Retailoring in a bluejeans border town

Ernie Lopez figures the workers at the Levi-Strauss factory he runs in El Paso clamp about a million of Levi's famous copper pocket rivets into jeans every week.

Despite the hammering the icon of American culture has taken as a result of global shifts in clothing manufacturing and Levi's fall from teenage favor, Mr. Lopez has high hopes.

"These people know this industry is going south," says Lopez of the men and women cutting, stitching, and labeling on his busy sewing floor. "But they're also well-paid and motivated, so they're going to do what it takes to keep this thing going."

One of the last stands of the US garment industry, El Paso today - along with its economic engines, jeansmakers - symbolizes the strategic thinking required for survival in a rough-and-tumble global economy.

Just a few years ago this city was the world's largest producer of Levi's - with more than 6,000 of the company's high of 18,000 US manufacturing workers.

But in this decade, US garment-manufacturing employment has fallen from just over 1 million to less than 750,000 as American manufacturers have sought out cheaper labor and other production-cost advantages in places like China, Sri Lanka, and Honduras.

In El Paso, garment-making's fall has meant a drop from a job high of 21,000 five years ago to fewer than 15,000 today. Levi's now has more former workers in retraining and skill-development programs here than it has employees. (It expects its payroll in El Paso to drop from 2,000 to about 1,200 workers over the next year.)

"We're not the only area of the country feeling the impact of clothing manufacturing going offshore," says Tom Thomas, vice president for economic development at the El Paso Chamber of Commerce.

"It's not just a Levi reality, it's an economic reality for the entire US," says Annette Morales, Levi's El Paso-based public-affairs manager for the Americas.

"This business is going where there are cheaper operating costs," she says. If anything, Levi's held off longer than most other US clothiers on moving manufacturing out of the country. Economists here say it is inaccurate to blame migration of the US garment industry on the North American Free Trade Agreement, as some free-trade critics are wont to do.

"The apparel industry is closing up plants in Georgia, Tennessee, North Carolina, Arkansas, and a list of other states, but they're not all moving to Mexico," says Tom Fullerton, regional economist at the University of Texas at El Paso. "They're off to El Salvador, China, and Bangladesh, so you can't blame this trend on NAFTA."

Partnership cut two ways

For El Paso, it was both good fortune and bad to have been built up by Levi-Strauss into such an important manufacturing base. Good, because the company is known as an excellent corporate citizen: Pay is good, job training and advancement is encouraged, as are classes in everything from computer literacy to English and citizenship.

Even as it retreats from El Paso, Levi's is working to get every former employee retrained for another job.

Levi's helped El Paso lobby for a $45 million displaced-workers retraining grant, the largest such federal grant for any US city. The company is also working closely with Boeing, now hiring for production facilities it has planned for El Paso. The aerospace company is particularly interested in Levi's nimble-fingered former seamsters.

A failure to adapt to new markets

But in a sense it was also unfortunate to end up the biggest manufacturer for a company that perhaps failed to sufficiently evolve with the times.

"As much as anything else Levi's problem is its falling market share," says Victor Grado, corporate economist with the El Paso Electric Co. "Baby boomers still like their Levi's, but ... kids are looking at and wearing other brands."

Despite a booming US economy and a ballooning of the teenage (and jeans-clad) consumer market to $140 billion in annual spending, Levi's sales fell 15 percent last year alone.

In February Levi's announced it was closing half its plants in the US and Canada and laying off 5,900 workers - this after an initial round that closed 11 US plants in 1997 and cut 7,400 workers.

Levi's managers now recognize that the company let a gold mine slip through its fingers. "While our competitors put everything into marketing," says Ms. Morales, "we held fast to our status as an American icon."

Still, others say garment manufacturing in the US can still be profitable - and a marketing plus.

"In order to respond quickly to our customers' needs and changing fashions, we feel we have to have a significant percentage of our production in the US," says Ed Heim, a vice president of VF Jeanswear in Greensboro, N.C., makers of Lee, Wrangler, and Brittania clothing.

Both Lee and Wrangler increased market share over recent years by focusing on "niche" markets - and all the while keeping over half of their manufacturing jobs in the United States, nearly 5,000 of those in El Paso.

"Not only is it possible to be profitable manufacturing in the US, but it's necessary" to be close to your consumers, says Mr. Heim. Levi's Lopez has got that message. At his Kastrin Street plant, the 1,000 employees who once sewed only 501s now produce dozens of styles for niche markets around the world.

"It used to be that 200,000 [pants] was a small run for us," he says, "but now we'll produce 2,000 of something, see how that sells, and go from there."

A few sewing stations at the factory are experimenting with hand-sewn pockets. Others produce the new L2 line that Levi's executives in San Francisco hope the most fashion-oriented kids will try, new designs by hot hip-hop singer Lauryn Hill, or baby-blue-and-cream-colored corduroys that will sell in Japan for $100 a pair.

"When a customer calls, we can now get an order for a certain style in certain sizes out in as little as a day," says Lopez. "That's new for us, but it's always going to be hard to do from China or Guatemala."