Levi Strauss, a guide for activists, July 04

Topics:

Levi Strauss: a company in crisis
Levi’s and sweatshop exploitation

- a draft guide for activists, July 04. No Sweat

In their own words

Founded in 1853 by Bavarian immigrant Levi Strauss, Levi Strauss is one of the world's largest brand-name apparel marketers with sales in more than 100 countries. There is no other company with a comparable global presence in the jeans and casual pants markets. Our market-leading products are sold under the Levi’s, Dockers and Levi Strauss brands.

The company is privately held by descendants of the family of Levi Strauss. Shares of company stock are not publicly traded.
The company employs a staff of 11,000 people worldwide, including 1,250 people at its San Francisco headquarters.

Levi Strauss & Co. is organised into three geographic divisions:
North America, based in San Francisco
Europe, based in Brussels
Asia, based in Singapore
(info: Levi’s website)

Levi’s post a profit

Second-quarter 2004 net sales were $959 million compared to $932 million for the second quarter of 2003. The sales performance reflected the continued growth of the company’s Asia Pacific business and worldwide rollout of the Levi Strauss Signature brand. Net sales declined in Levi’s U.S. and European Levi’s and Dockers businesses. Key factors contributing to sales decreases of the U.S. Levi’s and Dockers brands compared to the second quarter of 2003 included the impact of wholesale price reductions taken in mid-2003 for both brands.

Gross profit was $413 million, or 43.0 percent of sales, compared to $393 million, or 42.2 percent of sales for the second quarter of 2003. Gross profit in the 2004 period benefited from lower product costs and lower markdowns and sales allowances, as well as stronger foreign currencies.
Lower advertising expense, lower post-retirement healthcare expense and cost savings due to reorganisation initiatives more than offset higher incentive compensation expense and the unfavourable impact of stronger foreign currencies.
ï‚· Advertising expense decreased 25 percent to $65 million, or 6.7 percent of net sales, compared to $87 million, or 9.3 percent of net sales in the 2003 period.
ï‚· Post-retirement healthcare expense was a net benefit of $11 million compared to a $16 million expense in the prior year period. The $27 million improvement resulted from lower expenses related to plan changes that we reported in the first quarter.

Operating income was impacted by restructuring charges. The second quarter 2004 charges were primarily associated with the proposed closure of two manufacturing plants in Spain and layoffs incurred in the United States as the company streamlined corporate support functions.
As of May 30, 2004, total debt stood at $1.96 billion compared to $2.11 billion at the end of fiscal year 2003.
(Levi’s statement, July 13, 2004)

… but Levi’s are still in a mess

Slumping jeans maker Levi Strauss & Co. capitalised on the weak dollar and the success of its new discount brand to eke out its first quarterly profit since last summer.
The San Francisco-based company said Tuesday that it earned $5.6 million during the three months ended May 30, reversing a $41.8 million loss at the same time last year. It was Levi’s first profit since the quarter ending in August 2003.
Second-quarter sales totalled $959 million, a 3 percent increase from $932 million last year. If not for favourable currency fluctuations, the company said its sales would have dipped by 1 percent.
Levi’s is privately owned, but discloses its quarterly results because some of its debt is publicly held.
Although the quarter produced a profit, Levi’s sales continued to sag in its biggest markets. In the United States, quarterly sales of the Levi Strauss and Dockers brands dropped by 7 percent and 26 percent, respectively.
The company benefited from the widening appeal of its Signature brand, a discount clothing line unveiled last summer to cater to the tastes of bargain-minded consumers. The Signature brand, sold primarily in Wal-Mart and Target stores, generated second-quarter revenue of $84.9 million, or nearly 9 percent of the company’s total sales.
Levi’s also got a lift from strong demand in the Asia-Pacific markets, where sales climbed 26 percent from last year.
Stuck in a seven-year sales funk, Levi’s is pursuing the latest in a series of turnaround attempts that have led to the layoffs of thousands of employees and the closure of dozens of factories. The current overhaul is being engineered by Alvarez & Marsal, a consulting firm Levi’s hired late last year.
Since its arrival, Alvarez & Marsal has been sharpening Levi’s focus on its most profitable lines and cutting expenses. The latest austerity measures include the planned closures of Levi’s two factories in Spain.
As part of its reorganisation, Levi’s is trying to sell the Dockers brand, which accounted for about 22 percent of the company’s sales in the latest quarter.
(Michael Liedtke / Associated Press)

Levi Strauss closes last U.S. plants and produce abroad with cheaper labour
News report, 2003:
Levi Strauss will close its last two U.S. plants by year end and lay off 800 workers. The company also will close its three facilities in Canada next March [2004], leaving it with no plants in North America.
Workers at the two San Antonio plants sew and finish jeans. The company will contract with foreign manufacturing plants. The company said the moves were part of a strategy that began several years ago to shift away from owning and operating its own manufacturing plants.
"We're in a highly competitive industry where few apparel brands own and operate manufacturing facilities in North America," said chief executive officer Phil Marineau.

The San Antonio sewing plant employs 550 people, and 250 workers run the finishing plant.

Levi plants once dotted South Texas from San Angelo to the Rio Grande Valley. But for years Levi Strauss and other clothing makers have been shutting down U.S. plants and moving production to other countries with cheaper labour.

Canadian plants to close are two sewing plants in Edmonton, Alberta, and Stoney Creek, Ontario, and a finishing centre in Brantford, Ontario. The closings will leave 1,180 employees without jobs.
(25 September 2003, AP)

Note: in 1981 there were 60 U.S. clothing factories operated by Levi-Strauss

But not everyone’s suffering…

The boss of Levi Strauss made over $25m in compensation last year, marginally more than the profits booked by the entire clothing company.
The payment was the first fruit of an incentive plan signed by Philip Marineau when he joined Levi's in 1999. He could make a similar amount in each of the next two years.
Mr Marineau banked the cash in a year when he closed eight factories, including two in Scotland, with the loss of 3,900 jobs.
A spokeswoman for Levi's said, “He has done a phenomenal job".

Across the whole of 2002, Levi's recorded profits of $25m after restructuring costs, compared with $151m the year before. Sales in 2002 slid 3% to $4.1bn, down from a peak of $7.1bn in 1996.
(Guardian, 3 March 2003)

Naomi Klein comments:
Nike is by no means the only company spouting soothing new-age rhetoric while it plays emcee in a global race to the bottom.
Levi Strauss makes sure its entire Asian and Latin American contractors sign on to codes espousing the very highest principles in workplace rights. Those paper rights are a bargain, however, compared to the union contracts negotiated by many of the 13,000 North American Levi's workers who have lost their jobs in the past two years.
(Naomi Klein, 1999)

The roots of the crisis

In 1996 Robert Haas took Levi Strauss semi-private placing control of the company in the hands of four people – himself, an uncle and two cousins.
In the mid-80s Haas had shut down dozens of Levi’s plants and boosted the stock price 100-fold, from $2.53 per share to $265. Consultants described Haas as a “hero”.
But around 1990 Levi’s had begun coming apart at the seems. Advertising and in-store presentations were failures, market share collapsed. And a $850 million re-engineering project designed to speed up delivery times was a disaster. Business consultants complain that Levi’s became complacent, failed to develop new lines, failed to close their US plants quickly enough and exploit cheap labour abroad.
In the period 1996-9 Fortune estimated that Levi’s market value shrunk from $14 bn to around $8 bn. (In the same period Gap grew from $7 bn to $40 bn.)

Levi’s Code of Conduct

Clean Clothes report:
In March 1992 Levi Strauss & Co. unveiled its "Global Sourcing & Operating Guidelines," establishing a code of conduct for all contractors who manufacture or finish Levi's products, as well as a code for selecting countries in which to do business. As one of the first multinational corporations to adopt a code of conduct, this decision to take responsibility for standards in their workplace, and Levi's subsequent follow-up (their methods for implementing and monitoring these standards) are a worthwhile subject for analysis.

Levi Strauss was applauded for creating such a set of standards. The company's guidelines and other community service projects have even won awards. But the Levi's code has serious flaws: it does not meet or make reference to ILO standards: wage guarantees are only set at the local minimum wage not a living wage; the acceptable workweek is set at 60 hours; and a company-controlled system of verification does not ensure that even the standards set in the code are implemented and regularly monitored.

The Clean Clothes report concludes:
… based on documented visits to Levi's production sites, presents evidence that repeatedly shows that the company's code has not been implemented
And:
The evidence raises serious questions as to how the Levi Strauss guidelines are implemented and monitored. The code, lacking on certain points, appears to not be implemented, and in many cases workers are not even aware of its existence. The company-controlled monitoring process is not comprehensive and, given the numerous violations of the code, is not functioning effectively. Levi Strauss should upgrade their code to meet ILO standards and should adopt a program of independent monitoring to ensure that the standards they claim to support are indeed implemented and regularly verified.

(More information at the Clean Clothes site: www.cleanclothes.org/companies/levi5-5-98.htm)

The reality of the Code, an example:
In a 1996 case study of Noveca Industries, a facility in the Philippines with 100% of its production dedicated to Levi's, numerous violations of the Global Sourcing and Operating Guidelines were found. Breaches of the Levi's code were documented on several counts: workers worked more than 60 hours per week; overtime hours were mandatory (though the code stipulates that workers must be present voluntarily); employees did not receive one day off in seven days; workers received less than the minimum wage; union leaders were threatened, in violation of the guarantee of free association; and working conditions were not always safe or healthy. This was despite Levi's claim that "during their regular visits with contractors, our employees conduct full investigations including detailed questionnaires, on-site plant inspections and off-site interviews with workers.
Instead, researchers found:
"Noveca receives advance warning of any upcoming Levi Strauss inspections and, as a result, is able to prepare for such visits. People interviewed separately told us plant management informed the workers that representatives of the United States Department of Labour would soon visit the plant. As a result, the employees had to clean the plant from top to bottom in preparation. It was at that very same moment that Noveca began paying its staff the minimum wage...Our interviewees told us that no representative of the Department of Labour ever came, but that people from Levi Strauss did visit the administrative building in September 1996...Aside from compliance with the minimum wage, nothing else has changed at the plant: work hours are still as long, overtime is still mandatory...In our view, meeting with workers in locations where they feel safe would have allowed Levi's inspectors to become aware of the plant's problems as a whole....One interviewee told us that "it's the Levi's people (i.e. the ones in charge of production and compliance with the code) who make us work on Sundays to meet production targets"… Our exchanges with workers in Asia left no doubt that the main priority of Levi Strauss personnel is production and not working conditions. During our tour of Thailand and the Philippines, we met union representatives in four factories producing clothes for Levi Strauss and other major brand names.

Some more examples of work practices and violations of Levi’s Code of Conduct
From a Clean Clothes report (1998):

a. In November 1995, a visit to a Dhaka factory owned by the Azim Group, in Bangladesh revealed a hot and crowded workplace where workers were covered with white dust. Interviews with operators at a factory in Sabar, also owned by Azim, revealed that they were receiving wages that were only about 1/3 of what the general manager claimed to be paying his employees.
b. In 1995 workers from the PT Great River factory, producing jeans for Levi's reported that wages were not enough to cover basic needs. They told researchers that 70-75% of the workers at this facility located in Indonesia had been participating in a strike. Demands dealt with wages, food allowance, transport allowance, leave, stopping SPSI and the freedom to choose an independent trade union.
c. At the PT Ulinda plant, also in Indonesia one workers reported that in some cases work shifts strecth from 8 a.m. until 6 a.m. the following day to meet targets. That same year at PT Wearwel International in Jakarta, the company's chief executive reported that Levi Strauss had been a customer for six years and had asked them to sign a code of conduct. Meanwhile though, workers reported that they are closely watched and security guards even patrol the toilets -- which workers must obtain tickets to use, though these are not always given. Workers must meet daily targets or may be fired. When deadlines are being pursued, workers say they must work overtime. Though workers would like to demand better conditions, there is a great fear of being fired, indeed in interviews workers reported they are afraid to even talk in the building.
d. At the Korea Lanka factory located in Colombo, Sri Lanka workers produce Dockers products for Levi Strauss in the U.S. In 1995 operators reported they worked every day of the week. Management reported that though the GAP asked questions related to labour issues and conducted evaluations, Levi Strauss did not.
e. In Thailand, the TBI Group of Companies, based in Prahumthani does work for Levi's. Though there is a trade union at their Thai Iryo Garment, Ltd. facility, in 1995 researchers were told that buyers or quality controllers never visit their offices to ask questions.
(Recorded by SOMO/CCC in 1995)

Levi's employees in Hungary encountered obstacles in establishing a union, a clear contradiction of the right of free association guaranteed under the code. Finally in 1996 a symbolic presence was accepted. Two more years of struggle followed and by 1997 a union was established .

Cooking the books?

Media allegation of bad company practice:
Levi-Strauss denies allegations by two former employees, that the San Francisco jeans-maker falsely inflated profits.
A lawsuit filed by two former tax department managers accuses Levi-Strauss of claiming hundreds-of-millions-of-dollars in questionable income and tax deductions.
The pair claim they were fired in December for refusing to conceal financial information from auditors and the IRS.
They say last year Levi Strauss should have reported a net operating loss of $336-million dollars instead of posting a $25-million profit for the fiscal year.
A company spokesman calls the claims completely false and says the pair were fired for unrelated personnel reasons.
(04-16-2003)

Wall Street’s analysis, June 04:

As Levi Strauss & Co. prepared for its biggest new jeans launch in decades, it hired as a sales executive someone it considered the perfect choice: a vice president from motor-oil maker Pennzoil Co.
Ted Fox had no fashion or apparel experience. The main reason he won the job last year, executives say, was that he knew how to sell to Wal-Mart.
The unorthodox bet reflects a fundamental power shift. For much of Levi’s 151-year history, it was a powerful supplier. It made an iconic brand that millions wore or aspired to wear.
But in today’s world, Levi finds itself the supplicant, and it’s retailers who call the shots. Power is swinging to the companies that deliver goods: retailers and other distributors. Suppliers are being forced to adapt.
When Levi began to sell to Wal-Mart Stores Inc. last year, it overhauled its entire operation. The process was wrenching and full of setbacks, and it is only now showing signs of paying off.

The story of Levi Strauss’s surrender to the new power of retail began in 1999. The company was struggling to boost declining sales and to reduce debt, which had ballooned in a buyout that put ownership in the hands of a few descendants of the founder. The company hired Marineau, then running PepsiCo Inc.’s North American business.
Within days, Wal-Mart called him to broach the idea of selling Levi’s at its stores.

But Marineau believed that Wal-Mart offered an opportunity too great to ignore. Mass merchants such as Wal-Mart were selling a third of all jeans in the U.S., and their share was growing. Wal-Mart would be the fastest way to boost sales of Levi’s.

Levi developed its design-sales-distribution system to meet Wal-Mart’s specifications, not its own, said Scott LaPorta, president of Levi Strauss Signature, a new jeans brand Levi created to sell at mass retailers that include Wal-Mart and now Target Corp.

To persuade the different types of retailers — department stores, speciality chains, upscale boutiques and mass merchants — to carry Levi products, Marineau proposed a segmentation strategy: He would sell different versions of jeans for different prices, from Levi Strauss Signature jeans to $150 upscale vintage designs.

The idea included positioning Levi Strauss Signature as a “premium” mass brand. To differentiate, the company’s new brand had no distinctive “red tab” peeking out from the back pocket and no trademark Levi pocket stitching. Instead, they would bear the Levi name in a cursive scrawl. They also got less-expensive fabric.

Last July Levi Strauss Signature jeans went on sale at all 2,800 Wal-Mart stores in the U.S. The launch didn’t go as well as planned. After a few weeks, Wal-Mart complained that some styles were selling more slowly than other brands, which were priced at $15 to $18. Three months later, Wal-Mart cut the cost of a basic pair of men’s Levi Strauss Signature jeans to $19 from $23, hurting Levi’s profits.
Meanwhile, important parts of Levi’s core business began to deteriorate as executives focused on Wal-Mart. Some department stores reduced orders. Sales of regular Levi’s, which had begun to show signs of stabilising before the launch of Levi Strauss Signature, resumed their decline. For its fiscal year 2003 ended Nov. 30, Levi lost $349 million. Sales, which had been projected to grow by 2 percent to 5 percent, instead fell 1 percent to $4.09 billion. Debt hit $2.32 billion from $1.85 billion a year earlier.

After Wal-Mart cut prices on Levi Strauss Signature, sales began to rise.
In its first quarter this year, Levi narrowed its losses and saw a 10 percent jump in sales, thanks in part to Signature, which contributed about $105 million in sales. (The Wall Street Journal, 20 June 04)

Appendix 1

Levi Strauss and the Price We Pay
LA Times Dec. 1st, 2002
The cost of apparel has declined for a quarter century, helping make Americans the best-clothed people in history. All is right in the world, unless you ask how it happened. "To be competitive required us to lower our cost of goods, to go offshore. Apparel prices have gone down for 25 years, and it continues unabated, driven by an ageing population that wants to spend less on clothing." -- Levi CEO Philip A. Marineau

By FRED DICKEY
Brenda Pope sits at the kitchen table and stares sadly at her work-hardened hands. Inside one wrist is the purple welt of a surgical scar that runs halfway to her elbow. Twenty years at a sewing machine gave her the carpal tunnel injury. That scar and $15,000 in severance is what she has to show for those years. Near the edge of Blue Ridge, Ga., the Levi Strauss plant where she once worked now sits empty, a glass-and-brick shell overlooking acres of empty parking lot. Bored security guards stroll the grounds to protect what no one any longer values. A factory dies an honourable death when it falls apart from hard work and time. This one was cut down in full productivity. For a half-century, this apparel sewing plant was a wellspring that pumped life into the town. The workday was switched on by the gathering of 400 workers, mainly women, chattering as they punched the clock.
Hour after hour, they created a cadence from clacking sewing machines, generating wealth for their bosses and modest wages for themselves. The plant was shut in June 2002 , one of six Levi plant closures that left the San Francisco apparel giant with just a tiny U.S. manufacturing presence--a plant in San Antonio, Texas, devoted to quick turn-around products that have deadlines overseas plants can't meet. At the end, the Blue Ridge workers stood in small knots, tossed about by a maelstrom of emotions. Some were in shock. Some muttered that they would never again wear Levi clothing. Most worried about the future. Brenda Pope was one of those. Blue Ridge is a town of nearly 2,000 in north Georgia, just south of the Tennessee and North Carolina lines. Blue-green hills rise sharply a few miles south of town and provide a gateway to the Appalachians, gaining loveliness as they gain height. Residents are mostly Scots-Irish, descendants of the hard-edged people who broke the Cherokees, and then broke the soil. Today, many here, like Pope, are working poor. Measured against what most of us feel we need, the 44-year-old single mother asked little. She wanted to live among familiar pines and trustworthy people, create value with her hands and raise her child in the old ways. She did not think she needed a college degree to do these things. She was right, until she made the mistake of pricing herself out of the labour market--a feat accomplished by earning $14 per hour putting zippers in Levi's famous blue jeans. When Levi moved Pope's job out of the country, she became one of hundreds of thousands of American workers who have lost jobs during the past six decades as the garment industry seeks lower wages in underdeveloped countries. In that context, the decision to close the Blue Ridge plant was hardly unusual. Levi had clung to its last U.S. manufacturing plants long after most of its competitors had fled.
Yet when a company like Levi, with a reputation for good management and strong relations with employees, finally turns out the lights in the United States, it might be an occasion to measure the human toll, here and abroad, of the flight of garment industry jobs--and to remember that it's happening so that American consumers, who buy more clothing than any people in history, can get a shirt for $20 instead of $25. In 1950, 1.2 million Americans were employed in apparel manufacturing. By 2001, that figure had fallen to 566,000. In the same time span, the U.S. population almost doubled. Jobs went out of the country, and finished products came in. In 1989, the U.S. imported $24.5 billion in apparel; in 2001, $63.8 billion. In the last quarter of 2001, 83% of all apparel sold in this country was imported. The migration of these jobs is seen as the natural result of globalisation, the economic process that melds the technology and finance of the developed world with the vast labour pool of the underdeveloped.
This trend is especially attractive to the apparel industry because, basically, all it needs are sewing machines and low-paid workers. Globalisation has crept up so stealthily that it wasn't generally recognised until full grown. It accelerated around the end of World War II, when the industrialised world was reshuffling, says Charles Derber of Boston College, author of "Corporation Nation," a book that views corporate power through a populist filter. As American corporations witnessed the economic rise of Japan and other foreign competition, they started looking for an edge, and they found it in cheap labour abroad. "They realised that more money could be made by using those billions of workers as producers as well as consumers," Derber says. Many corporate executives view this sea of cheap labour as an attractive profit centre, or, if they find it predatory and distasteful, as a competitive necessity.
Economists say globalisation will be the platform for Third World countries to build their own free-market economies, and that low wages are part of the growth process. Michael M. Weinstein, a New York economist who has studied the job-flight phenomenon, says of the plight of Pope and others like her: "Any policy you give me for saving that person's job is going to threaten somebody else's. I don't mean to sound callous, but there are plenty of low-end jobs [in the U.S.] that need filling. If we bar low-cost goods from abroad, it would be the poorest among us who depend on these products who would be punished most harshly." In other words, it is the poor who would suffer most if, say, clothing at Wal-Mart suddenly cost more. Weinstein adds, "We don't need garment jobs to have full employment for Americans. It's a good thing when these jobs go to the worst-off people in the world. I regard it as unconscionable to clamp down on sweatshops that are making these people's lives better than they would otherwise be." The search for the worst-off people in the world means the garment industry is looking for a target that's always moving.
As soon as wages rise in one country, work can be moved to another. Charles Kernaghan, director of the National Labour Committee in New York City, calls this long-distance shuffle a "race to the bottom" of the wage scale. The committee has a list of hourly apparel wages in Third World countries, including: Guatemala, 37 cents; China, 28 cents; Nicaragua, 23 cents; Bangladesh, 13 to 20 cents. In addition to low wages, manufacturers in many countries benefit from child labour and long workdays as well as the absence of health plans, environmental protections, workplace safety standards and efforts to organise workers. In fairness, some U.S. apparel makers, Levi among them, have taken steps to police conditions in plants overseas, and to pay fairly. But those efforts are far from universal. "American companies make showcase visits to these offshore plants, but they always get the VIP tour and are manoeuvred to talk only to employees who have been coached for such occasions," says Kernaghan, an old-style, angry labour activist who knows his enemy, doesn't trust him and never gets too close. Levi Strauss & Co. has taken on the role of dressing people to look sexy and cool, but the company began in 1853 as a wholesale dry goods business. Its first garments were work pants made of canvas-type material to serve workers in dust-clogged mines and on docks.
As the years passed, Levi grew, its sales reaching $4.3 billion by fiscal 2001, and the company expanded its manufacturing to other parts of the country. Levi became a paragon of corporate beneficence. It provided benefits, fair wages and even helped employees earn diplomas. It donated ball fields to the small towns where it operated. Even unions liked the company. Ann Woody was a management employee at the Blue Ridge factory. She remembered when Bob Haas, a descendant of the founders and Levi's president and CEO, visited the plant about a decade ago. Workers planted a tree in his behalf to show their affection. It was a touching moment of mutual fidelity. Company fortunes faltered in the mid-'90s in the face of competition from goods made overseas.
When the time came for Levi to close Blue Ridge, Haas had become chairman of the board, replaced as president and CEO by Philip A. Marineau, who was recruited from Pepsi-Cola to "turn this thing around." To reduce labour costs, Marineau had to break the paternal mould that the Haas family had formed over many years. Journalist Karl Schoenberger wrote in his 2001 book, "Levi's Children," that "Levi Strauss is one of the very few major companies in the apparel industry that has not been indelibly branded a scoundrel by human rights critics. . . . It has the distinction of trying harder and far longer than any other multinational corporation to do the right thing." The new boss was tough enough to say to the workers: Sorry, but this is about money. Marineau doesn't do fireside chats. He's all business. Asked why the company closed Blue Ridge and turned out faithful workers, he says: "To be competitive in the marketplace required us to lower our cost of goods. It required us to go offshore.
Apparel prices have gone down for the last 25 years, and it continues unabated, driven by an ageing population that wants to spend less on clothing." In announcing the six plant closures, Levi said it was becoming a "marketing company," and that future production in almost all cases would be by contract manufacturers. That would take place in 50 countries, including Mexico, Bangladesh and China. To author Derber, that explanation is code language that actually says: We're going for the cheap labour, and we don't want the dirty hands of ownership that go with sweatshops. The goal is to have "plausible deniability" about labour conditions. He said that foreign plant owners are rarely steeped in touchy-feely management techniques and operate with the backing of powerful politicians who can impede whatever government oversight might technically be on the books. Asked why Levi contracts out its manufacturing, Marineau gives several competitive business reasons, then he pauses and acknowledges, "The apparel industry is chasing low-cost labour." For Levi, the advantages became obvious this year.
In the third quarter, which ended Aug. 25, Levi's sales were up 3.5%, its first increase since 1996. Five weeks ago came an agreement to sell a new line of lower-priced jeans through the vast Wal-Mart Stores chain. Marineau predicted that the new Levi Strauss Signature brand would generate hundreds of millions of dollars in sales each year--all from garments made abroad. To its credit, Levi has been a pioneer overseas, creating a corporate code of standards for every manufacturer with which it contracts. Levi also pays inspectors to enforce the standards. Writer Schoenberger acknowledges Levi's effort, but says, "How well they have managed to enforce that code is probably very debatable," given the serpentine twists in Third World countries. In fact, enforcing the codes of various private groups and international organisations is not achievable, Weinstein says.
Groups such as the World Trade Organisation, NAFTA and the International Labour Organisation have no real leverage to control American multinationals because the United States has such vast economic clout. "Say the Philippines has a beef against American trade practices," he says. "What are they going to do, refuse to do business with the U.S.?" That segues into a main Kernaghan point. The labour activist says that the most effective step against globalisation abuses would be to pass legislation in the United States prohibiting the entry of goods from countries whose products fall short of acceptable standards. In other words, the U.S. would be saying to multinationals operating offshore: We can't stop you from making clothing in sweatshops, but you can't sell it here. "We have the power to determine what comes into our country," says Jay Mazur, retired president of Unite, the union that traditionally represented most American apparel workers. "We say cocaine can't come into our country; so we can say that goods produced in sweatshops can't either."
Kernaghan and his allies (human rights advocates and some labour unions, but thus far not many politicians) believe that such legislation would eliminate the common explanation companies give for abusing humane standards--we do it because our competitors do. Opponents argue that the law would send clothing prices higher in the U.S. Karen Collis was the president of the Unite local in Blue Ridge. When Levi announced the closure, there was little the union could do except negotiate severances. Collis, 31, is luckier than most. She's bright, young and ambitious. She has a supportive husband and plans to use her $11,000 severance to pursue an accounting degree. She may be one of the few for whom being laid off will be a blessing. Collis, though, knows her former co-workers do not need severance packages.
They need employment. She is upset--at the union she believes gave up on the Blue Ridge plant, at Levi for turning its back on loyal workers, and even at Mexico, which is where she and other workers heard their jobs are going. So in the race to the bottom, is Mexico the next stop? In the sand-blown Mexican border town of Piedras Negras, two hours southwest of San Antonio, a mother of five prays that Collis' prediction comes true. It won't. The woman, who did not want her name used for fear of reprisal at work, lives in a two-bedroom crumbly stucco house so narrow it seems you can't open the back door without closing the front. The tiny front room is filled with rows of family photos, religious symbols and a snowy old TV that is always on and seemingly never watched.
Even the furniture coverings are threadbare. At the moment, the room is festive and crowded as several relatives have gathered for the momentous occasion of this interview. Her children are almost awkwardly polite and listen as attentively as if this were pay-per-view. She says she earns about $55 a week sewing cloth bags at the local factory. Two years ago, she earned twice that much working on Levi jeans at a large factory, but it closed and the jobs moved to Central America and the Far East. The closure left her and her husband, whose own job is spotty, with far more bills than money. Today, she worries that she will fall behind on her sewing quota. She is not as nimble as she once was. She holds her bladder until lunch or quitting time to avoid slowing down. She knows that 100 people would line up for her job, and would gladly take the latest starting wage of about $35 per week. There is no job security and no one to appeal to because the union in her plant is as answerable to the company as she is.
This year's economic downturn in the U.S. has hurt the Mexican apparel industry, but most jobs were lost because companies moved to countries with lower wages, says Julia Quinonez, head of CFO (Border Committee of Women Workers) in Piedras Negras. She says that 4,500 apparel jobs have disappeared from that small city in the past three years and that wages have gone from $4 per hour 10 years ago to an average of 80 cents today. Quinonez says the jobs are going abroad, or farther south in Mexico, where wages are about 60% of those along the border and labour protections are rarely enforced. Martha Tovar, president of Solunet-InfoMex, an economic research company in El Paso, Texas, says that 68 textile plants closed in Mexico last year, depressing conditions in the border area, including the poor woman's family in Piedras Negras. Prices are so high, they cross the border to buy beans and rice, and occasionally--very occasionally--some chicken or cheap beef.
When told that some housekeepers in L.A. earn her weekly income by lunchtime, the mother's eyes widen and she says, "How can that be?" Her ambition is to gather her family and slip across the border, where she wishes to find out if such stories can be true for her. Asked how she would do that, she shrugs. "I'll just use a guest pass to cross over, then not return." She has little curiosity about the companies responsible for her wages. She would, however, like to ask them--whoever they are--"Why is it that you can't pay me enough so I can live decently? So that I can feed my family chicken even once in a while?" She is not an economist and she has never heard of globalisation, but her instincts tell her that the job that allows her barely to survive is soon going the way of thousands of other jobs in her town. In the race to the bottom, it turns out, Mexico is in the rearview mirror.
Lisa Rahman would consider that Mexican family blessed with riches, because $1 an hour far exceeds any amount the 19-year-old garment factory worker would dare dream of when asleep in her family's shack. Her closer-to-earth ambition is to double her income to about 30 cents per hour. That would mean chicken in her rice maybe once a week. Rahman lives with and is the main support for her parents and two young relatives in the vast slums of Dhaka, Bangladesh. All she can afford is one room, and during the rainy season, the family collects the bedding and moves to the one dry corner so that they don't get soaked. She has never gone to school, ridden a bicycle or seen a movie. Her wages allow the eating of chicken maybe once every two months. She describes the neighbourhood: "Ninety to 100 people in my neighbourhood all use one water pump, one outhouse and one stove with four burners." Rahman has worked in garment factories since she was 10, the last three years at the Shah Makhdum factory.
She says she often works from 8 a.m. until 10 p.m. seven days a week, with a day off maybe once a month. Her take-home pay is the equivalent of 14 cents per hour. The factory is hot, and the drinking water is dirty. If she gets sick and can't work, she doesn't get paid. If she gets sick very often, she'll be unpaid permanently. Rahman is waif-like--about 5 feet and 110 pounds--and has round eyes that float in her still-young brown skin. Everything about her begs for a protective arm around her, but that draws her no slack on the job: "If we fail to meet [production quota], the supervisors yell and curse at us. They curse our parents and call them filthy [names]. Sometimes they slap us." One product that Rahman worked on most recently was for the Walt Disney Co. of Burbank, a contract purchaser from the factory. It's a Winnie the Pooh shirt that retails for $17.99.
Asked to guess the shirt's retail price in the U.S., Rahman says, "About 50 or 100 taka," which is 86 cents to $1.72. Rahman had never heard of Disney, Disneyland or Mickey Mouse until a labour dispute broke at the plant recently over working conditions. The Disney licensee promptly suspended its work there--forcing Rahman and others to reverse field. They are now trying to have the manufacturing resume. Rahman says she hopes to work at the plant until she is old. And what's old? "Thirty." A spokesman for the Disney company, Gary Foster, says of Rahman's allegations about the Shah Makhdum plant: "We have visited that plant 12 separate times, and everything she says about it is untrue." Asked if Disney garments are still being produced there, he says, "As far as we know, there is no Disney licensee making products in that plant." Asked why he isn't certain, he says, "That is the licensee's decision." Bangladesh is a desperately poor nation of 134 million that needs a lot of Lisa Rahmans to staff its 3,300 sewing factories. The country provides garments for most major American apparel manufacturers, including Levi. In 2000, Bangladesh companies made 924 million garments for U.S. companies with a wholesale customs value of $2.2 billion. Recently, however, the Bangladesh minister of commerce complained that wages in other countries, such as China, were undercutting labourers in his nation. That is not surprising to labour activist Kernaghan. He says that fickle multinationals have found new low-wage destinations, and China heads the list. Richard H. Dekmejian, an international relations expert at USC, makes a judgement on where globalisation is leading us: "Third World countries have no choice but to let these companies operate so their teeming populations don't die of hunger. People take what crumbs they're able to catch. But the overall impact of globalisation is that the rich get richer and the poor starve.
That will eventually lead to an explosion. It's inevitable." Union veteran Mazur is more sanguine. "The world sees us as the great economic engine, and they just want it to work for them, too. By giving the world fair wages for labour, we would create social stability, and make peace more possible." Sitting at the table with Brenda Pope is her 11-year-old son, Brian. He's a chubby, pleasant boy, well-mannered in a "yes sir, no ma'am" way that sounds almost quaint to a Southern California ear. Brian was found to have lupus a year ago, and he has red splotches on his face and arms caused by the disease, which can kill if it's not carefully--and expensively--controlled. He can do nothing about his face, but he reflexively tries to cover his sleeveless arms. When I ask if he would mind playing outside for a while, he complies without a murmur. When he's gone, I ask his mother how he's doing. "Lots of kids give him a hard time.
They call him pizza face and stuff like that. It just breaks my heart. He once asked me, 'Momma, are you ashamed of how I look?' When the doctor told him about the lupus, the only question he had was, 'Am I gonna die?' " Pope has been pushed around by life, but some of it was her own doing, and she knows it; to wit: the two men she married, including Brian's father, whom she divorced 10 years ago. The look on her face as she discusses them tells me I could write the familiar script. "I dropped out of school; figured I could live on love. I was stupid, I reckon," she says with a hollow laugh. When Pope switches attention to her lost job, she says she anticipates drudging trips to the welfare and unemployment offices, and endless job hunts that promise little for her limited skills. She could flip burgers for about $6 an hour--if they'd hire a middle-aged woman with a G.E.D. and an old-fashioned work ethic--but that wouldn't be enough to save her house and pay the costs of treating her son's sickness. "I'd dig ditches if the pay's good," she says. Helen M. Lewis, who also lives near Blue Ridge, is an author and authority on the familiar Appalachian struggle to make a living. She doesn't know Pope, but she has known thousands in the same situation. "I'm sorry to say it, but she'll probably lose her house and move onto her parents' property with a trailer home.
It's an old pattern. There are millions of people in this country like her who want to be productive workers and who are content to live marginally middle-class lives; instead, they become dependent on society because large corporations tromp on them chasing more profits from sweatshop foreign workers." No one in Blue Ridge, currently, is looking for a woman who has sewn a couple million zippers into pants. In fact, not many in Blue Ridge are looking for anyone. The town is rapidly turning into a mountain resort of antique shops, summer houses for rich Atlantans, and retirement and convalescent homes. In job-availability shorthand, that comes down to bedsheets and bedpans serving those low-paying industries. The state of Georgia has set up a job agency for the former Levi workers. State employees eagerly staff job banks, but for far too few positions. They encourage people who can't type to learn computer skills, and provide some funding to go back to college or trade school.
That's of marginal value to middle-aged people conditioned to manual work and who, in any event, can't afford to stop working while going to school. Brian is invited back to the kitchen table. He listens to his mother vent at her ex-employer. Levi was part of the Pope family. Her mother worked there for 26 years before retiring, and three other members of her immediate family were let go with Brenda. "Four of us are out of a job." It's as though another husband took off. "They said they was going to give us a commemorative denim bag." She pauses for the irony of that to settle. "Twenty years, and I get a denim bag made out of the same damn scraps I threw in a basket?" She laughs. "I just can't wait to get that denim bag." Brian chuckles, too, but isn't sure why. Asked about his mother's situation, he responds with a child's heart. He smiles at her proudly and says he wants to give back his allowance to help out. She hugs him tightly. As I walk down the driveway, I look back and see Brenda and Brian Pope standing on the step holding hands. American consumers are blessed in many ways.
As the nation's standard of living has risen and the cost of clothing has dropped, homes have grown bigger, as have closets. Shopping for clothes has become a pastime for millions of people because they can afford to do it regularly. Thanks to this Levi closure, we can buy, say, five shirts for $100 instead of four. The cost of having that fifth shirt? Higher welfare, health-care and job retraining costs for hard-working people like Brenda Pope, the shrinking lives of people like Lisa Rahman and the family in Piedras Negras, and perhaps the explosion forecast by Dekmejian. It is part of the American character to believe that things will always get better. However, many poor countries are mired in the depression that says bad things never change. Both are often right. On March 25, 1911, 275 young immigrant women who sewed garments for six bucks a week were about to go home. It was quitting time in the cluttered Triangle Shirtwaist Company factory in Manhattan. A fire broke out and spread quickly through clutter on the floor. The rush to get out turned to panic as they realised they were trapped on the upper floors, where the doors opened inward. Many leapt onto pavement from eight stories up. At the end, 146 died. Photographs of their bodies laid in an orderly line on the sidewalk shocked America. In response, laws were passed establishing workplace safety standards.
Wage laws eventually followed, decreeing that apparel workers should not only not die, but their lives should be worth living. Ninety years later, on Nov. 25, 2000, a fire broke out on the fourth floor at the Chowdhury Knitwear factory in Narsingdi, Bangladesh. It darted across the factory floor and enveloped tables piled with shirts. A can of solvent exploded into a fireball. Someone grabbed an extinguisher. It was broken. The 1,250 apparel workers panicked. Some dashed to the roof, where they were cornered and jumped to their deaths. Some raced down the stairs to the main exit, where they discovered the metal gate was locked. As their pounding went unanswered, others piled up behind them. Fifty-two workers died, mostly young women and children. The factory was soon back in production. No new laws were passed and nothing much changed, except about 50 new faces at the sewing machines.

Appendix 2

Based on information from Yannick Etienne at Batay Ouvriye in Haiti and the Haiti Support Group
Union workers fired in Haiti!
Friday, March 05, 2004

Union-busting at the CODEVI Free Trade Zone
Haiti rebel army already using weapons in bosses' defence!

Ouanaminthe, Haiti
On Monday March 2nd, 2004, 34 members of the trade union SOKOWA (Sendika Ouvriye Kodevi Wanament - Ouanaminthe Codevi Workers' Union) in the Codevi Free Trade Zone in Ouanaminthe, Haiti, were brutalized and illegally fired by the company's management and told to come take their paychecks next Monday, March 8th. These firings were accompanied by many threats at gunpoint, as well as physical abuse.

This situation followed a tumultuous two weeks in Haiti, rocked by political events and at the Ouanaminthe free trade zone:
-On Feb. 16th, the new trade union handed management a letter in which they informed it of the union's existence and requested a meeting to discuss factory matters. On the same day, Limbert Cruz, the Codevi Free Trade Zone Director, answered the letter, saying that management's doors were always opened for the workers organisation, and their agreement to meet with the union at any convenient date and place. (The union would meet later concerning this letter and prepare an answer Feb. 26th, suggesting March 1st for this meeting).

-On Wednesday, February 25th, a few workers were informally discussing things with members of management (Jean Renaud, Luis and Jean Philippe) when, following a complaint by one of the unionists, Ariel Jerome, the latter was informed that he was fired. Protesting, he was violently beaten up with rifle butts and forced to give up his work badge.

-Thursday, Feb. 26th, all of the factory workers stopped working in protest, demanding Ariel Jerome's re-hiring at work, medical treatment, as well as the firing of the two main management persons responsible: Jean Renaud and Borgella. Limbert Cruz came out to talk to them and agreed to cancel the firing and take care of the abused worker's health. Indeed, Jerome was give his badge back and sent to the health centre for tests and medication. Cruz, however, added that he needed to consult about the issue of the two managers.

-No response to the question of the two managers was forthcoming. Quite the contrary, on Monday morning (March 1st), Jean Renaud passed throughout the factory, line by line, informing the workers that Levi Strauss was withdrawing its orders, because, amongst other reasons, the workers' work-stoppages meant that the business was suffering and consequently they needed to get rid of workers. Rumor had it that he said before losing his job, he would make many workers lose their jobs. Monday afternoon, Renaud called all of the union members and, with much pressure, informed them they were fired. Dominican military (Ouanaminthe is on the border between Haiti and the Dominican Republic) pointed their weapons at the workers and seized their badges. Several were roughed up. All in all, 34 were fired, all union members. The workers resolved to stop working on Tuesday, in protest.

-On Tuesday, March 3rd, all of the workers were mobilised to protest the firings. All of a sudden, members of the rebel army at Ouanaminthe arrived, with guns, to rough up the workers. Several workers were handcuffed. After much mistreatment and threats, they were forced to resume work.
Later, the rebels revealed that they had been contacted the previous evening by factory management who informed them that the workers were going to make problems at work the next day. Management even gave them a list of union members that they were to get rid of.

It is possible that more firings have occurred this morning, Wednesday March 3, 2004, as the workers are determined to mobilise in order to counteract management's arbitrary and unjust actions.

Batay Ouvriye is urgently soliciting each and everyone's input to support our effort to force Dominican free trade zone operator Grupo M to reverse its decision before next Monday, especially as all government offices (Labour Bureau, Justice.) in Ouanaminthe continue to be closed.

Wandsworth Guardian, 5th August 2004

The plight of Haitian workers protesting against Levi's was highlighted by Battersea and Wandsworth TUC who showed their solidarity by protesting against the jeans manufacturer at its central London flagship store.
The group, which included campaigners from the Haiti Support Group as well as natives from the island, demonstrated against the sacking of 350 workers at the Levi's factory in northern Haiti this summer.
The protest last Thursday afternoon involved about 25 demonstrators outside the store on Regent Street, who handed out leaflets to members of the public.

Geoff Martin, from Battersea and Wandsworth TUC, said: "We got a really good response. We are twinned with a union in northern Haiti, so today was particularly important."
Workers who make the 505 and 555 jeans at Levi's Ouanaminthe plant, sub-contracted out to Grupo M, had held a one-day strike after staff received threats from their supervisors and were beaten up by soldiers in June.

Following the strike, half of the workforce, including all its union leaders, were fired.
Mr Martin, added: "All we're asking for is for Levi's to play fair, enforce their own code of conduct and get the sacked workers in Haiti back to work.”
Levi Strauss, the company behind the world famous brand, claims it is committed to its company's ethical code of conduct and that measures have since been put in place to find a long-term solution. A spokesman for the company said: "When we became aware of factory management allegedly discharging a group of workers on the basis of their involvement in attempting to form a union, we immediately investigated.
"We worked with factory management and non-governmental organisations, such as the Worker Rights Consortium (WRC), to reinstate the workers with back pay, benefits, and full status.
"We also worked with Grupo management to establish strict policies against any violence or military presence at the factory." According to the company spokesman, production declined at the factory during this period and Grupo M management "took the business decision of laying off workers in low-efficiency production" roles.

However, Charles Arthur, from the Haiti Support Group, was unimpressed.
He said: "Workers have the right to form unions. In their own code of practice Levi Strauss calls on all it's suppliers to recognise this right, but in this case they are turning a blind eye to union-busting in Haiti."

Appendix 3

Jean production in Mexico

The Journey of a Jean

Many of the jeans worn in Canada and the US start their journey in Mexico. The lure of low wages and lax enforcement of labour and environmental laws, combined with the elimination of tariffs under NAFTA and a weak peso, has attracted US jean manufacturers across the border. The northern Mexican city of Torreon has replaced El Paso, Texas as the continent's blue jean capital. In 2000, Torreon produced an average of six million garments a week, 90% of which were exported to the US and Canada.
Farther south, in the state of Puebla, Tehuacan is another Mexican jean manufacturing centre, with 60% of its 400 garment factories producing jeans for the US market.
Labels like Guess, Levi's and Gap are stitched onto jeans of all shapes, sizes and styles churned out by Mexico's maquiladora factories.

Toxic Fashions
The latest wave in jean fashion calls for a highly labour intensive product, dipped in layer upon layer of toxic chemicals.
The journey of the jean, from fabric mills through the hands of cutters and sewers to the chemical baths of laundries, takes its toll on both workers and the environment.
Once the fabric weight is selected and the yarn is spun, either in Mexico or in the southern United States, the dying process begins. Chemicals are used in making blue dyes, and the darker the jean the more chemicals are involved.
For designer jeans, textile companies use sulphur treatment and mercerisation (which involves treating the cotton in a caustic soda solution, and then neutralising with acid to improve dye absorption).
Tinting - in which beige and yellow dyes are padded onto finished fabric by hand - is one of the latest fads. Hints of purple and green "overdyes" add another stage of chemicals to the mix. Mexico's lax enforcement of environmental laws allows companies to dump dyes into surrounding bodies of water, polluting the groundwater that feeds nearby farms. The deep blue of the creeks surrounding jean factories in Tehuacan is the dangerous result of such unregulated dumping.
The dyed denim is then snipped by cutters. Though some factories use computerised machinery to precisely slice their denim, many capitalise on the inexpensive labour Mexico has to offer for this very labour intensive step.
The same is true for sewers who carefully feed the sectioned pieces of heavy denim through machines for up to 12 hours a day. Young women who sew at high speeds to meet unrealistic production quotas often suffer repetitive strain injuries, back problems, and eyestrain. Once the jeans are assembled, they are sent to laundries for additional chemical treatments. Tinted, "dirty" vintage jeans add new labour intensive steps to the finishing process. Jeans are "crunched" by hand to create wrinkles in the dye, rubbed manually to remove the indigo, and sponged to add colour.
More expensive styles are first "dipped" in dyes, then baked in resin to keep the indigo dark and provide an aged, rigid denim look.
Another technique involves bleaching and stonewashing with enzymes to destroy the indigo. For instance, amylase is used to shrink the jeans and soften the fabric. Cellulase weakens the cotton fibre before the jean in thrown in a stonewashing process with pumice stones or other abrasive objects.
Laccase is replacing bleach in stripping the indigo dye from the jeans to give them an aged look. At this stage in the process, tinting and "overdyes" can be done by hand on the single garment rather than on the bolt of fabric. The last toxic step is the drying and baking. The large dryers, heaters and ovens present a final problem. Mexican laundry workers are seldom protected from the toxic fumes released by huge dryers, heaters and ovens.
All that's left is for workers to "tag" the jeans, and the transformed denim is plastic wrapped, packed and shipped off to retailers and distributors in the US and Canada. The cost of the latest hand-finished jeans is more than the figure on the price tag in a brand-name designer store. Lax enforcement of health and safety and environmental laws is poisoning workers and communities in Mexico's jean producing capitals.
Maybe it's time to say, "No to toxic fashions."
(Maquila Solidarity web site)

Appendix 4. Levi Strauss in Thailand, 2002

Letter from Bed and Bath Prestige Ltd of Bangkok, Thailand to UN Officials, 9 December 2002

We, the workers of Bed and Bath Prestige are requesting of officials from the United Nations to call on the Government of Thailand to involve itself in our case and end our suffering.
Our company, Bed and Bath Prestige, was a highly profitable enterprise operating almost a decade. Bed and Bath produced children's apparel for such corporate giants as Nike, Levi's, Adidas and Reebok. The management and shareholders of Bed and Bath grew very wealthy over the years from our labour. Then, on October 10, 2002 suddenly and without notice our factory was shut down. This was done in violation of Thai law and international standards in that we were not paid any compensation, nor were we paid our wages for the last period of operations. Bed and Bath, Nike, Adidas and others have profited off of our labour without paying us our salaries or our compensation. This is unjust!

Since October 10, we who number almost 400 workers have been protesting peacefully outside the Ministry of Labour. We have marched on the Nike offices as well as the US Embassy here in Bangkok. The police have issued an arrest warrant for our two principles bosses, Mr Chaiyaphat Photikamjorn and Ms. Uayporn Songpornprasert, but efforts to locate these two have been very poor and totally unproductive. National and international authorities have claimed "sympathy" for our plight, but have done nothing to help us. They wish we would simply go away, but we cannot and will not let this injustice stand.
We have a very clear-cut legal case. We are entitled to our back wages and our compensation. If we were in wealthy or prominent positions the Government of Thailand and the police would have resolved this situation immediately. But we belong to the poor and invisible class of workers whose rights are so often violated and who are too often forgotten by our Government and international authorities. We ask the United Nations and other international bodies to call on the Government of Thailand, Nike, Levi's, Reebok and Adidas to help us.

The Government of Thailand makes claims about the equal treatment of all before and under the law. The corporations we produce for, particularly NIKE, spend millions in P.R campaigns bragging of their respect for workers and just working conditions. In our case this has been a sham. Our working conditions were atrocious. Our drinking water was laced with amphetamines and overtime was routinely forced on us around the clock, all in the name of more and more production while we saw little in return. Now, that Bed and Bath has shut down the law of the country has not been followed.

The law as pertains to back wages and compensation when a business shuts down in Thailand is very clear. The Shareholders and Board of Directors who grew so wealthy off of our labour continue to operate as shareholders and officials in other Bangkok companies, often producing for the same corporate clients as Bed and Bath! How can this stand when they have not met their responsibilities to us?

We call on you of the United Nations to intervene with the Government of Thailand as well as Nike and others to correct this unjust situation and prove that the law of Thailand and international law applies to all.

Sincerely,
The workers of Bed and Bath Prestige Co, Ltd. Bangkok, Thailand