupled with the correct labor complement. Finally, U.S. companies must continue to lobby Congress for financial relief, restrictive tariffs, and a level playing field with the rest of the world. These steps may sound difficult and even painful in some cases, but they may represent the best financial options left for this struggling industry.