Levi Strauss plans to close six plants, lay off 3,600

By Michael Liedtke The Associated Press
Tuesday April 09, 2002

SAN FRANCISCO — Levi Strauss & Co. said Monday it will close six U.S. plants and lay off 3,600 employees, or 22 percent of its work force, as the long-slumping company looks overseas to produce blue jeans that became a piece of Americana. 

With the decision, San Francisco-based Levi’s took another step down the path of other major clothing makers that have lowered prices and boosted profits by farming out production to Latin America and Asia, where costs are dramatically lower. 

After it completes the latest closures in October, Levi’s will have shut 29 U.S. factories since the company’s sales started crumbling in 1997. The plants to be closed between June and October are in San Francisco; Blue Ridge, Ga.; Powell, Tenn.; and the Texas cities of Brownsville, San Benito and El Paso. 

The purge will leave Levi’s with just two U.S. plants, both in San Antonio — a striking retrenchment for a 149-year-old company that used its blue denim jeans popularized during California’s Gold Rush to create one of America’s best-known brands. 

Both company and union representatives said the jobs were casualties of global competition. 

“It’s unfortunate Levi’s had to give in to competitive pressure like this,” said Bruce Raynor, president of the Union of Needletrades Industrial and Textile Employees that represents workers at four of the factories. 

“This is a painful but necessary business decision,” said Levi’s CEO Philip Marineau. “There is no question that we must move away from owned-and-operated plants in the U.S. to remain competitive in our industry.” 

Raynor and other labor leaders blamed Levi’s cutbacks on U.S. government policies that make it easy for manufacturers to save money by moving production overseas. 

“When Levi’s aren’t being made in the United States, it says a lot about manufacturing trends that have become a threat to the U.S. economy,” said Greg Denier, a spokesman for the United Food and Commercial Workers union, which represents workers at the two other plants. 

Even as its sales sagged, Levi’s maintained wages ranging from $9 to $14 per hour at its U.S. plants, Raynor said. That commitment put Levi’s at a competitive disadvantage with rivals like the Gap, Guess and Ralph Lauren that use foreign contractors that frequently pay workers less than $1 per hour. 

Privately held Levi’s didn’t disclose how much it will save from the cutbacks, but the company plans to pour some of the extra money into marketing, spokesman Linda Butler said. 

The company is trying to woo back consumers after five consecutive years of sales declines that reduced annual revenue from a peak of $7.1 billion to $4.3 billion in fiscal 2001. 

Levi’s warned in January it would probably close some of its remaining U.S. plants, and the details revealed Monday were in line with analyst expectations. 

“They made a valiant effort to be a good corporate citizen for as long as they could, but they had to do this,” said industry analyst Jeff Stewart of Wachovia Securities. “It was just getting too expensive for them to do business here.” 

About 3,300 workers will lose their jobs at the six factories. The company also plans to jettison 300 of the 530 workers at one of the remaining San Antonio plants. The cuts come from a worldwide payroll of about 16,600 workers. 

Levi’s also will lay off about 645 European workers later this month after it closes to two Scotland plants, Butler said. 

The U.S. workers affected by Levi’s plant closures will be hard pressed to find jobs at equal wages because many only have high school degrees, Raynor said. 

Levi’s workers in San Francisco and Tennessee will receive $2,200 “transition” payments in addition to severance pay based on their years of service, Butler said. The company is still negotiating the severance packages at the other four plants. 


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