TEXTILES: Hot Pants, Cold Comfort

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Hit by a one-two-three punch of changes in fashions, imports from Japan and general economic uncertainty, European manufacturers of synthetic fibers are suffering. Many of their plants are working at only 70% to 80% of capacity. At that level, the profits of older and smaller plants have been wiped out. Even such giants as Britain's Courtaulds and Imperial Chemical Industries, France's Rhone-Poulenc, Germany's Farbwerke Hoechst and Italy's Montedison have been weakened by financial fibrosis.

The Netherlands' AKZO, for example, is laying off more than 6,000 workers, a draconian measure that has raised questions in the Dutch Parliament. The move has also caused Dutch, German and Belgian labor leaders to plan a joint committee to monitor AKZO's future management decisions. U.S. companies in Europe have been hurt too. "Very few firms, European or American, are making much money out of fibers," says a Monsanto executive. "The European industry has double-knitted itself into a corner."

The Europeans expanded capacity rapidly in the late 1960s, but their new plants started spinning out fibers at precisely the wrong time. U.S. imports of European fibers have sagged, partly because last year's currency realignments raised the dollar price, partly because U.S. firms are producing a larger percentage of the polyester filament used in popular jersey-knit textiles, previously a prime market for the Europeans. Last year also, when the Nixon Administration pressured Japan into clamping "voluntary" restraints on textile exports to the U.S., the Japanese redirected much of their sales drive to Europe. In Britain, Japan has won 20% of the market for some kinds of man-made fibers v. 2% in 1970. The Japanese assault coincided with a temporary European economic slowdown that intensified competition and forced manufacturers to cut prices.

Changes in taste have also crimped demand. Hot pants, short skirts and teeny bikinis use fewer fibers than clothing did in the age of the coverup. Even European affluence can work against the industry. The spread of central heating encourages men to wear lightweight suits; as bedrooms become warmer, more people sleep in the raw, thus snipping away at the pajama market.

One traditional European response to such troubles has been to form a cartel to restrict production and raise prices, but that way out is no longer easy. Last March the West German Cartel Office fined nine German companies $15 million on charges of fixing prices and sharing markets. The companies are appealing, but the Common Market's trustbusters are studying the case to see if the nine also should be brought before the European Court of Justice in Luxembourg. The companies may escape further chastisement, but for reasons that can give them only cold comfort. The cartel was terribly inefficient: prices fell, and markets were chaotic instead of orderly.