Hanesbrands, inc. to close 2 Eden plants

Hanesbrands Inc. accelerated the pace of cuts to its apparel-manufacturing base in the United States today by announcing plans to close four plants in North Carolina, including two in Eden. Nine plants will be closed overall.
The plant closings will affect 8,100 employees worldwide, or about 16 percent of its work force, including 1,345 in North Carolina. The remaining 6,750 job cuts will affect five plants in Central America.
The Winston-Salem apparel marketer has closed, or is closing, at least 29 plants worldwide since spinning off from Sara Lee Corp. in September 2006. That includes at least 10 in North Carolina.
The biggest of the four North Carolinas plant affected in the latest round of cuts is a knit-fabric plant in Eden, where 600 jobs will be eliminated by late summer 2009. The Eden plant is the company’s largest remaining knit-fabric plant in the U.S..
Another 120 jobs are being cut at an Eden yarn plant, which will close by year’s end.
The plant closings represent the third-largest job cut in recent memory in Rockingham County, eclipsed only by the elimination of 840 jobs by Brown & Williamson Tobacco Co. in August 1995 and 750 jobs by Fieldcrest Cannon Inc. in December 1996, according to data from the N.C. Employment Security Commission.
Brad Corcoran, Eden’s city manager, said he had not heard anything about the closings until he saw it on the morning news. Hanesbrands said that some Eden employees were told of the plant closings Tuesday night.
“I have no idea what’s going on” Corcoran said. He said he would have expected to be informed about the closing directly by the company, but that didn’t happen.
“There was no courtesy call, no e-mail, no nothing,“ he said. “Obviously that wasn’t a concern for them.“
Graham Pervier, the president of the Rockingham County Partnership, said that the announcement was surprising given plant managers had not indicated recently the plants were in danger of closing.
He said he believes more than half of the employees at the Eden plants live in Virginia. The plants are close to the North Carolina-Virginia border.
“We have had hopes that innovation and higher overall shipping costs from foreign countries would have helped these plants stay up and running,“ Pervier said. “I guess, with this announcement, that’s not the case.“
The company also said it is closing a knit-fabric plant in Forest City, which has 470 employees, a yarn plant in Gastonia, affecting 140 employees, and a sheer-hosiery warehouse in Rockingham, affecting 15 employees.
Production at the Forest City and Gastonia plants will end this week, the company said. The warehouse in Rockingham will shut down by Nov. 30.
Counting the closing of the Eden and Forest City knit-fabric plants, the company said that the moves “will complete the migration of the company’s large knit-fabric textile production from the United States.“
When the North Carolina plants and warehouse are closed, Hanesbrands will have 5,030 employees in North Carolina, including about 3,385 in Forsyth County. It also will have about 9,800 in the United States. It will have 11 domestic plants, including limited production at its Weeks plant in Winston-Salem, a sock plant in Mount Airy and yarn plants in China Grove and Sanford.
The plant closings, while painful, don’t come as a surprise considering that Hanesbrands management said before the spinoff that it would pursue lower-cost production, with a balance between the Western Hemisphere and Asia.
“We are making significant progress in expanding our supply chain production capability in Asia and consolidating into fewer, larger facilities located in lower-cost countries around the world,“ Richard Noll, the chief executive of Hanesbrands, said in a statement.
“Globalizing our supply chain, and eventually balancing production between Asia and the Western Hemisphere, is a critical plank in our strategic efforts to reduce costs, improve product flow and increase our competitiveness.“
Hanesbrands said it expects to take restructuring charges of $76 million, of which about $51 million will be taken in the third quarter. With these charges, Hanesbrands said it will have taken about $204 million out of the $250 million in restructuring charges the company expected to have in the three years following the spinoff.
“In addition to improving cost competitiveness, these moves will lay the foundation for completing our Asia build out and improve the alignment of our sewing operations with our end-state flow of textiles,“ Gerald Evans, Hanesbrands’ president and chief global supply-chain officer, said in a statement.
“We regret that employees will be affected by this production streamlining, but our supply chain globalization is necessary to strengthen our overall company and keep us competitive around the world.“
The textile production from the latest closings will be absorbed into textile plants in Central America.
Most of the sewing production from the closed Central American plants will be moved to the company’s new Asian plants. Hanesbrands has opened or bought four sewing plants in the past two years — two in Thailand and two in Vietnam.
Hanesbrands began 2008 with 2,000 employees in Asia and expects to finish the year with 6,000.
The company is constructing a textile fabric plant in Nanjing, China, which is expected to go online in 2009 to supply fabric to the company’s expanding Asian sewing network.
Hanesbrands said it is ceasing most of the production at its Pedregal sewing plant near San Salvador, El Salvador this week, cutting 1,900 jobs. Another 700 jobs will be cut at the Pedregal plant when production ceases by March 31.
In Costa Rica, the company has ceased production at its Industria Textileras sewing plant in Cartago, eliminating 1,250 jobs.
In Honduras, the company will end production by year’s end at its intimate-apparel sewing plant in Choloma, eliminating 1,250 jobs.
And in Mexico, the company will close its sewing plant in San Pedro, Coahuila, in 2009, cutting 1,650 jobs.
“It’s interesting to point out here that globalization doesn’t just affect U.S. manufacturing operations,“ said Tony Plath, a finance professor at UNC Charlotte. “It’s also affecting Asian and Central American facilities.
“Hanesbrands is seeking greater cost-competitiveness on two fronts here — reducing the overhead costs associated with worldwide textile production, and labor cost reduction by centralizing manufacturing operations in markets with the lowest labor costs in a global market.
“While the United States isn’t the only casualty of globalization, because of our relatively high cost of labor and cost of living, we do feel its effects more acutely than other regions of the world.