Fifty staff at Canterbury Spinners' Dannevirke plant have been made redundant.
Company spokesman Geoff Senescall confirmed 50 staff of 85 were told today they would lose their jobs because the company needed to downscale.
It will scale back its Dannevirke carpet production by cutting out the yarn and spinning operations.
The remaining 35 staff will work in the dyeing operations.
The company's proposal is now out for consultation - if it goes ahead the job losses would take place by the end of September, and the company is proposing remaining staff move onto a shift pattern with reduced hours.
"The company is disappointed they have to do this, but the wool and carpet market is challenging. You've got synthetic carpets that are out there and less activity," Mr Senescall said.
First union textiles secretary Paul Watson said the Dannevirke company had been hard hit by the news.
He said the move represented further rationalisation in the textiles sector.
"A priority for First union will be minimising the impact on staff, and outstanding issues for further discussion include voluntary redundancies, relocation opportunities and ensuring workers' income is protected as new shifts are introduced.
"As we have done at several textile plants in recent years, we will also look for support to establish a redundancy support coordinator to work alongside staff made redundant to help with training and finding other jobs."
First union general secretary Robert Reid said that in parts of the manufacturing industry, especially outside the primary sector, significant challenges remained.
"Many manufacturing workers are still facing very uncertain times."
Today's announcement follows last year's closure of Norman Ellison Carpet's spinning plant in Onehunga with around 85 job losses, and 190 redundancies at Summit Wool Spinners in Oamaru earlier this year. Canterbury Spinners purchased the Oamaru site and re-employed 60 workers.