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Survival or Meltdown: Execs Ponder Future Of U.S. Manufacturing

U.S. apparel production is being decimated by the explosive growth of imports, which have left the industry fighting for its life in Washington.

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Photo By John Aquino

NEW YORK — A generation ago, Rocco Ciccarelli’s story would have been typical of the flourishing garment trade in New York. Now, his factory could be one of the last of a dying breed, as apparel manufacturing in the area and the country continues to undergo a dramatic downturn.

The explosive growth of imported apparel — particularly from China, which for the year ended in May shipped 75.5 percent more garments than it had a year earlier, on a unit basis — has decimated domestic producers, and left the industry fighting for its life in Washington.

More than 40 tailors, mostly aging European immigrants, sat working at sewing tables in the loft building in a gritty part of Queens that Ciccarelli’s Primo Coat Corp. has called home for the past three years. As Ciccarelli walked among them on a rainy afternoon last week, the 67-year-old Italian immigrant said he’s been pleased with business lately.

“This year is pretty good; we can’t complain,” he said. “We’re supposed to go on a vacation next week, but we still have so much work to complete.”

As his workers hunched over the high-end suits they were finishing, many sewing without the aid of a machine, a visitor could notice something unusual about the Long Island City factory. The employees seemed relatively relaxed and showed no signs of the tension that usually accompanies a factory rushing to push out a large order. The bundles of half-completed garments that typically cover most available flat surfaces in a large plant were nowhere to be seen.

Asked how long it took his workers to complete a typical suit, Ciccarelli said he wasn’t sure — he’d never tried to clock out the man-hours. In an average week, he said, his factory turns out 80 to 85 men’s and women’s suits.

Clearly, Ciccarelli’s market segment is an atypical one for the U.S. apparel industry. He’s a custom tailor, making one-of-a-kind, high-end garments. Primarily working as a contractor, he fills orders taken by high-end tailor shops in major cities that offer bespoke suits but don’t have the space or manpower to actually assemble them, turns out costumes for Broadway shows, sews competition equestrian jackets for those with the money and time to show horses and, on occasion, fills orders for high-end designer labels. The soft-spoken tailor asked not to reveal his clients’ names, citing privacy concerns.
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The men’s and women’s suits he produces retail for $1,500 to $4,000, and typically go through two or three rounds of fitting and adjustments. Even with the back-and-forth, Ciccarelli’s factory delivers a finished suit in about 17 days — less time than it takes a container of apparel to travel from an Asian factory to the West Coast. Speed and the ability to work on one-off garments basically cuts Far Eastern manufacturers out of the loop.

Ciccarelli said he doesn’t know how manufacturers that have to compete directly with importers can keep up.

“Ready-to-wear manufacturing is finished in the U.S. There are very few left,” he said. “Most of them cannot compete.”

Ciccarelli admitted part of the reason his firm has succeeded in recent years is that many of its competitors have gone under, leaving his customers with fewer choices of suppliers.

The data on the decline of apparel manufacturing is dramatic. Apparel employment peaked in May 1973 at 1.5 million, according to Department of Labor statistics. At the end of June, there were 314,500 apparel manufacturing workers and 270,800 textile mill employees in the U.S., according to Labor. For the combined industries, that’s a 57.2 percent drop from the 886,600 apparel workers and 479,900 textile workers employed a decade earlier.

The decline of manufacturing in the U.S. has been long-term and not limited to the apparel and textile sectors. Also as of June, there were 14.7 million Americans employed in all manufacturing industries, off 4.2 percent from a year earlier. But the overall number of manufacturing workers has been up and down over the past decade and the June figure is only 12 percent lower than it had been in June 1993.

In apparel and textile manufacturing, the rate of job loss has been accelerating. After experiencing single-digit percentage decreases for most of the Nineties, in 2001 employment dropped 12.8 percent, in 2002 it was off 14.8 percent and in 2003 it fell 10.6 percent, or 295,200 jobs lost in three years.

This belies an industry belief commonly held through the Eighties and Nineties that the domestic manufacturing sector would shrink down to a core critical mass that would be needed to turn orders quickly and fulfill some particularly high-end orders.
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Leaders of the textile industry continue to fight trade deals they claim will sacrifice more U.S. jobs. As reported, a coalition of industry trade groups on Thursday took to the steps of the Capitol building to announce they were asking the Committee for the Implementation of Textile Agreements to activate the safeguard measures to slow the explosive growth of Chinese imports.

Jack Mulqueen, a longtime Seventh Avenue figure who’s working with Ciccarelli to launch a line of custom-made women’s suits for department stores, said history suggests the odds are against the industry’s fight to put the brakes on imports.

“In a million years, it will never happen,” he said. “I’ve heard that for 40 years.”

Chinese imports have been up dramatically in four categories of merchandise that are no longer regulated by quotas: knit fabrics; robes and dressing gowns; bras, and gloves. U.S. industry executives fear that in 2005, when quotas on all textile and apparel categories are dropped by the 146 World Trade Organization nations, China’s massive textile and apparel industry will swamp the rest of the world with low-priced goods. With this concern in mind, China’s accession agreement to the WTO included a provision allowing the U.S. to reimpose quotas if Chinese imports threatened to cause market disruption.

Even with quotas still in place on most categories of merchandise, Chinese imports of textiles and apparel have been growing strongly. For the year ended May, they were up 46.3 percent to $10.25 billion, at a time when overall imports rose 11.2 percent to $76.07 billion.

The continuing pressure of quotas has driven many domestic suppliers out of business and led others to seek ways to diversify. This year, a contingent of contractors from Chinatown went on a trade mission to China, figuring cultural ties would give them a leg up in joining forces with that nation’s manufacturers. Companies including Made In New York Group, the producer of Lafayette 148, have opened their own factories in China, contending the cost structure required to operate in the U.S. is untenable.

These trends have many market observers starting to wonder if the domestic apparel manufacturing industry will eventually disappear.

Keith Hull, president of domestic textile maker Avondale Mills Inc., based in Graniteville, S.C., said he fears the erosion of the U.S. apparel manufacturing base will continue.
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“It will be hard to see what’s going to reverse it,” he said. “It’s unfortunate, but it’s just the most labor-intensive part of the process.”

In recent years, the focus of many domestic producers has been quick-response orders, an area in which geography gives local players an advantage. Hull noted manufacturers in Mexico, the Caribbean Basin and Central America have increasingly taken on an important role in providing quick turns, often at the expense of U.S. firms.

Domestic players typically describe themselves as the first to see orders cut when the economy slows down, and the first to see orders come back when demand picks up and leaves retailers scrambling to fill their shelves. However, in the weak economy of recent years, that sort of scramble has been less common.

The problem, explained Ken Levine, chief financial officer of Secaucus, N.J.-based private label wholesaler Hazan Group, is that the brief periods of demand don’t necessarily make up for long idle stretches for domestic makers.

“It’s hard to gear up for the peaks and survive during the valleys,” he said.

Hazan today buys about 40 percent of its merchandise from New York contractors, particularly during peak-demand weeks, but Levine acknowledged, “It’s very hard to feed them 50 weeks during the year.”

One of the problems facing domestic manufacturers is that, as their ranks thin, it becomes even harder for the suppliers they rely on for everything from buttons and trimmings to sewing machine parts to remain in business. That can leave them dependent on out-of-town and foreign suppliers, which can erode some of their time advantage.

“What do they do if the piece goods come five to seven days late?” Levine asked rhetorically.

High-end designer Lucy Barnes, who produces her collection in an industrial loft on the far West Side of Manhattan, said supplies have become a problem.

“We use a lot of vintage fabrics…and over the last couple of years, 80 percent of our suppliers have gone under,” she said in an interview on her fourth-floor loft, down the block from one of Midtown’s few lumber yards. “You place an order and the next day you walk up and there’s a sign that says, ‘Sorry, we’re closed.’”
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The problem cuts both ways, with shaky suppliers and producers in a flimsy web of dependency.

Impala Industries International, a Los Angeles converter that specializes in small lots of printed imported fabric, still keeps $1.5 million to $2 million worth of gray fabric on hand to meet the small orders of its customers.

Chief executive officer Bernie Gardner said it’s become common for his smaller customers to show up, order 25 to 100 yards of fabric, and pay for it with a credit card. That’s often because they’ve been cut off by standard commercial lenders. Credit card sales now represent about 25 percent of his volume, a proportion Gardner described as “quite a bit for us.”

“We say that a third of our customers are going into business, a third are going out and the other third don’t have any credit,” he said.

Gardner said he didn’t think U.S. apparel manufacturing would ever disappear, if only because the low cost of entry attracts people into the business.

“Just on the basis of the entrepreneurial thing that happens in this business, there are always going to be some new guys coming in,” he said. “We see that in our customer base.”

At Los Angeles-based jeans producers Koos Mfg., vice president of marketing Tom Brenner had a similarly upbeat attitude.

“Our L.A. facility has been in a state of sold-out for years,” he said. “Last year, had we been able to double our 400,000 units a week, we would have been able to sell that product out without looking for a new customer.”

Still, he said as part of a strategic shift, the company plans to move all its contracting orders to its Mexican factory, which employs 1,500. It will use its Los Angeles site to produce three jeans brands it owns — A.G. Adriano Goldschmied and the upcoming Big Star and Double A lines.

Brenner acknowledged that, as the company phases in those two brands, it will lay off about 20 percent of its 1,500-strong Los Angeles workforce, but it plans to phase those workers back in over six to nine months as the new businesses ramp up.
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He contended by selling its own brands made in its own local factory, Koos will be able to offer retailers better quality and faster turns than they could get from suppliers who are dependent on foreign production.

“If U.S. manufacturers remain obsessive on quantity and margins, those guys are going to go bye-bye,” he said, “because they can’t compete with the global resources available today.”

Executives at surviving domestic manufacturers agreed it’s necessary to have a distinctive value proposition to survive. Mulqueen contended his and Ciccarelli’s effort to sell custom-made women’s suits though high-end department stores could work for two reasons. One is that this is a familiar business to department stores, many of which offer custom men’s product. The other is that it’s a business that allows them to cut inventory, since in theory all a custom-suit in-store shop would need in inventory was a range of model suits for sizing purposes and some swatch books. “This is something we can do domestically,” Mulqueen contended.

He and Ciccarelli said they would plan to ramp up manufacturing capacity at Ciccarelli’s factory if the department store venture proves a success. But Ciccarelli suggested that could be challenging, since business conditions have scared off many workers, creating a labor shortage.

“The good tailors and other people, they changed jobs,” he said. “Now they want to run elevators or be a doorman.”

Executives said the continuing decline leads them to worry about the future direction of the U.S. economy, given the traditional important role that manufacturing jobs have played in sustaining the middle class.

“I don’t think it’s good for the country,” said Avondale’s Hull. “When we export our manufacturing jobs, we export part of that wealth creation. There’s a ripple effect. Manufacturing jobs pay barbers and airline tickets and so on. As you start to pull out that wealth creation, I think it’s going to have a significant economic impact on our long-term economic well-being.”

Ciccarelli, an Italian who immigrated to the U.S. at the age of 19, recalled having to take a test proving he was a skilled tailor in order to get a visa. A career in the apparel industry, working for other companies and on his own, allowed him to raise a family in a comfortable home in the Long Island suburb of Valley Stream.
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He said he also worries about the consequences of the loss of manufacturing jobs.

“If the educational system will not bring up the new generation with a new set of skills,” he said, “this country will be in very serious problems.”
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