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Drying off around the world

Step out of your shower in Las Vegas or Paris, and it's highly likely the towel you dry yourself with was manufactured in Arad.

March 13, 2008 16:13
Drying off around the world

towel factory 88 224. (photo credit: Courtesy)

The year was 1940, and Paul Heiman, a refugee from Nazi Germany, found himself broke and unemployed in Cincinnati, Ohio. Unable to find a job, Heiman implemented a traditionally Jewish solution: he began buying things from one person and selling them to another. Linens were Heiman's product of choice - buying and selling textiles from the family's small apartment. He began to specialize, focusing on supplying hospitals with all the textiles they needed - sheets, pillowcases, towels, blankets and curtains. During his lifetime, Paul Heiman remained strictly a wholesaler. He bought and sold, not manufacturing anything himself. The change began in 1973, when Paul's grandson, Gary Heiman, just 21 at the time, left the US to come to Israel to serve as a volunteer during the Yom Kippur War. The Heiman family had always been ardent Zionists, but Gary's experience during the war caused him to make two critical decisions: first, to stay in Israel, and second, to build an industry here, creating jobs. He convinced his father that opening a factory in Israel would be both a sound business venture and a benefit to embattled Israel. "It was just a gut feeling, a seat-of-the-pants decision," says Shuki Kuchinsky, CEO of Arad Textile Industries, the subsidiary of Heiman's company that resulted from Gary's decision. "At first, they weren't sure what they would manufacture here. 'How about towels?' Gary suggested. That's where it started," Kuchinsky recalls. It took almost four years to implement the decision. "Gary was just a kid, born the same year I was, 1951. He had to go to Switzerland to be trained in textile manufacturing at the company where all the machinery was being made. Then they had to find a place to locate. They settled on Arad. Avraham "Baiga" Shochat - who later became finance minister - was mayor of Arad at the time, and he convinced him Arad was ideal. It was a development town, so some government financing was available. Arad was a dusty town in the middle of the Negev, with only about 9,000 residents. They picked a spot for the factory out in the middle of nowhere, and built an 18,000-square-foot building that stood all by itself. When it opened in 1976, there were 30 employees, working in shifts of a dozen at a time." Success was neither automatic nor immediate, Kuchinsky says. "Gary had a lot of problems - he was maybe too honest. Israelis were cheating him left and right. After five years, they came to the point that they either had to close, or find someone else to manage it. Dov Lautman had founded Delta Textiles in 1975, and he came to Gary with a 'let's make a deal' proposal. He told Gary he wanted to buy half the company for just $1, but then he'd also invest in new equipment, expand the factory and also bring in new management. The two would own the company 50-50. Gary agreed, and it turned out to be a very fruitful cooperation. They considered listing it on the Tel Aviv Stock Exchange in 1993, but decided against it. Instead, Gary bought all the shares from his brothers and Delta Textile, and now owns it himself." Kuchinsky came to Arad Textiles in 1981, along with Lautman's people. "I was a young engineer, and we started to work. We only went home to spend time with our families and to sleep, and it took two to three years before we started to see light at the end of the tunnel. Even though our main objective was to sell towels to the US, for the first five years we didn't ship them even a single towel. Gary's father was passionate about quality, and until he was convinced that we could consistently supply a high quality product, he wasn't prepared to deal with us. I remember trying to convince him that we knew what we were doing. I took him to the factory - we'd just completed our second expansion, so part of the factory floor was empty, without even a loom. 'But what will we fill this building with?' he asked. "'Where will the orders come from?' I convinced him that there were plenty of markets in the US and Europe. We met every six months, and finally he began to trust us. By 1990, we were shipping towels to the US, in fact, between 1987 and 2000, we multiplied our production every two or three years." In 1988, at his father's request, Gary Heiman returned to Cincinnati and took over as CEO of the parent company, Standard Textiles. Still a closely-held company today, Standard ranks as the world's largest supplier of industrial textiles to the European market. Its Israeli subsidiary, Arad Textiles, Ltd, is one of the largest towel manufacturers in the world. Step out of your shower in Las Vegas or Paris, and it's highly likely the towel you dry yourself with was manufactured in Arad. It's not just towels that come from Arad, either, but also sheets, blankets, bath mats, robes and other specialized items for hotels and hospitals worldwide. In Israel, Arad Towels supplies the IDF, the Israel Prisons Service, the Health Ministry and 70 percent of the country's quality hotels. Walking through the factory, one sees thick, lush terrycloth towels - six million a month - tumbling out of the industrial dryers, ready to be folded and shipped to companies all over the world. Towels begin as cotton thread wound on man-sized spools, are woven to order, bleached, dyed, washed in Tide detergent - another canny corporate arrangement - and are then folded, packed in cartons, loaded onto trucks and shipped out. On any given day, towels bearing the corporate insignia of hundreds of customers - Crowne Plaza, the United States Department of Veteran Affairs, the University of Kansas Hospital, Emory Healthcare, St. Luke's Roosevelt Hospital Center - roll off the line. Their biggest order was for several million towels, Kuchinsky says. The smallest? "Fifty bath mats." Running a major manufacturing industry in Israel is not for the faint of heart. Manufacturers here need contingency plans to deal with unique local issues - war, labor strikes that shut down shipping for weeks, and a very diverse labor force, many of whom are so new to the country that they don't speak Hebrew. Beyond that, Israeli industries can't afford to be "just as good" as the competition - they have to be better. Arad Textiles' business tagline: "Uncommon ideas. Smart solutions" describes how the firm turned liabilities into assets, and in the process, cornered the market. One of the company's earliest innovations was to supply hotels with "room-ready" towels. "Believe it or not, before we came along, the standard way of selling towels to hotels was to sell them raw - not pre-washed or pre-shrunk. Hotels would take delivery of new towels, but then they'd have to send them out to be laundered and shrunk before they could go into guest rooms. We were the first to sell towels 'room ready,' which was a big plus. Suppose you're a hotel at the Dead Sea, with an unexpectedly high guest list. You need towels within 24 hours. You call us, we ship, and when the towels arrive, the hotel staff take them directly from the packing cartons and put them in guest rooms. Today, room-ready towels are the industry standard, required by all hotels. But we were the first to make that change." To combat the issue of port strikes, Arad Textiles again found a smart solution. "We never, ever, let a customer down. That's our first priority, Kuchinsky says. "If the port is closed, we ship by air, at our expense. We spend a lot of money to maintain our customers because for us, being a reliable supplier is critical. If a war breaks out in Israel, it doesn't affect our European customers at all - to make sure, we maintain warehouses in London, Belgium, Switzerland, France and Germany, with a back inventory of anything they might need. Even during wartime, we can supply our European customers within 24 hours." Running the factory like a family prevents another set of problems, Kuchinsky maintains. "Many of our employees started working at about when I did, in the 1980s. We're family. We all know each other. We don't even have a research and development unit in Arad - we don't need it. All our employees are involved in R&D. What I'm selling this year won't be popular next year, so we're constantly looking for something new, and our employees are key to keeping us innovative." That attitude infuses company loyalty. "During the 2006 war, our factory in Migdal Ha'Emek was in the area where bombs were flying. But no one missed a day. When we had our 30th anniversary last September, we put together a company book, with color photos of each and every one of our 600 employees. We had a great celebration, a gala for 1500 people. Gary and his family came from Cincinnati. It was a great evening." Several employees mention other, less publicized, acts of kindness. "We've had two employees who needed kidney transplants," says Fanny Edry, Kuchinsky's assistant since 1983. "We took care of them, paid their expenses, while other employees donated vacation time. Another time, the daughter of one of our workers had a very rare disease, for which the only treatment was in Cleveland. Twice, Gary paid to fly her there, for a month each time. She's 19 now, and doing well." Every Israeli disaster, from war to weather, prompts a donation of towels to any institution that needs help - and frequently food and diapers, too. Employees respond in kind. "Pinchas, our weaving manager, has been with us since the first day," Edry recalls. "When Gary was visiting, Pinchas took him to show him his new home. He told Gary that if it hadn't been for him, he never would have had it. Gary was very touched." The Negev region supplies most of the work force, about half of whom are new immigrants from FSU countries and Ethiopia and the other half Jewish Israelis, Arabs, Druse and Beduin. "About 60-70 Beduin work here now," Kuchinsky says. "All men. We experimented and built a factory in a Beduin village where we'd employ only women, but I finally had to give up. It didn't work; they weren't quite ready yet. But we just opened a new class for Beduin who served in the army. They have [a high school] education, and now we offer them training and work. We started with 24 in the class, it dropped to 16, and we hope ultimately 10 will qualify. We teach basic textile techniques, English and computers." Utilizing international trade agreements for advantage is another Kuchinsky technique. "We also have three factories in Jordan, employing about 700 people. That was a gift of president Clinton," Kuchinsky laughs. "Part of the peace agreement created a 'QIZ,' a Qualified Industrial Zone, in Jordan. So if you have a product that has 8% value added [tax] in Israel, and 11% value added in Jordan, you can sell it to the US with no quota and no duty. It's a boon to Jordan, because we're a huge employer and their whole economy is just a tiny fraction of Israel's. And it's great for us, because it allows us to compete with the Far East on cost." The family nature of the business extends all the way up and down the corporate structure. "Until just a couple of years ago, Gary still came back for army reserve duty, serving as a paramedic on helicopters," Kuchinsky says. "He says when he comes here, he feels at home. He insists on speaking Hebrew. You speak to him in English, he answers in Hebrew." Gary's wife, Kim, is also involved in the company as Senior Vice President of Decorative Products. In Israel, Kuchinsky's wife, Noa, has embarked on a new venture entirely. "Two years ago we decided to play in the biggest playground in the world [retail], and Noa, who has a Masters in marketing, is doing the designs. She began designing extra-luxury home products for a chain of retail stores we're calling, 'Bed, Bath and Home.' So far we have six stores in Israel. Exporting? Soon, we hope." What's next for Arad's biggest industry? "We're running at 100% capacity, now," Kuchinsky says. "We're expanding the factory again. A marketing agreement with a major US retailer is in the works." The small business started by a Holocaust survivor in the family apartment has gone big-time. From the first Israeli factory of 18,000 square feet, it's now outgrown the latest expansion of 550,000 square feet. But still, Gary Heiman's Standard Textiles and its Israeli subsidiary, Arad Textiles, remain very much family businesses.

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