Levi’s to shut down apparel plant in July due to rising costs

Saying it could no longer find a way to cut costs, apparel giant Levi Strauss & Co. will close its "cut-and-sew" plant in Makati that has been producing Levi’s jeans for the Philippine and Asian markets since 1972. At the same time, Levi Strauss announced it would donate $50,000 to a charity to aid residents around the Makati plant and people affected by the closure. In a statement, Levi Strauss Philippines Country Manager Ramon Martelino said 257 workers will be terminated. Operations will stop at end-July. As a result of the closure, Levi Strauss will only become a retailer of the Levi’s and Dockers brands in the Philippines. The company did not say where the operations will be moved, only that it has many subcontractors in the region. Workers will be given a "fair and proper" separation pay, but Mr. Martelino did not go into details. "This has been a very difficult decision for us. We have examined comprehensively all other options, including cost containment and improving the efficiency and productivity of this plant as first options. Unfortunately, such measures cannot overcome the significantly lower costs of outsourcing," Mr. Martelino said. Levi Strauss said the move will allow it to "focus on its core competency of marketing its branded products in Asia and grow its business in the region." In a phone interview, Mr. Martelino told BusinessWorld the work force was informed about the shutdown Wednesday. "It came out very well We had a meeting with the employees and spoke to them about the situation. It is painful. The domestic business will continue to operate by marketing Levi’s and Dockers. The Philippines remains an important part of the total business in Asia," he said. On its Web site, the apparel giant founded by Bavarian immigrant Levi Strauss in the US in 1853 is anticipating a "difficult retail environment in several markets around the world." Mr. Martelino said the Makati plant had a number of disadvantages. "Our plant produces jeans for the Philippines and Asian countries particularly in Japan. We will transfer the sourcing of the products in other locations in Asia-Pacific. At any given point in time, we maintain subcontractors around the region. As the manufacturing garment industry has become developed, obviously, sourcing products has become borderless," he said. The Levi Strauss Foundation will make a "philanthropic grant" of $50,000 to a nongovernment organization to "assist residents of communities near the plant with social and economic development programs," Mr. Martelino said. — R.A.M. Rubio, BusinessWorld