The pairing of Mohawk Industries, one of the nation's preeminent flooring manufacturers, with Dal-Tile, the largest manufacturer, distributor and marketer of ceramic tile in the United States, has in one fell swoop established a formidable industry presence with vast potential to expand the distribution of tile products and allow them to more deeply penetrate the specialty retailer channel.

Each company complements the other in a variety of ways. Dal-Tile brings to the table an established nationwide network of distributors and sales centers, along with a proven expertise in tile design and product development. Mohawk has a well-respected brand name, an extensive transportation system, and marketing and merchandising muscle -- along with considerable financial strength.

"We're very happy with the merger," said Chris Wellborn, Dal-Tile president. "Together with Mohawk, we will be able to cover even more distribution points. And we see ourselves as becoming even more serious competitors to the European tile manufacturers -- particularly in floor tile."

The acquisition, which closed in late March, creates numerous "cross-selling opportunities" between Mohawk and Dal-Tile, Wellborn added.

There are other synergies as well. Dal-Tile has long had an excellent reputation among contractors and builders. A key Mohawk strength has been its ability to penetrate the small dealer/specialty retailer community. That strength among retailers is something that Dal-Tile is setting out to leverage, Wellborn said.

So on paper at least, it would appear that the Mohawk and Dal-Tile combination constitutes the birth of an industry juggernaut. But not all observers have yet been able to draw a bead on the ramifications of Mohawk's Dal-Tile acquisition. Many have adopted a wait-and-see perspective, but most agree that the pairing of the two companies has the potential to exert considerable impact on the market.

"Dal-Tile is the 800-lb. gorilla among U.S. tile producers -- always has been," said Pete Johnson, vice chairman and director of sales & marketing for Summitville Tiles. "The company will continue to be a serious competitor no matter who owns it."

Certainly, Mohawk's market presence and influence will be enhanced by its acquisition of Dal-Tile, said Gray La Fortune, director of the Ceramic Tile Institute of America (CTIOA). And consumer demand for ceramic and stone products could well be stoked by a major industry player with the resources that Mohawk has at its disposal, he added.

"Mohawk has the horsepower to advertise on a national basis," La Fortune remarked. "They could promote much greater consumer awareness of tile and stone products."

Though Mohawk has expressed its intention to leave in place Dal-Tile's existing structure and management hierarchy, the conjoined forces of the two companies create numerous possibilities for cost savings and greater market penetration for both their hard- and soft-surface products. Some industry observers think it's possible that Mohawk's core products may begin to appear in Dal-Tile warehouses and showrooms.

"I think eventually that will happen," La Fortune said. However he added that, over the near term, it's more likely that Dal-Tile products will be introduced to existing Mohawk customers before Dal-Tile takes on Mohawk product lines.

Like La Fortune, Johnson views Mohawk's Dal-Tile acquisition as another example of established flooring entities outside of the ceramic segment -- such as Shaw, Beaulieu, Witex, and others -- finding ways to get a foothold in the tile business. "To me, the big picture is that the floor covering industry seems to think that there's a great future in ceramic tile," Johnson said. "That bodes well for the future of the tile industry."

Despite the industry's vote of confidence in their product segment, U.S. tile producers still face a raft of challenges. One pressing concern, Johnson said, is competition from producers abroad who already enjoy an 80% import penetration rate in the United States. The pairing of Dal-Tile and Mohawk, he predicted, will do little over the short term to take back market share from foreign tile manufacturers.

Johnson noted that comparatively higher labor costs in the United States, as well as the strength of the U.S. dollar, make it difficult for domestic tile producers to compete with their foreign counterparts. "It's going to be tough sledding for American manufacturers for the foreseeable future," he said.

Like the Americans, European manufacturers are also trying to gauge how Mohawk's acquisition of Dal-Tile will affect their own fortunes.

"In my view, it too early to express opinions about the impact on the U.S. tile market of the acquisition of Dal-Tile by Mohawk," said Donato Grosser, consultant to Assopiastrelle, the Association of Italian Ceramic Tile and Refractory Manufacturers. "Dal-Tile was a good going company before the acquisition with a clear strategy. Mohawk may assist Dal-Tile in improving its profitability by streamlining the distribution system of the company.

"Still, I do not know how this will affect the market."