Road to Reform Began at Textile Factory
In September, 1989, Du Pont Co. executive Richard Warburton was chatting with a government official in Sydney during a meeting of the Australian Manufacturing Council. He casually mentioned that Du Pont could probably operate a particular Australian-owned textile factory without the $35-million annual public subsidy it needed to stay afloat.
The official’s eyes lit up. “You really mean that?” he told Warburton, chairman of Du Pont Australia-Du Pont New Zealand Ltd.
That was the start of what turned out to be a historic arrangement between a foreign firm and the Australian government in helping transform the nation’s inefficient and highly protected industries into lean global competitors. Along with autos and steel, officials have targeted the textile industry for restructuring through reduced tariffs and export promotion.
With the government official acting as go-between, Warburton met with J.G.L. Industries in November, 1989. Seven months later, Du Pont announced the acquisition of J.G.L.’s nylon filament manufacturing plant for $150 million.
In the first deal of its kind, Du Pont received $46 million from the government as a one-time sum to “kick-start” the venture, Warburton said. Normally, the government would have had to pay the plant, Fibremakers, as much as $256 million in public subsidies through 1995.
Without the subsidies, the plant was losing $2.5 million a month as it struggled with outdated equipment and a bloated work force.
“They were a local firm, a more entrepreneurial firm. They didn’t have access to world markets, world supplies or technology,” Warburton said.
The Delaware-based maker of chemical and textile products initiated a series of sweeping changes. With the prior agreement of the unions and government, Du Pont laid off 350 people, nearly a quarter of the work force.
Then it shut down the plant for two weeks to improve safety standards and train each worker in them.
Du Pont introduced new management techniques, moving toward a “participatory management system instead of the Theory X, boss-tells-labor,” Warburton said.
The firm also plowed $12.8 million into state-of-the-art equipment--and it has started to pay off.
As a result, Warburton projects that Fibremakers will break even by the third quarter of 1991, despite the Australian recession. By 1992, Dupont expects profitability. After that, “we’ll be seriously looking into export markets,” he said.
“It’s the sort of thing I think Australian industry can do a lot more of: Boost those practices to get Australia back to world competitiveness,” Warburton said.
