Imagine the return on investment that Berkshire Hathaway will have to realize in order to repay its monumental investment. Many accountants have poured over the financials of Shaw and seen the company’s considerable opportunity for expanded profits. Why else would a takeover company be interested in entering the floor covering industry? Outsiders recognize the low profit margins and see vast potential to capitalize by entering our industry.
So consider the year 2000 as a turning point for the floor covering industry. By complementing its existing holdings, including ceramic tile companies (Justin Industries, Featherlite Building Products and American Tile Supply) and retailing concerns (Nebraska Furniture Mart, Jordan’s Furniture, Star Furniture Stores and RC Wiley Home Furnishings), Berkshire’s successful entry into carpet manufacturing could well stimulate greater Wall Street interest and investment in the floor covering industry.
Think about all the different programs that could be implemented with increased funding. Consider brand name recognition marketing. Consumers still think DuPont produces carpet, rather than the fiber used in its manufacture. Tapping the power of this type of marketing is sure to have a dramatic effect on the consumer.
In 1998, carpet manufacturers (under the Carpet & Rug Institute umbrella) tried unsuccessfully to unveil a consumer program that would raise the level of the entire industry. Unfortunately, they pulled the plug on the program before it had a chance to be truly effective. In the end, the dollars earmarked for the CRI program were diverted to the individual programs of each participating carpet manufacturer.
More money could unlock the door to new carpet trends and technologies. Lately, the industry has been very stagnant in terms of creating new innovations and styling to spur increased consumer demand. I believe Berkshire’s entry into carpet manufacturing could constitute the push the industry needs for greater expansion and prosperity.
The entire industry, along with the shareholders of Shaw, should be happy with the latest news. But it’s hard to overlook the irony in seeing Bob Shaw and Shaw Industries, a company with vision and an ability to expand its market share and dominance through acquisitions and growth, become the acquisition target of one of the world’s strongest and most successful investment holding companies.