Upholstery Fabric Industry

Plant Closings and Major Layoffs

Summary

Source: U.S. Census Bureau Current Industrial Report MG313T (Broadwoven Fabric) -- Discontinued in 2005

The upholstery fabric industry in the U.S. is under siege by foreign competition resulting in plant closings or major layoffs in Connecticut, Massachusetts, North Carolina, South Carolina and elsewhere in the U.S. Among the companies affected were:

• Quaker Fabrics of Fall River, Massachusetts, which at its peak in the mid-to-late 1990s employed over 2,400 workers is now completely closed following an August 2007 bankruptcy filing.
• Joan Fabrics which filed bankruptcy in April 2006 was at one time the largest upholstery maker in the U.S.; the magnitude of job losses is unknown but certainly was several hundred.
• Intermark Fabric Corporation in Connecticut where the total number of layoffs is unknown, but far exceeded the 35 jobs last in the final round of layoffs.

According to a report in the September 24, 2007 issue of Furniture Today, 24.5% of all upholstered furniture sold in the U.S. in the second quarter of 2007 was imported, versus 8.6% a decade ago.

U.S. upholstery fabric manfacturers have been particular hard hit by a loophole in the tariff schedule that allows cut pieces of fabric for use as furniture upholstery to be classified as furniture parts and enter the U.S. duty-free, in contrast to the duty on fabric in roll form, which range from 7 to 17 percent depending on fabric type. This duty circumvention is severely damaging to U.S. upholstery fabric manufacturers. In 2005 the U.S. imported $1.2 billion in textile parts for chairs and other furniture, of which $811 million were of Mexican origin (for automobile seats) and $336 million were of Chinese origin (for home furnishings). While it is not possible to calculate precisely the loss in tariff revenue to the U.S. treasury due to this duty circumvention, it is undoubtedly several tens of millions of dollars annually.

Below is a year by year, and state by state list of upholstery plant closing and major layoffs known to NTA, the actual total is undoubtedly much larger as we do not necessarily get written notice of every layoff. To these upholstery job losses should be added jobs lost at fiber and yarn companies that supplied the upholstery companies. For examaple, just in 2007, Unifi lost over 600 jobs, mostly due to the closing of the company's customers Quaker Fabric Corporation and Joan Fabrics/Mastercraft.

2007

2006

2005

2004

2003

2002

2001

State of the Industry

On March 4, 2008 the Consumer Product Safety Commission published (73 FR 11701) Standard for the Flammability of Residential Upholstered Furniture; Proposed Rule which included as part of the rule-making process a survey of Products and Industries Potentially Affected. According to CPSC (headings and emphasis added):

Upholstered Furniture Industry

• The 2002 Economic Census reports that 1,686 U.S. companies (with 1,946 establishments) manufactured upholstered household furniture.

• The Economic Census reports that the value of shipments of upholstered household furniture by U.S. firms in 2002 was $10.3 billion. The Annual Survey of Manufactures reported value of product shipments of $10.0 billion in 2003 and $9.55 billion in 2004. The value of product shipments for 2005 was reported by the Census Bureau to have totaled $9.9 billion.

• Although there are a large number of upholstered furniture manufacturers, the top four companies accounted for nearly 35 percent of the total value of household upholstered furniture shipments in 2002. [T]he 50 largest companies accounted for about 67 percent. Reports from the trade press indicate that the industry has become more concentrated in the last ten years.

• Several firms have ceased operations; others have merged with larger companies through buyouts. The consolidation included Furniture Brands International's acquisition of HDM Furniture Industries (which included Henredon and Drexel Heritage) in 2001, and La-Z-Boy's acquisition of Ladd in January 2000 and Bauhaus and Alexvale in 1999.

• La-Z-Boy is the number one upholstered furniture manufacturer (by dollar volume), and Ladd, Bauhaus, and Alexvale all previously ranked in the top 30. Furniture Brands International is the second-leading domestic manufacturer of upholstered furniture, and companies it acquired were previously part of number four-ranked LifeStyle Furnishings, International, Ltd.

• The industry also includes many small companies and establishments. The 2002 Economic Census reports that only 29 percent of upholstered furniture establishments (564 of 1,946) had 20 or more employees, and only 10 percent (200 establishments) had 100 or more. By some measures, such as the U.S. Small Business Administration's (SBA's) definition for qualification for small business loans, a furniture manufacturing company is considered to be ``small'' if it has fewer than 500 employees (at all of its establishments). This definition encompassed more than 97 percent of firms in the industry in 2002.

• Exports of upholstered furniture had a value of about $285 million in 2005, or almost 3 percent of the total value of shipments. The value of imports of products categorized by the Census Bureau as NAICS 337121 was $2,792 million in 2005. Therefore, there were net imports of about $2.5 billion. With estimated domestic shipments of $9.9 billion, these net imports resulted in total apparent consumption of upholstered furniture in 2005 (domestic shipments plus imports, minus the value of exports) of about $12.4 billion.

• Imports have grown in recent years, accounting for about 22 percent of the value of total apparent consumption of residential upholstered furniture in 2005. By way of comparison, about 10 percent of the value of apparent consumption of upholstered household furniture in 1999 was imported. The leading country of origin is China, which accounted for about 52 percent of the value of imports in 2005 and nearly 63 percent of the value of imports in 2006. Mexico accounted for about 11 percent of imports in 2006; Italy about 8 percent, and; Canada about 5 percent. These four countries accounted for 86 percent of the total value of imported upholstered furniture in 2006.

• The importance of China as a source for imports has grown significantly in recent years. China supplanted Italy as the leading country of origin in 2003, and by 2006 the value of imports from China was almost 6 times that of the second-ranked country of origin, Mexico. Italy had been the number one source for upholstered furniture imports for many years. The majority of units from both China and Italy in 2004 reportedly were upholstered in leather.

• Although much of the gain in China's market share has been at the expense of Italian imports, some of the furniture imported from China is from plants that have been established by several major Italian firms. China has been the leading source of wood (non-upholstered) furniture imports and its growth as a source of upholstered furniture is expected to continue.

• The Economic Census reports that 4.8 million wood dining room chairs were shipped in 1997, with a value of shipments totaling about $526 million. In 2002, shipments fell to 2.9 million chairs, with a value of about $446 million. The decline in domestic shipments is attributable to significant increases in imports of wood furniture from China and other countries. Census data are not reported separately for upholstered and non- upholstered dining chairs.

• In 1994, an industry-sponsored study surveyed participants in the voluntary industry program to improve the cigarette ignition resistance of furniture that was developed by the Upholstered Furniture Action Council (UFAC). Among the firms surveyed were manufacturers of upholstered dining room and kitchen seating. The study report estimated that the total value of shipments of such furniture that complied with the UFAC Program (and, therefore, had upholstered seats) was about $250 million for 1993. Based on the value of 1992 shipments ($580 million), perhaps 3 to 4 million upholstered dining chairs were shipped by these UFAC participants. A great majority of these items may not have had upholstered backs, or they had upholstered backs that were not contiguous with upholstered seats. Other firms that are not participants in the UFAC Program also manufacture upholstered dining furniture. Given the limitations of the market data, the number of dining chairs produced annually that fall within the scope of the proposed standard cannot be estimated with much precision, although the total number of units is thought to be relatively small.

• Annual domestic retail sales of all types of living room and family room upholstered furniture total about 30 to 33 million units with a value of over $20 billion.

• Increasingly in recent years, retailers have reportedly devoted more floor space to private labeled furniture imported directly from foreign manufacturers.

Upholstery Fabric Industry

• [A]pproximately 100 to 200 domestic manufacturers derive a significant share of their revenues from fabric for residential upholstered furniture. This number includes textile mills that produce finished upholstery fabric and textile finishers that purchase unfinished goods and perform additional processes, such as printing and dyeing.

• [T]he 1990s saw consolidation of firms specializing in upholstery fabric production, with larger firms buying out competitors or divisions of competitors. However, in just the last few years the U.S. industry has been shaken by the decreased demand for domestically-produced fabric as a result of increased competition from imported upholstery fabric, the increased popularity of leather upholstery, and the dramatic increase in consumption of upholstered furniture imported from China.

• One of the largest marketers of upholstery fabrics in the U.S. reported that the trend to greater foreign competition and the entry of more converters of upholstery fabric (companies that purchase and resell fabrics) has resulted in greater fragmentation of the upholstery fabric industry in recent years, with lower barriers to entry, and an increase in competition based on price.

• Interior fabric revenues of the top 10 firms totaled more than $1.9 billion in 2002, based on a trade press survey. A similar survey found that the top 10 upholstery fabric mills had combined revenues from interior fabric shipments of $2.4 billion.

• In addition to declining sales for the leading U.S. upholstery fabric manufacturers, the difficult state of the industry is evidenced by recent bankruptcies of firms that were once industry leaders, such as Joan Fabrics (previously the number one upholstery manufacturer) and Quaker Fabric (previously the number three firm). Both of these firms ceased operations and their production facilities were liquidated in 2007.

• Of 663 firms in NAICS 313210 in 2002, only 63 (about 10 percent) had 500 or more employees. About 65 percent of the firms had fewer than 20 employees. The SBA considers firms with fewer than 1,000 employees to be small businesses for the purposes of programs administered by that agency. [I]t is likely that nearly all manufacturers of upholstery fabrics could be considered small businesses under SBA guidelines.

• Fabric finishers also tend to be small. Of 1,016 broadwoven fabric finishing firms in NAICS 313311 in 2002, only 30 (3 percent) had 500 or more employees.

• Only a few firms currently apply FR treatments to upholstery fabrics.

• The U.S. Census Bureau reported that U.S. upholstery fabric production in 2004 was 284 million square yards (which is the equivalent of 189 million linear yards).

• This production was 43 percent lower than 2002's reported production of 499 million square yards (332 million linear yards) of upholstery fabric.

• The number of looms in operation for the production of these fabrics totaled 2,610 at the end of 2004, down 20 percent from 3,098 looms at the end of 2002.

• Based on a survey of upholstered furniture manufacturers by Ciprus, Ltd., about 233 million linear yards of upholstery fabric were consumed in the production of household furniture in 2001. This total does not include leather and vinyl upholstery, which are estimated to have comprised about 30 percent of all furniture upholstery materials used in 2001. Therefore, total upholstery use for the domestic manufacture of residential upholstered furniture was about 333 million linear yards. Estimates of total annual upholstery fabric consumption based on average requirements for chairs and sofas/ loveseats are 225 million linear yards. According to industry sources, an average of approximately 7 linear yards of fabric is needed to upholster chairs and 11 to 15 yards are needed for sofas. Based on about 31.5 million annual unit shipments (of which perhaps about 53 percent are sofas, sofabeds, and loveseats and about 47 percent are other chairs), estimated annual upholstery material requirements are about 321 million linear yards (about 217 million yards for sofas, sofabeds and loveseats plus 104 million yards for chairs).

• The U.S. Census Bureau's Economic Census report, Upholstered Household Furniture Manufacturing: 2002, included information on the costs of upholstery fabrics and other materials used in the production of upholstered household furniture in that year. The report placed the delivered cost of woven cotton upholstery fabrics (excluding ticking) at $312 million and the delivered cost of other woven upholstery fabrics, such as those made of rayon, nylon, and polyester (excluding ticking) at $802 million. The combined total delivered cost of upholstery fabric of $1,114 million was about 22 percent of the total delivered cost of all materials used in upholstered furniture manufacturing in 2002 (which was, according to the Census Bureau, $5,107 million). Other upholstery cover materials include leather, which is not reported as a separate material category by the Bureau of the Census, and coated and laminated fabrics, which had a delivered cost of about $185 million in 2002.

• In its 2007 Annual Report, La-Z- Boy, the largest manufacturer of upholstered furniture in the U.S., reported that purchased cover materials (primarily fabric and leather) accounted for about 28 percent of the total cost of raw materials for its upholstery group.

• Until recent years, relatively little upholstery fabric was imported. A report by Keyser Ciprus, Ltd., estimated that 8 million linear yards of residential upholstery fabric were imported in 1997. That accounted for approximately 2 percent of total consumption of upholstery fabric for residential furniture production in that year. However, as noted above, foreign upholstery fabric production facilities (located primarily in China) have expanded operations and imports of upholstery fabrics have grown substantially.

• Much of the foreign production is from facilities that are owned or operated in partnership with U.S. textile firms. For example, Culp, Inc., reported that almost 60 percent of their sales of upholstery fabrics in their fiscal year ended April 29, 2007, consisted of fabrics produced in plants outside the U.S., compared to 17 percent of sales just two years before. Culp owns and operates four upholstery plants in Shanghai, China, and markets other fabrics from third party sources which are also located in China. The firm only has one remaining upholstery fabric plant in the U.S., down from fourteen in 2000. Culp's experience in shifting production to foreign plants has also been reported by other U.S. upholstery fabric manufacturers. In January 2007 Richloom Fabrics Group shifted production of its Berkshire Weaving upholstery line from its South Carolina plant to a facility in Shanghai. Quaker Fabric Corporation also entered into business agreements in recent years with Asian firms to produce fabrics it designs.

• Quaker estimated that, industry-wide, about 42 percent of total domestic upholstery fabric sales (excluding automotive fabrics) were imported in 2004, versus only 11 percent in 2002. The company's management believed it was likely that the trend continued, and it estimated that about 60 percent of furniture upholstery fabric sales were imported by the end of 2006.

• Quaker Fabric, which had long been a major U.S. producer of upholstery fabric, could not successfully adjust its operations to meet the recent market shifts, and the firm liquidated its operations in 2007.

• At least until recent years, exports of upholstery fabric were significant for many U.S. manufacturers. In the late 1990s as much as 20 percent of the upholstery fabric production by U.S. manufacturers in recent years may have been exported. As noted above, more upholstery fabric is being imported from China and other foreign sources in more recent years, and some major U.S. fabric manufacturers have established production facilities in China, or have established business relationships with Chinese firms to produce fabrics to their specifications and designs. These market changes could be expected to reduce exports by domestic firms from previous levels.

• There is a growing practice, especially for leather, to purchase fully cut and sewn parts from areas outside of the United States including but not limited to: Argentina, Brazil, China, Italy, Thailand and Uruguay. This trend should continue given the lower labor costs in some of these areas and other existing economic conditions.

• La-Z-Boy reports that importing cut and sewn leather parts results in savings of 10 to 20 percent compared to domestic purchases and fabrication of these parts.

• Culp reports that it rapidly expanded its cut and sew operations in its Shanghai plants.

Fiber and Fabric Trends

• CPSC-sponsored surveys of furniture manufacturers in 1981, 1984, and 1995, and commercial surveys in 1997, 2001, and 2006 provided information on two characteristics of fabrics: fabric type and principal fiber (or material) type. Fabric Type refers to commonly- accepted descriptions of the ways in which fabrics are manufactured or of their distinctive characteristics. For the period covered by these surveys, manufacturers increased their use of jacquard and dobby fabrics, and decreased their use of velvet fabrics. Usage of cotton prints and flocks fluctuated within fairly narrow ranges during the period, according to the surveys. Most upholstery fabric fibers are classified as cellulosic (e.g. cotton and rayon) or thermoplastic (e.g., polyester, polyolefin, and nylon); other materials used to make upholstery include vinyl (which is coated on a base fabric), wool, and leather. Based on the 2006 Ciprus Limited survey, cellulosic fabrics currently account for about 25 percent of upholstered furniture upholstery covering materials. Thermoplastic fabrics account for 45 percent; leather, wool and vinyl-coated fabrics account for about 30 percent (mostly leather). Review of the data on material types from the surveys conducted since 1981 indicates that the most notable changes over the years have been the increase in use of leather at the expense of both cellulosic and thermoplastic fibers. The Ciprus survey in 2001 found that about 30 percent of furniture covering materials used in that year was leather, significantly greater than found in the earlier surveys.\35\ Fabrics made from predominantly cellulosic fibers include heavier-weight fabrics (such as cellulosic jacquards and velvets) and lighter-weight fabrics (mainly cotton prints). Analysis of survey data since 1981 indicates that heavier cellulosic fabrics have usually comprised about 15 to 20 percent of all upholstery covering yardage. Surveys of furniture manufacturers in the last several years show the shift towards thermoplastic fabrics peaked during the period of the mid-1980's to the mid-1990's. Information provided to the CPSC by the Upholstered Furniture Action Council (UFAC) showed that a significant shift to greater use of thermoplastic fabrics began in the 1950's, and became more pronounced in the 1970's. An estimated 31.2 percent of furniture in use in U.S. households during the period 2002-2004 was covered with fabrics predominantly made with cellulosic fabrics; an estimated 50.2 percent were covered with predominantly thermoplastic fabrics, and 18.6 percent were covered with other materials (mainly leather, wool, and vinyl-coated fabrics).