Levi, an American Icon, to Shut Last Plants in U.S.

By Leslie Earnest
Times Staff Writer

September 26, 2003

Levi Strauss & Co., maker of a jeans brand so all-American that it became ingrained in the nation's identity, said Thursday that it would close the last of its North American manufacturing plants, laying off almost 2,000 workers.

San Francisco-based Levi, which is celebrating its 150th anniversary this year, said it would shutter two plants in San Antonio by the end of the year, displacing 800 workers there and marking the end of its U.S. manufacturing operations. The clothing firm will discontinue its Canadian operations in March, erasing 1,190 jobs at three plants in Alberta and Ontario.

The venerable company has been shifting its production overseas during the last two decades, and today uses about 500 contractors to produce its apparel in 50 countries, including Mexico, China and Bangladesh. Still, switching off the lights at its remaining U.S. factories symbolizes the struggle of an industry that has been battered by the forces of globalization.

Levi's announcement heaps more pressure on the Bush administration and Congress to do something to help U.S. textile and apparel manufacturers, which say they have lost 2.5 million domestic jobs in recent years.

On Thursday, several manufacturers and labor leaders announced the formation of a group called the Free Trade for America Coalition to lobby for changes in trade policy. That followed the bankruptcy filing Wednesday by Cone Mills Corp. of Greensboro, N.C., the largest U.S. denim-fabric maker.

"There's a lot of saber rattling going on right now on trade," said Kevin Burke, president of the American Apparel and Footwear Assn., an industry trade group. "Politicians have to answer to constituents who are wondering where the jobs are going."

Last year, 96% of the apparel purchased in the U.S. was made in other countries, up from 93% in 2001, according to Burke's group. Through June of this year, U.S. apparel imports increased 17%, with much of the clothing coming from Mexico, Central America and China.

The shrinking base of U.S. apparel factory jobs is apparent in Southern California. Clothing makers, which in 1996 employed nearly 104,000 workers in Los Angeles County, accounted for 64,000 jobs as of July.

Levi, for most of its long history, has stood apart from other apparel makers because few, if any, brands have been as linked to the American landscape. Levi's has been a symbol of a boundless American spirit since prospectors rushed into California 150 years ago and discovered not only gold but also newfangled work pants reinforced with copper rivets.

"As the miners went into the Sierra Nevada to pan for gold, Levi stood the test," said Peter Sealey, adjunct professor of marketing at UC Berkeley and former marketing head of Coca-Cola Co. "That was what created the whole image and history of the company."

The company also became synonymous with ethical business practices. In the 1950s, Levi stood apart from other factory owners when it integrated the workforce at its Virginia plant, refusing to create separate work spaces or accommodations for black employees, despite protests from the local white establishment.

When the privately held jeans maker started to manufacture some of its products overseas, it established strict anti-sweatshop guidelines with its contractors, which the company says it continues to enforce.

Closing down its remaining factories is the end of a long process for the parent of the Levi's and Dockers brands. In 1996 Levi hit an all-time record of $7.1 billion in sales and employed 37,000 employees worldwide. But since then, the company has seen its business slide.

Over the last seven years, Levi has closed dozens of plants in North America and Europe and slashed thousands of jobs as it struggled to reorganize. Just two weeks ago, the company said it was laying off 350 U.S. workers, mostly at its headquarters.

"We're in a highly competitive industry where few apparel brands own and operate manufacturing facilities in North America," Chief Executive Phil Marineau said. "In fact, we are one of the last companies to do so."

The jobs lost at Levi plants in North America are likely to shift to Latin America and Asia, the company said. Levi is simply adapting to a reality that many other U.S. apparel makers have had to face, said Burke of the apparel trade group.

"What you're seeing with Levi is just the economic reality of our industry," Burke said. "American consumers, when shopping for these products look at price and quality, and they don't necessarily look to where the product is made."

To many consumers, Levi has been a symbol of "confidence, sex, youth, rebellion, freedom, originality and authenticity," said Alex Wipperfuth, partner at Plan B, a San Francisco marketing firm.

"Those are the dimensions of Americana, according to Levi," he said. "I think the key issue is, will any of those fall away once people realize Levi is not produced in the U.S. anymore?"

The company, though it expressed concern about the jobs lost, said the final plant closures were just a continuation of Levi's shift in direction that began in the late 1990s, when the company decided to transform itself from a domestic manufacturer into a company focused on product design, sales and marketing. The San Antonio plant was producing less than 5% of the product needed for the U.S. market, company spokeswoman Linda Butler said.

"It's a painful business decision that is made, but it's made to be competitive and ensure the long-term success for the company," Butler said. "We are and have been for years a global company with a long history and deep American roots. And we still do. We still employ many people in the U.S." Currently, Levi has more than 5,000 workers in the U.S..

Levi has struggled for years to reverse a sales slide that began when the company's jeans lost favor among fashion-conscious younger shoppers, who buy most of the denim sold. Ultimately, the company found its products sandwiched between lower-cost alternatives sold by Sears, Roebuck & Co. and J.C. Penney Co. and high-priced options from trend-setting designers such as Tommy Hilfiger Corp. and Calvin Klein. Even more expensive choices sprang up, including brands such as Diesel and Seven that sell for more than $100.

The problem intensified as mass merchandisers, such as Target Corp. and Wal-Mart Stores Inc., began grabbing a huge chunk of the jeans market.

Levi struck back this summer, when it began selling a lower-priced Levi Strauss Signature brand in Wal-Mart stores. Today, Levi sells jeans ranging in price from $20 to $220 and still remains one of the top jeans brands among American youth.

Although the company has continued to struggle with intense competition and downward pressure on prices, it recently said it expected improved sales and profit for its fiscal third quarter, which ended Aug. 24.

Still, Levi, which is controlled by the family of founder Levi Strauss, is weighed down by $2.37 billion in debt and faces an Internal Revenue Service probe of some tax issues.

. Levi's American roots have been an important part of its marketing in the past, said Stephen Walker, president of Headmint Inc., a New York marketing firm. Walker, formerly with the London-based advertising agency Bartle Bogle & Hegarty, helped plan Levi's European marketing campaign in the mid-to-late 1980s, when the brand was flagging there. He worked on the brand for four or five years, creating ads that capitalized on Levi's image as an American icon.

The same agency is now creating similar ads for Levi in the U.S., he said.

"They're using advertising and marketing to perpetuate the myth that they're buying this authentic, classic American piece of clothing," Walker said. "Ultimately, the question probably will become, 'How much does the consumer care that the reality and the image are no longer aligned in any way?' "