US garment makers tailor an industry around staying at home

November 17, 2013 12:41 pm

US garment makers tailor an industry around staying at home

By Barney Jopson in Los Angeles

In a corner of sun-kissed Los Angeles, women with superstar looks and skimpy outfits catch the eyes of passersby. The glitz and glamour of Hollywood, however, are far away. Clad in plain tops and hot pants, they are posing in posters on the wall of a drab factory, the very place where their clothes were made. Welcome to American Apparel, a holdout against the forces of globalisation. Its thrumming sewing machines and quick-fingered workers are producing the kind of $20 T-shirts that its rivals have long since bought from low-cost factories in Asia.Some 98 per cent of the clothes worn by Americans are produced outside the US, according to a trade group, but the garment district in Los Angeles remains an outpost for the “Made in America” brand.

It is the kind of place that matters to champions of USmanufacturing, including President Barack Obama, who has said production is “roaring back” as outsourced jobs come home.

American Apparel would like to be the vanguard of a renaissance, as would smaller factories to which other brands outsource work. But as it is losing money, its first challenge is proving that US manufacturing can make financial sense.

The garment factories traditionally served local fashion designers who lived in symbiosis with the entertainment business. In the past decade they produced $3bn-$4bn of clothes a year, but employment nosedived as productivity rose.

Their future now depends on factors that range from building safety in Bangladesh to US immigration reform. Ultimately they boil down to one thing: how to keep costs low so Americans can buy affordable clothes.

Garment-making is not energy intensive so factories do not get much benefit from new supplies of cheap US shale gas, but Dov Charney, American Apparel’s founder, says other economic trends are shifting in his favour.

China, which exported $160bn of apparel last year, is less attractive than it once was because workers are demanding higher wages and transport costs have gone up since outsourcing began. As China’s advantages narrow, those of Los Angeles and its two ports grow. “LA is the new centre of the world,” he says.

Another factor is “fast fashion”, the drive to change store merchandise more frequently so consumers shop more often. The likes of Zara, Hennes & Mauritz and American Apparel all need factories close to western consumers so they can respond quickly to new trends. It can take 10-12 weeks to get a new item from China to US stores; from Los Angeles it can be done in two weeks.

American Apparel pays its workers $10-$18 an hour and says there is a moral case for producing in the US. Marty Bailey, its chief manufacturing officer, helped other companies to move production overseas in the past and says: “In many cases [factory work] was providing something better than what people had, but it was still very exploitative – the fact that people are working so hard for so little.”

Working conditions were thrust into the spotlight in April when more than 1,100Bangladeshi workers making clothes for western brands died in a collapsed factory building. The disaster prompted some multinationals to ask what they could make at home.

In Los Angeles, the answers lie in a sprawl of desert-hued buildings bordered by barbed wire and the odd palm tree. Here most of the staff hail from Mexico or El Salvador and the work is done as in Asia: each sewer does just one seam; washers fade jeans with brillo pads.

The sector is still notorious for breaches of pay and working time regulations. But David Fitzpatrick of Labor Law Monitoring, who inspects factories for big outsourcers, says those he knows provide decent pay – including bonuses linked to productivity – and a safe workplace.

But when the Financial Times visited factories with him, owners complained that they were short of orders. “You got any customers out there for me?” asked one, who had heard that another big buyer was going to abandon the US.

American Apparel says US immigration law is making life harder. The company was forced to dismiss 1,800 of its then 7,000 workers in 2009 because they lacked proper work papers. Now it is campaigning for reform, saying it would be more productive if it could hire undocumented immigrants with factory experience. Instead a spokesman says they go to underground “sweatshops”.

Because machines cannot manipulate fabric as well as the human hand, automation in the garment sector has been limited. That is why labour can be as much as 60 per cent of production costs and why the wage gap between Los Angeles and Asia is too great for most mass market retailers to pass up.

California’s minimum wage of $8 an hour translates into a basic monthly salary of about $1,300. In Bangladesh, the minimum wage is $38 a month, although workers are demanding a 77 per cent rise.

Despite Bangladesh’s safety problems, when McKinsey surveyed big company executives this summer, 83 per cent said they planned to buy more from the country over the next one to two years. “The current share of [apparel] sourcing from the US is tiny to irrelevant,” says Achim Berg of McKinsey.

Kevin Klowden of the Milken Institute, a think-tank, says there will “never” be a big revival in Los Angeles garment making. But there is a future for plants making expensive products – such as $150-plus premium jeans – because they give brands leeway to absorb higher costs.

One denim flag bearer is J Brand, whose head office sits above a factory owned by a Korean-American couple that produces 20,000 pairs for it a week.

Karen Phelps, a J Brand design director, says their coexistence is “like all my Christmases coming at once”. It means she can have a sketch made into a prototype in a couple of days. She can also ensure precision on the production line, which is vital for back pockets, because if they are too big they “accentuate the woman’s behind”.

While American Apparel is known for its racy posters, it is a problematic poster child for LA manufacturing. It has been hampered by erratic management, but Mr Charney says his approach will eventually be vindicated. “It’s just that the execution hasn’t been perfected.” Until it is, mid-market garment factories will be hanging by a thread.