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Eye on inflation: Flooring industry meets economic threats head on

June 11/18, 2018: Volume 33, Issue 26

By Ken Ryan

 

The flooring industry is operating amidst significant inflationary pressures, the likes of which haven’t been experienced since the end of the Great Recession. In fact, the U.S. Bureau of Labor Statistics reported in June that inflation climbed 2.8% in the last 12 months to its highest level in six years.

Inflation impacts all industries, including flooring, which is heavily dependent on raw materials and transportation—both of which have endured substantial cost increases.

“Inflation is a real business challenge that is facing Mohawk and many other industries today,” said Brian Carson, president, Mohawk Flooring N.A. “We hear about it in the newspapers, on TV, everywhere. We see it in our personal lives when we go to the store, the restaurant and even the gas station. The good news is our economy has strengthened over the past few years, but that strength has created constraints in many areas of our businesses—from lumber and petrochemical materials in our products, to transportation and labor to produce and deliver them.”

In response, suppliers across the board are announcing significant price increases in products. Others along the supply chain have acted in kind, passing along cost increases to their end users. At the same time, companies are working to maximize efficiencies to better withstand an inflationary period that some believe will be the new norm.

“If you have only been in business since 2006, you haven’t seen inflation—we have been in a deflationary period,” said Tim Baucom, executive vice president of the residential division of Shaw Floors. “Since the Great Recession we’re feeling legitimate inflationary pressures for the first time. Going forward, we have to manage and lead with an inflationary mindset rather than a deflationary mindset, because we are moving toward a period like in the early ’80s where even if you are making significant improvements in product, you will have to raise prices to maintain profitability, so you can reinvest in your business; otherwise, you will fall behind.”

Like other manufacturers, Armstrong Flooring has implemented price increases and surcharges in cases where it can no longer absorb the effects of inflation. According to Steve McLean, director, global procurement, the company is proactively working to manage the impact of inflation primarily in lumber, resilient raw materials and transportation costs. “We consistently monitor basic energy, petrochemical feedstocks, key raw material markets and macro-economic indicators globally to understand pricing trends. This enables us to identify risks and opportunities in the market. Our efforts include negotiating with suppliers, particularly where prices are not warranted by market dynamics. We also leverage the extensive global supply base we’ve built up over decades to give us flexibility in sourcing.”

Distributors in the middle

Flooring wholesalers feel the pain of inflation as acutely as any member of the supply chain, as they have faced steady margin erosion even while looking internally to control costs. The consensus among several of the top 20 flooring distributors is the consumer of any goods or services should bear the cost of inflation. Accordingly, wholesalers typically pass along a portion of their increased input costs to the channel, much as their various suppliers do as well.

Raising prices or kicking the inflationary can down the road is not enough, however. At the same time, both distributors and their channel partners are working together to drive efficiencies. That’s according to Scott Rozmus, CEO of FlorStar Sales, a top 20 wholesaler based in Romeoville, Ill. Whether it involves finding lighter-weight (but still protective) packaging, reviewing and optimizing delivery routes, introducing additional technology to improve the speed and accuracy of order entry, or otherwise simplifying the business process, he believes any activity that reduces cost provides an opportunity to pass less along. “While we certainly are committed to such efficiencies, at the end of the day much of inflationary supply chain pressure has to get passed along to that end consumer of the goods or services.”

As with others, Haines has certainly dealt with cost increases, particularly in the transportation arena where ELD (electronic logging devices) mandates have caused a significant contraction of capacity. The industry’s largest wholesaler has worked over the past three years to find ways around what was then a projected increase in costs.

“As this forecast has become reality, these plans are helping us,” said Michael Barrett, president and CEO, Haines, Glen Burnie, Md. “We have worked to engage companies such as JB Hunt and CH Robinson to assist us contractually to ensure our costs are kept under control. On the delivery side, we have a multi-year contract with moderate escalators that has aided us in managing through the cost component of transportation. Companies like Hunt also have much greater capability to ensure our driver pool is maintained through their capabilities in sourcing and hiring drivers. The one variable that does affect us and others is fuel. As fuel continues to rise, we will have to address the cost impact of this charge. On the inbound freight side, the positive impact that CH Robinson provides is the ability to find capacity needed to move freight. We are seeing costs escalate here as well and we continue to monitor to ensure we can achieve our goals.”

Both of these approaches are within Haines’ business model. What is somewhat out of its control is manufacturer price increases. As Barrett explained, “[Manufacturers] are balancing all the transportation cost issues but are feeling pressure on energy costs to run factories as well as raw material cost increases. In these cases where price increases are happening, we are having to pass them through. We continue to look for ways to keep our costs under control, so we can minimize any internal need to raise fees or other costs. We will maintain that approach for the foreseeable future.”

To a large degree, increases in raw materials and transportation costs are part and parcel of doing business in any industry, flooring included. What’s different now as opposed to, say, six years ago is the pace of inflationary pressure, executives say.

Several distributors began working on inflationary strategies long before inflation began creeping into the picture. Madison, Wis.-based Jaeckle Distributing, for example, has had a fuel surcharge in place for many years to help cover the fluctuations in costs that can’t always be addressed through constant price revisions. That helps keep things more stable so the company doesn’t have to reissue standard pricing as frequently. “That said, price changes are happening more frequently these days, and it can be a challenge to stay on top of things and keep all pricing updated,” said Torrey Jaeckle, vice president. “We’ve had one vendor who has increased prices three times already this year. Given the fact that product might only be ordered by a customer once a month or so, it can be confusing for customers to be getting billed different prices on every subsequent order. It also creates issues for distribution and retailers who might bid a job several months in advance only to find costs have changed significantly once the order actually comes through.”

What’s more, he added, vendors seem to be giving less notice on price increases now, which gives distributors less time to implement the increases, which means they are absorbing some increases at least for a short period of time until they can work through the logistics of implementing it on their end. “In addition, pricing has become much more complex over the past several years, which increases the time to implementation,” Jaeckle said. “Many prices are now negotiated between the retailer, distributor and manufacturer, and when prices change trying to get all three of us on the same page with regards to new pricing going forward can be a challenge and time consuming.”

Adleta, a top 20 wholesaler in Carrollton, Texas, has absorbed as much as it could, according to John Sher, president. For the first time in years it has been forced to increase its delivery costs. “However, our one-charge drop fee is still a tremendous value,” Sher explained. “Our customers have told us the consistent Adleta delivery on our trucks with Adleta-employed drivers trained to handle flooring products is one of the value adds we bring.”

Exacerbating the inflationary pressures in 2018 are increases in labor—both in hiring and retaining—insurance premiums and fuel costs. “Workers costs have gone up; entry-level costs have gone up substantially in the last three to five years but really in the last year,” said Jeff Striegel, president of Elias Wilf, a top 20 distributor based in Owings Mills, Md. “The fact is labor, insurance and fuel all continue to rise. This time it’s for real.”

Given the tight labor market, several manufacturers say they have been forced to pay bonuses for new hires and to retain quality employees.

Retailers react

To no one’s surprise, flooring dealers say they are experiencing the same pressures as everyone else. Strategies to combat the inflation differ somewhat, however. Nick Freadreacea, president of The Flooring Gallery, Louisville, Ky., said some material costs can be caught upfront and passed on in some cases or not at all. “Retail prices are usually easily adjusted, but builder/multifamily can be hard to change more than once a year,” he said. “Freight and fuel surcharges are those hidden cost that are harder to recover, and those items really eat into the bottom line of a company.”

Adam Joss, co-owner of The Vertical Connection Carpet One, Columbia, Md., said inflationary pressures haven’t negatively impacted his business since the increases get passed on to the consumer anyway. “Personally, I think there’s more to it than just labor shortages and raw material costs—it’s also a result of years of consolidation.”

In talking to many of its dealer partners, Mohawk’s Carson said he knows they have seen inflation in their costs as well—things like installation labor and rents. “At Mohawk, we are constantly investing in our plants to innovate new products, but also to innovate our processes to drive efficiencies and lower our costs and to do our best to offset inflation. Despite these efforts, sometimes the input costs rise to a degree where we have no alternative but to pass them along. I know that’s difficult, but it’s a reality in today’s markets. I think these pressures of additional inflation will be with us for a while.”

Keeping its plants financially healthy is the fuel that allows for continued investment in new products, new capacities, new services and new efficiencies, Carson added. “These investments in innovation are vital to all our businesses whether the dealer, the distributor or the manufacturer. Mohawk will always be committed to continuous innovation.”

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NWFA and Mohawk Flooring launch partnership to promote NWFAU

Screen Shot 2016-07-28 at 4.31.52 PMSt. Louis—The National Wood Flooring Association (NWFA) recently launched a new partnership with Mohawk Flooring after they adopted NWFA University into the Mohawk University to fulfill wood floor training for their customers.

“Mohawk is pleased to be working with the NWFA in providing our valued retail partners with best-in-class training focused on successfully selling, positioning and installing Mohawk’s hard surface products,” said Susan Hahn, Mohawk’s director of new business development. “We look forward to growing this partnership throughout 2017 as we bring value to the marketplace and to our customers through this integrated training program.”

Last week, Brett Miller, NWFA vice president of education and certification, and Stephanie Owen, NWFA director of education, attended the Mohawk Flooring show in order to launch this new partnership as well as to run training demonstrations on the show floor.

“Everyone who came by our booth was very excited about the opportunity to get their employees engaged with online wood floor training,” Miller said. “The same theme was continuously discussed, ‘everyone wants wood floors, we just need to feel confident selling them the right products.’” Owen added, “NWFAU gives them a consistent point of education and information to be sure everyone is on the same page.”

To learn more about NWFA University and the training opportunities available in 2017, visit NWFA’s website.

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Mohawk Flooring and Susan G. Komen partner to cushion fight against breast cancer

screen-shot-2016-10-13-at-10-10-00-amCalhoun, Ga.—Mohawk Flooring has expanded its support of the 2016 Susan G. Komen 3-Day, placing more than 6,000 pieces of SmartCushion under the sleeping bags of walkers and crewmembers in cities across the country. In this three-day event held in seven cities, walkers cover 60 miles to accomplish one mission: a world without breast cancer.

Last year Mohawk provided 800 cushions for the Philadelphia 3-Day; this year soft, durable, eco-friendly SmartCushion will be waiting for weary walkers in all seven cities holding the event. The Susan G. Komen 3-Day walk is a critical fundraising event that has raised $810 million for breast cancer research, education, early detection and treatment since its inception in 2003.

More than 243,000 people will be diagnosed with invasive breast cancer in 2016. This statistic hits home for Mohawk president Brian Carson, whose wife was diagnosed in 2012. Carson recalls, “Our lives changed overnight. The diagnosis was devastating not only for my wife, but our entire family. I realized it is all of our responsibility to encourage our loved ones to get checked regularly.”

susan-g-komen-3-dayThe company encourages its retail partners to become involved as well. “What can you do through our products, or through your business, to help drive breast cancer awareness and support for breast cancer prevention in your own communities?” asked Carson. “If there’s an opportunity for you to help with the cause, I would encourage you to do so.”

Mohawk retailers across the country have long been committed to the fight against cancer. Since 2001, Mohawk retailers have raised millions of dollars through Mohawk’s Decorate for the Cure/Specify for the Cure programs, in which Mohawk donates proceeds per square yard of SmartCushion and KaraStep carpet cushion sold—to Komen.

October is Breast Cancer Awareness Month, and throughout the month, Mohawk will be focusing on education in all of its social channels, including informative posts shared on Mohawk’s blog Creative Home. A video, “2016 Mohawk #CushiontheFight,” is now available on YouTube.

mohawk-smartcushion“Breast cancer awareness content has been customized for Mohawk retailers to post and share as well on their social platforms,” said Mollie Surratt, senior director of public relations, content and social media at Mohawk. “So many of us have been affected by breast cancer and this cause is perfect for reaching Mohawk’s target audience demographic to raise awareness while sharing our brand story.”

For more information on Mohawk’s Decorate for the Cure program, visit MohawkFlooring.com.

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Mohawk Flooring wins Promoboxx’s Aligned Awards

screen-shot-2016-10-04-at-9-22-12-amBoston—Mohawk Flooring won the 3rd annual Aligned Awards at Promoboxx’s Aligned Conference for its Love Your Floor Sale campaign. Aligned brings together brands across industries to share marketing strategies that empower local retailers and was created by Promoboxx. The Aligned Awards recognize the best co-branded digital campaigns that connect and align a national brand with its local retailers.

Mohawk Flooring’s winning Love Your Floor Sale campaign delivered in-market consumer leads to local retailers and resulted in a great sale season for the company’s retail partners. Retailers promoted digital content and received paid ad dollars for Facebook and mobile display digitally via Promoboxx Local Ads. The content was shared across retailers’ digital channels and led consumers to a mobile-optimized landing page, which highlighted their local flooring store alongside the brand promotion and lead-gen form.

As the driver behind Mohawk’s campaign, Mollie Surratt, senior director of public relations, social media and content marketing at Mohawk, said, “Mohawk is proud to have been the first in the flooring industry to empower our valued retailer partners through compelling social content campaigns in Promoboxx. Not only does Promoboxx represent the Mohawk brand well, the platform drives affinity, engagement and, most importantly, revenue to our retail partners, all while making their lives easier by providing localized digital marketing solutions at the click of a button. We’re proud to work with Promoboxx and honored to win the 2016 Aligned Awards.”

For additional resources, including video interviews, view the Press Resources page.

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Mohawk forms industry’s first partnership with Yelp

YelpElevateCalhoun, Ga.—Mohawk has forged a new partnership to provide its aligned retailers an enhanced online presence on Yelp, called Mohawk Elevate powered by Yelp. It’s the first marketing partnership of its kind between Yelp and a flooring manufacturer.

“Mohawk is the industry’s digital leader,” said Mollie Surratt, senior director of public relations, social media and content for Mohawk. “So this was a natural step for us—teaming up with Yelp, the clear leader, to give our retailers additional digital support in the reputation management space. Yelp will help our retailers connect with thousands of consumers who trust the Yelp review process to guide them to quality businesses and products.”

Yelp’s purpose is to connect people with great local businesses. It does this by offering business profile pages so consumers can locate businesses, visit them and then post reviews of their experiences. By the end of Q1 2016, Yelpers had written more than 100 million local reviews.

Visitors access Yelp via their mobile devices (approximately 91 million a month on average during Q1 2016) and their desktop computers (approximately 69 million a month during Q1 2016). Home and local services businesses account for 12% of reviewed businesses on Yelp by category.

According to Yelp, 78% of consumers turn to review sites of its kind to find local businesses, and four out of five users visit Yelp because they intend to buy a product or service. Yelp helps consumers make buying decisions and drives local purchases because consumers trust Yelp reviews as the most influential, highest quality and most trustworthy reviews online. That trust is embedded in Yelp’s recommendation software, which protects consumers and business owners by highlighting the most trustworthy, useful and reliable content on Yelp.

In addition to the Yelp website and mobile app, Yelp reviews are syndicated to a number of major review sites and search engines including Apple Maps, Siri, Amazon, Yahoo, Bing and Mapquest.

 

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Mohawk captures gold Stevie award for SmartStrand campaign

Stevie Awards LogoCalhoun, Ga.Mohawk Flooring’s yearlong SmartStrand Forever Clean launch campaign has been awarded a gold Stevie award in the American Business Awards program, one of the nation’s most celebrated marketing and business recognition programs. The award is one of three national honors garnered in 2016 by the company’s far-reaching durability test in partnership with the Tough Mudder Challenge.

“This campaign was a thoughtful, ambitious approach to sharing SmartStrand features and assets with the world, and these national awards are a result of the true ingenuity of our Mohawk associates,” said Mollie Surratt, senior director of public relations, content and social media at Mohawk.

The Stevie Business Awards program attracted more than 3,400 nominations. Mohawk Flooring’s gold Stevie award was earned in the New Product or Service Introduction of the Year category, in which only one Gold honor was presented. The award was announced during an awards gala held in New York on June 20.

At the heart of Mohawk Flooring’s award-winning campaign was a multifaceted sponsorship of the Tough Mudder Challenge torture test, in which new SmartStrand carpet was put “to the test” in the internationally known obstacle races. Twenty feet of SmartStrand carpet was rolled out on eight Tough Mudder courses where it was stomped on by more than 10,000 muddy participants at each location. The carpet was then shoveled out of the mud and successfully cleaned using only water.

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Mohawk official flooring sponsor for "Home Free"

Home Free LogoCalhoun, Ga.As the official flooring sponsor of  Fox’s hit show “Home Free,” Mohawk carpet, rugs, hardwood and laminate flooring will welcome home the families of heroes in the second season of the series. “Home Free” is an unscripted competition and reality TV series hosted by expert professional contractor Mike Holmes. The season premiere aired June 16.

Former NFL player and sports analyst Tim Tebow will join Holmes in the DIY competition program this season in which “Home Free” challengers will compete to win a dream home for their personal heroes and $100,000 for themselves.

Each week, Holmes presents contestants with tasks designed to test their knowledge and DIY skills. Couples with the best work move forward while those with sub-par performance must face elimination.

“‘Home Free’ provides a powerful national platform to communicate Mohawk’s style, design and ease-of-installation benefits,” said Mollie Surratt, Mohawk’s senior director of public relations, social media and content. “Mohawk is proud to place our carpet, rugs, hardwood flooring and laminates in the homes of these deserving heroes and equip Mohawk retailers to share this great integration in-store.”

This season, contestants were building not one house but a whole neighborhood. House styles varied from Victorian and Cape Cod to French Country and Southern Dream Home. In addition to carpet and area rugs, contestants selected several hardwood and laminate Mohawk products to give their projects warmth, fashion and resilience.

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Mohawk Flooring wins prestigious PRSA awards

Screen Shot 2016-06-16 at 1.58.12 PMCalhoun, Ga.—Mohawk Flooring has been named a winner of the 2016 PRSA Silver Anvil Award of Excellence and the PRSA Bronze Anvil Award of Commendation for its year-long SmartStrand Forever Clean launch campaign centered around the company’s 2015 sponsorship of the Tough Mudder obstacle race. Largely known as the public relations industry’s top honor, the Silver Anvil indicates Mohawk’s far-reaching and strategic campaign development designed to lead customers to its retailers across the U.S., Canada and Australia.

“We are truly honored to be among the 2016 PRSA Silver and Bronze Anvil program award winners and give recognition to the hard work of so many talented Mohawk associates,” said Mollie Surratt, senior director of public relations, content and social media for Mohawk Flooring. “Last year’s award-winning campaign placed our SmartStrand Forever Clean carpet in the middle of an international obstacle challenge. In the course of the campaign, our product faced a variety of challenges and opportunities head-on to ultimately showcase the cleanability of SmartStrand Forever Clean for the entire world to see. It was a powerful activation for the Mohawk brand and, most importantly, our retail partners.”

Recognizing public relations skill, creativity and resourcefulness, the Silver Anvil Award has served as the public relations industry’s most distinguished honor for more than 60 years. The coveted awards program recognizes the most influential and creative PR campaigns throughout the nation and allows winners to promote and share best practices. This year’s ceremony was held on June 9 at the AXA Equitable Center in New York City; Mohawk Flooring was recognized in the Marketing, Products category.

The PRSA Bronze Anvil awards program recognizes and honors the very best public relations tactics executed every year. Of the 639 entries submitted in 2016, only 65 organizations were selected as winners by the Bronze Anvil judges. Mohawk Flooring’s SmartStrand campaign won in the Word-of-Mouth category.

At the heart of Mohawk Flooring’s award-winning campaign was the multifaceted sponsorship of the Tough Mudder Challenge torture test, which put the new SmartStrand carpet “to the test” in Tough Mudder’s internationally known obstacle races. Twenty feet of SmartStrand Forever Clean carpet was rolled out on eight Tough Mudder course, where it was stomped on by more than 10,000 muddy participants at each location. The carpet was then shoveled out of the mud and successfully cleaned using only water.

The campaign was supported by robust in-store marketing materials, local event activation kits, national social media sweepstakes and local social media content. Mohawk also worked with leading bloggers to communicate about the campaign.

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Mohawk Group's Light Lab receives ILFI certification

Mohawk Group Light Lab Design CenterDalton—Mohawk Group’s Light Lab, the company’s recently renovated design studio, has received Petal Certification from the International Living Future Institute (ILFI) Living Building Challenge 2.1.

The ILFI’s Living Building Challenge is a building certification program, advocacy tool and philosophy that defines the most advanced measure of sustainability in the built environment possible today. The Challenge is comprised of seven performance categories called Petals: place, water, energy, health & happiness, materials, equity and beauty. Petal Recognition is given to projects that satisfy the requirements in three categories of the Living Building Challenge, when at least one is water, energy or materials.

“We are incredibly excited to be the first in the state of Georgia, as well as the first building product manufacturer, to receive the prestigious Living Building Challenge Petal Certification from the ILFI,” said Rochelle Routman, vice president of sustainability, Mohawk Flooring. “For quite some time, Mohawk has used Declare, ILFI’s ‘nutrition label’ program for products, as a way to report and disclose information about the ingredients in the products that we make. Now we’ve set an even higher bar in sustainability as we have extended ILFI’s rigorous sustainability standards to our newly renovated design center by achieving certification through the Living Building Challenge.”

The 33,000-square-foot Light Lab is a mid-century modern building  here that features 365-degree views of landscape and natural vistas. Built in the early 1960s as the headquarters for World Carpet, the building has been used most recently as a showroom space for Mohawk Flooring North America residential products. The conceptual design of the interior renovation for Light Lab was provided by students from the Savannah College of Art and Design and the building is now home to all of the product design teams in the Mohawk organization. Light Lab has satisfied the Living Building Challenge requirements for the site, health, materials, equity and beauty Petals.

“Mohawk’s petal certification further demonstrates the company’s progressive attitude and unwavering commitment to both sustainability and ILFI’s transformational programs, including the Living Building Challenge, Declare and the Living Product Challenge,” said Amanda Sturgeon, chief executive officer of the ILFI.

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Mohawk Industries to create 200 jobs in Dalton

Mohawk_Industries_logoDalton—Gov. Nathan Deal today announced that Mohawk Industries, the world’s largest flooring manufacturer, will expand its existing vinyl flooring operations in Dalton-Whitfield County. This project will significantly increase the company’s current U.S. luxury vinyl tile (LVT) manufacturing capacity. The $100 million capital investment in infrastructure and equipment will generate approximately 200 jobs for the region.

“Mohawk’s continued expansion in Georgia underscores how a premier flooring manufacturer helps Georgia’s entire floor covering industry remain competitive,” Deal said. “This is a great indicator of the resilience of the carpet and floor covering industry. We look forward to Mohawk’s continued job creation and investment in our state.”

The project will increase Mohawk’s production of flexible and rigid LVT (WPC) products for both residential and commercial applications. Mohawk currently employs more than 34,000 individuals worldwide and approximately 10,250 in Georgia.

“Mohawk currently is starting up its Dalton LVT plant, which will be operating at full capacity by the end of 2016,” said Brian Carson, president of Mohawk Industries’ Flooring North America segment. “This major investment to expand our U.S. LVT production will meet increased demand for our unique products and enhance Mohawk’s position as the global leader in LVT, the world’s fastest growing flooring category.”

Mohawk acquired the IVC Group in 2015, positioning the company at the forefront of the global vinyl flooring market. The acquisition added state-of-the-art manufacturing capabilities in both in Europe and North America, including the world’s largest, most efficient LVT production lines in Dalton-Whitfield County.

“As the flooring industry leader, we will bring the same exceptional design and performance features to the LVT that we have in our other product categories,” Carson said. “Combined with our industry-leading national distribution system, this expansion will provide our customers with the broadest product offering and the highest level of service in the LVT category.”

“This is the third major investment on this site and this expansion will complete the build-out of the property that we prepared for IVC back in 2010,” said Whitfield County commission chairman Mike Babb. “This is proof that the economic development process works and that the effort was worthwhile. We are very pleased that the company continues to grow and thrive and we appreciate all that Mohawk does to help our community.”

Georgia Department of Economic Development (GDEcD) regional project manager Stephanie Scearce represented the Global Commerce division in partnership with Mohawk Industries, Dalton-Whitfield Joint Development Authority and Dalton Utilities.

“We are excited about Mohawk’s choice to expand their operations in Dalton-Whitfield County,” said GDEcD commissioner Chris Carr. “Existing industry accounts for a major portion of the state’s investment and job opportunities, and we look forward to working with Mohawk and our partners in Dalton-Whitfield County to ensure they have the resources they need to continue to deepen their