Not long ago, textile manufacturing was the Chrysler Corp. of American business. Strapped by outmoded equipment and threatened by European and Japanese competition, the industry was on the verge of collapse. Even the move here from high-cost New England seemed unlikely to bail it out.

That was in the early 1970s. Today, less than a decade later, textile-making, both here and in New England, has staged a comeback, and the revival is so apparent that even the onetime wolf-criers are blushing with embarrassment.

Well-outfitted with up-to-date equipment, textilemakers here are in the throes of a major technological revolution that is promising to transform the industry almost as dramatically as computerized typesetting and offset printing have altered the publishing business.

Inventories, once seemingly unmanageable and a major problem for the industry, are tightly controlled now by sophisticated computers. Day-to-day management has improved. And American exports have increased so rapidly that it's the Europeans now who are clamoring for quotas.

"I think the industry was really in a state of confusion then," explains John V. Cauthen, executive vice president of the Fort Mill-based Springs Mills Inc., recalling those hand-wringing days of yesteryear. "A lot of things were going on then. I don't think they knew where they were heading."

This is the story of how the American texile-manufacturing industry, once bleeding profusely and almost left for dead, sprang back to life to become the world leader again, despite its own best efforts. (Although the parallels with Chrysler aren't exact, there may be some lessons to be learned.)

It's a story that involves both a bootstrap effort by the industry and a lot of old-fashioned luck. To their credit, U.S. manufacturers have invested heavily in costly new technology. They've updated their management procedures. And they've dropped expensive-to-produce specialty fabrics.

At the same time, however, they've also benefitted from some lucky turns: Industry wage levels and work rules have remained low. The shift to new-process double-knits never took hold. American-made denims have become a worldwide rage. And the recent decline in the dollar made their exports more attractive.

The change is particularly evident here at Springs Mills, where old turn-of-the-century brick mill-town buildings at the company's Lancaster plant are being outfitted with new air-jet-fed looms and computer monitoring systems. Burlington Mills, another major producer, already is using robots extensively.

"You're talking about a resurrection, really, because this plant was built in 1895," says William S. Hood, one of the plant managers at the Lancaster bale-handling and cotton-blending operation. "Until this equipment was put in, we were still doing a lot of this by hand."

Moreover, Springs now has its eye on a new super-secret, high-speed spinning machine that could, if installed in numbers, eliminate three major departments in one operation. (Ironically, most of these technological breakthroughs are Japanese. U.S. manufacturers, textile-makers say, have shown little interest.)

As in the case of today's auto industry, what pushed the textile business into its turnaround was a brush with extinction -- in this instance the 1973-75 recession. Caught with warehouses of excess inventories and outdated management practices, the industry changed its thinking and its balance sheets as well.

Fortunately for textile managers, the shift coincided with a series of important technological breakthroughs -- more rapid-fire looms and computer-tracking of inventories. When the industry did start to modernize in earnest, there was no question the investment would spur new gains.

The modernizing effort, begun seriously in 1977, was a substantial one. Over the past 10 years, the industry's capital spending has topped $11 billion, and most experts expect another $23 billion worth between now and 1990. By then, Cauthen says, 90 percent of existing mills will use the new shuttleless looms.

The late-1970s updating included improved inventory control. Before, Cauthen says, no one really paid much attention to inventory levels, a gaffe that left the industry gasping during the recession. Now, stocks are tracked on complex computer networks. If inventories get too high, production is cut.

There also were changes in the industry's long-standing, paternalistic work scheduling practices. Until the late 1970s, most plants kept running six days a week, whether in boom or slump. Today, temporary layoffs -- to keep inventories in balance -- are accepted practice. Springs Mills shut down a week last June.

Finally, in another streamlining move, American manufacturers abandoned expensive-to-produce speciality items such as woolens and worsteds and concentrated instead on more basic fabrics better-suited for U.S.-style volume production. Today, most "fancy" materials are made in Europe or the Far East.

The industry also got some help from the stars. The widely feared "knit revolution," which would have required U.S. manufacturers to refit their entire operations, never actually took hold. Instead, the market for double-knits wilted and domestically manufactured woven fibers sprang back.

At the same time, American-made denims caught on worldwide. And the decline in the value of the dollar made U.S. exports even more competitive. Springs, for example, is finding its Fort Mill-made sheets are hot items in France. By contrast, European textile-makers are in disarray.

Admittedly, not all the industry is humming along without snags now. Although the United States is the leader again in fiber- and fabric-making, the more labor-intensive apparel-manufacturing end of the business still is hurting. Americans simply can't live on the wage-levels paid in Taiwan and Hong Kong.

And not all domestic textile-makers have fully upgraded. The 20 or so really large U.S. manufacturers and a seocnd tier of 200 medium-sized firms have modernized significantly. But the industry includes another 4,800 small, less efficient operations. Many are hanging only by a thread.

Nevertheless, the results overall have been dramatic. Although profits edged up only 7.2 percent last year compared to 11.5 percent in 1979, it marked the first time in memory that the mills had survived a recession unscathed -- a remarkable performance, in the face of the auto and housing slumps.

Moreover, the outlook for coming years is encouraging as well. The new looms are 10 times as efficient, pushing productivity up sharply. And fabric quality has greatly improved. Cauthen says the air-jet loom "just won't weave a defect" into the cloth it makes. It simply stops first and sets off an alarm.

Incredibly, the modernization -- so far -- also has been accomplished without serious loss of employment. Commerce Department figures show job levels in the industry have edged down only slightly in recent years. And most of these have been achieved by attrition. Permanent layoffs have been almost nonexistent.

Moreover, the push toward more efficient equipment has only begun. Even beyond the air-jet looms, experts say the industry is at the start of a technological revolution that soon will involve sophisticated microprocessors and sophisticated new electronics.

Indeed, industry leaders expect still another surge of new capital investment in the next few years, this time to build new plant facilities as well as to update old equipment. Many of the industry's present buildings simply can't accommodate the newer technology.

But the next round of improvements may not prove as cost-free as the last. For one thing, the rapid modernization may squeeze out many of the industry's smaller firms, many of which are inefficient and undercapitalized. "Every time we have a downturn," Cauthen says, "somebody is going to drop out."

And, although industry leaders shrug it off, that could lead to declining employment. Cauthen concedes that "if we built a mill today with the leading edge of technology available, we could produce a yard of fabric with half the manpower we use now." Can attrition alone continue to absorb the decline?

Finally, manufacturers also face a spate of deadlines for meeting federal environmental and safety regulations. The American Textile Manufacturers' Institute projects sharply increased spending in these categories over the next few years. The controversy over control of health-damaging cotton dust, for example, has yet to be resolved.

Still, Cauthen and other industry leaders say they won't be stopped by those challenges right now. They're still reveling over the industry's unexpected comeback. "Our unrecognized strength was the sheer size of our operation," Cauthen exults. "There's no question now that we can compete."