published Saturday, August 27th, 2011

Mohawk Industries CEO says recovery years off

  • photo
    Melissa Kernea prepares to pick up a load of yarn off of a conveyor belt at Mohawk Industries, Inc. in Dalton, Ga., in this file photo.
    Photo by Staff File Photo /Chattanooga Times Free Press.

CALHOUN, Ga. — A full economic recovery could be years away since consumer confidence slipped following the country’s debt debate, the head of the nation’s biggest floorcovering company said Friday.

Jeff Lorberbaum, chairman and CEO of Mohawk Industries, called on political leaders to create confidence and “get out of the way” of job creation.

“We need government to create confidence through consistency,” he said at the Gordon County Chamber of Commerce’s first State of Industry event. “When you get uncomfortable, what do you do? You spend less.”

That decline in spending has hit manufacturers like Mohawk especially hard, as consumers worried about their jobs have chosen to hold off on expensive home upgrades like new floors and carpet.

Since homebuilding started to fall in 2006 and lenders restricted the availability of credit, flooring manufacturers have gone through “the largest decline in the history of the flooring industry,” he said. Carpet sales are down nearly 40 percent from the peak levels five years ago, Lorberbaum said.

“Government policies were put in place to help people own homes, and we thought it was a good policy,” he said. “We had people with almost no income who were able to buy houses. It was ridiculous.”

Then, “Lo and behold, you have to pay the piper sooner or later,” he said of the meltdown in the subprime mortgage market.

The flooring industry hit rock bottom in 2010, forcing plant closures and mass layoffs throughout Georgia’s carpet belt.

Flooring’s recovery has been further stymied by the rising price of petroleum, which is both the basic building block for creating carpet as well as a major cost of transporting flooring to customers.

Lorberbaum acknowledged, however, that the debt crisis has had the positive effect of forcing Congress to agree to tackle the growing national debt, a thorny subject that could result in spending cuts, tax increases or a combination of the two.

“Sometimes the only way to get everybody to agree is, you need a crisis,” he said.

FOREIGN CHALLENGES, OPPORTUNITIES

Though Mohawk itself is building plants in Mexico and Russia to take advantage of growing demand there, Lorberbaum said, domestic flooring industry is not as susceptible to international competition as other lines manufacturing.

The cost of shipping and storing tile, carpet and wood flooring forces international competitors to spend money on inventory management rather than plant efficiency, he said.

But he’s not resting easy.

The specter of another recession and new regulation could further dent demand and raise the cost of doing business in the U.S., he said.

“The question is, are we expecting another recession?” he asked. “Not many people believe that we are.”

GEORGIA OUTLOOK

Chris Clark, president and CEO of the Georgia Chamber of Commerce, admitted that some of the states surrounding Georgia had shortened the Peach State’s lead in manufacturing over the past decade, with the state losing some high-profile businesses like Volkswagen to Tennessee.

But Clark said Georgia is focused on creating good conditions for business, fighting new rules from Washington and fixing outdated state regulations.

“Everywhere we go, it’s the rules and regulations from Washington that are crushing our state,” Clark said.

“We’ve got to have regulatory reform not just at the federal level, but at the state level as well,” he said. “We believe manufacturing is key to the renaissance in this state.”

HOUSING

Weak housing growth and tight credit remain the biggest obstacle to the carpet industry’s recovery, Lorberbaum said. The Mohawk CEO said it could take “four to five years” to reverse.

But John Watson, former chief of staff to Ga. Gov. Sonny Purdue and principal at TPA Realty Services, said things already are improving.

What he called “dealflow,” an important measure of the number of loans being made by banks to homebuyers, developers and businesses, has been picking up.

“The only way to work through the surplus inventory is for the banks to shed the assets at a low enough cost and at a low enough basis so that the investor can make a buy,” he said.

Selling through foreclosed inventory is important, Lorberbaum agreed, but so is perspective.

“This is the same thing that happens in every cycle,” he said. “What’s abnormal is the depth and length of time. Instead of one to two years, it’s going to last three to four years.”

about Ellis Smith...

Ellis Smith joined the Chattanooga Times Free Press in January 2010 as a business reporter. His beat includes the flooring industry, Chattem, Unum, Krystal, the automobile market, real estate and technology. Ellis is from Marietta, Ga., and has a bachelor’s degree in mass communication at the University of West Georgia. He previously worked at UTV-13 News, Carrollton, Ga., as a producer; at the The West Georgian, Carrollton, Ga., as editor; and at the Times-Georgian, Carrollton, ...

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dennis said...

I am so tired of hearing these so called experts saying that the recovery is just going to take another year or two. We have been told that the last 5 or 6 years. So stop lying to the people. Folks we still have thousands of people without jobs and they have been unemployed so long that they have no idea when they are going back to work. There are no JOBS. Many of those people have lost everthing that they had. They were people just like me and you, working and living pay check to pay check. I work for a company that if you apply with them and you have been unemplyed for more than six months, your application is not even going to get looked at. I think that it is time for the goverment and all of the top ceo's to stop lying to the american people about the economy. I guess that they think that we are all stupid or blind. All these companies want are cheap labor, to pay no taxes, so that the can pay their top ceo's mulitmillions. Have you ever heard an offer from a ceo of a major company offer to take a pay cut so that his employees could see some of the same benifits that the ceo's enjoy. And they keep asking and wondering why the american people don't have any faith in these companies and there own government.Dam right I am mad. Mad at all three of the political parties because neither of them care about the people back home. All three parties should be so ashamed with the way they have acted and mind you, they do it where the whole world can see how they act like little children who can't share their toys. But nothing is going to change until this we get rid of the people at the top who says its may way or we will hold the rest of you back. I can't speak for no one but myself, but I can tell you that at the next election wheather it be a national, county, city election if you are in office I am going to try and help you stand in the unemployment line.

August 27, 2011 at 8:10 a.m.
Astropig said...

“We need government to create confidence through consistency,”

Maybe if companies like his would stop buying congressmen and senators and spent less time trying to manipulate the tax code to favor themselves,stifle competition and get corporate welfare they would have a sustainable,profitable business model.Later on in this puff piece, he chastises the government for encouraging home ownership among people that couldn't really afford it, but you didn't hear those words during the boom years. Back then people like him were raking in the cash and telling shareholders how smart they were in order to cash bigger bonus checks. Back in the early 'aughts, you couldn't find any business exec that thought that housing was an unsustainable bubble. They thought that prices would rise forever and with it, their pay and perks.

And why would any homeowner invest money in their place when companies like yours build all of your new plants in third world countries in a desperate attempt to eliminate jobs here and hire people that will work for starvation wages? You want us to make an investment in you,but you won't make an investment in the state that made you a roaring success.Tell us again how unemployed workers in this country and desperately poor workers in the countries that you relocate to can afford what you make. I'd like to hear how that works.Confident workers, Mr. Lorberbaum, workers that are not afraid that their way of life will be destroyed so that you can please Wall Street for another 90 days, will buy your stuff.

Memo for Mr. Lorberbaum- Government doesn't "create" anything but more government. If you would just realize that and stop waiting on another free lunch from Washington,maybe your company could prosper again.

August 27, 2011 at 12:13 p.m.
Wilder said...

WILLIAMS v. MOHAWK INDUSTRIES INC

Shirley WILLIAMS, Gale Pelfrey, Bonnie Jones, Lora Sisson, individually and on behalf of a class, Plaintiffs-Appellees, v. MOHAWK INDUSTRIES, INC., Defendant-Appellant.

No. 04-13740.

-- June 09, 2005

I. BACKGROUND

Mohawk is the second largest carpet and rug manufacturer in the United States and has over 30,000 employees.   According to the plaintiffs, Mohawk has conspired with recruiting agencies to hire and harbor illegal workers in an effort to keep labor costs as low as possible.1  For example, according to the plaintiffs' complaint

Mohawk employees have traveled to the United States Border, including areas near Brownsville, Texas, to recruit undocumented aliens that recently have entered the United States in violation of federal law.   These employees and other persons have transported undocumented aliens from these border towns to North Georgia so that those aliens may procure employment at Mohawk.   Mohawk has made various incentive payments to employees and other recruiters for locating workers that Mohawk eventually employs and harbors.

Furthermore, “[v]arious recruiters, including Mohawk employees, have provided housing to these illegal workers upon their arrival in North Georgia and have helped them find illegal employment with Mohawk.”   Additionally, Mohawk knowingly or recklessly accepts fraudulent documentation from the illegal aliens.

The plaintiffs further allege that Mohawk has concealed its efforts to hire and harbor illegal aliens by destroying documents and assisting illegal workers in evading detection by law enforcement.   According to plaintiffs' complaint, Mohawk takes steps to shield those illegal aliens from detection by, among other things, helping them evade detection during law enforcement searches and inspections at Mohawk's facilities.

According to the complaint, Mohawk's widespread and knowing employment and harboring of illegal workers has permitted Mohawk to reduce labor costs.   Mohawk has done so by reducing the number of legal workers it must hire and, thereby, increasing the labor pool of legal workers from which Mohawk hires.   This practice permits Mohawk to depress the wages it pays its legal hourly workers.

Finally, the plaintiffs allege that Mohawk is “able to save substantial sums of money” by paying its workers reduced wages.   Furthermore, Mohawk knows that illegal workers are less likely to file worker's-compensation claims, and, therefore, Mohawk is able to save additional monies.   According to the plaintiffs, these benefits constitute unjust enrichment under state law.

August 27, 2011 at 8:48 p.m.
Wilder said...

IN THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT


No. 07-15208


D. C. Docket No. 07-00049-CV-HLM-4 NORMAN CARPENTER, Plaintiff-Appellee, versus MOHAWK INDUSTRIES, INC., Defendant-Appellant

I. Background

Plaintiff/Appellee Norman Carpenter (“Appellee”) initiated this action on March 15, 2007 in the United States District Court for the Northern District of Georgia against Defendant/Appellant Mohawk Industries, Inc. (“Mohawk” or“Appellant”), and also against various employees of Mohawk Industries, Inc.,alleging that he was terminated in violation of 42 U.S.C. § 1985(2) and various Georgia laws.

Specifically, Appellee contends in his complaint that he reported to Mohawk’s human resources department that several temporary employees, hired by Mohawk through a temporary employment agency, were illegal aliens. After making his report, Appellee was required to meet with attorney Juan P. Morillo, who represents Mohawk in a separate lawsuit,Williams v. Mohawk Industries, Inc., Civil Action File No. 4:04-cv-0003-HLM. In the Williams lawsuit, a group of current and former Mohawk employees filed a class action lawsuit against Mohawk in the District Court for the Northern District of Georgia, alleging that Mohawk conspired to place illegal aliens to work, in violation of federal and state RICO laws.

Appellee alleges that the meeting between him and attorney Juan P. Morillo was designed to coerce him into recanting his report, which Appellant knew would be damaging to its defense in the Williams action. Appellee refused to recant his report, and he was terminated the day after the meeting. Appellant’s stated reason for terminating Appellee was because it had discovered that Appellee was committing immigration crimes by harboring illegal aliens.

August 27, 2011 at 9:12 p.m.
Wilder said...

If given the option of purchasing any floorcovering product Mohawk Industries produces, or having dirt floors, I would choose the latter.

August 27, 2011 at 9:20 p.m.
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