Life After Levi

Levi may have walked away from workers, but it didn't leave them empty-handed.

The company gave its employees a well-publicized whopper of a severance package. In Knoxville, some are taking full advantage of it, returning to school or starting up their own business. But preliminary results from an ongoing study show many are having problems adjusting to the lay-offs, which were announced last November and took effect in June.

Cynthia Rocha, an assistant professor of social work at the University of Tennessee, is doing a two-year study of the Levi workers. A sample of 200 workers will be interviewed every six months.

The preliminary results of the first survey show that 22 percent are working, with 75 percent of that number making less than they did at Levi. Almost 50 percent are getting job training or have returned to school—ranging from a simple computer class to enrollment in a two-year college program.

About half of those surveyed are showing signs of clinical depression or anxiety, Rocha says. Surprisingly, she adds, the severity of the depression does not seem to correlate with how long people had worked for Levi.

"The people who had the most problems were the ones who didn't feel like their family could help them financially or who were already having problems paying their bills," she says.

Totaling $200 million, the severance package included: eight months notice, up to three weeks' severance pay per year of service, career counseling services for six months, continuation of healthcare benefits for 18 months, a $500 bonus if they found a new job, a $6,000 allowance for benefits, relocation, education, dependent care, or small business start-up.

David McIlwaine, of the local United Food and Commercial Workers Garment Council, has helped workers adjust through hundreds of factory closings at numerous companies. "I've seen a couple of good severance packages but nothing that approaches what Levi's did," McIlwaine says. "I know Levi's is very conscious of its image, which had something to do with what they did."

Still, he reports that plant closings have triggered domestic abuse, heavy drinking, and marital problems among some former employees. "A person's identity is so often tied up with their job," he says.

Rachel Munsey, a laid-off Levi worker who is working part-time for Rocha, says many interviewers are handing out pamphlets on where to get help and counseling.

"These people are literally breaking down in front of the interviewer and crying their eyes out," she says. "They really don't know what to do."

—Joe Tarr

As Levi Strauss closes plants here and opens more overseas, laid-off workers wonder about the company�s priorities

by Joe Tarr

Times have been lean for Rachel Munsey since Levi Strauss closed its two Knoxville plants this year, costing her a $14.15-an-hour job as a maintenance worker. Munsey now has a part-time job and plans to return to school to become a paralegal.

But she has had to pawn the title to her truck and sell her tools to make ends meet. "Working part-time doesn't pay my bills. I have to sell my stuff in order for me and my son to live," Munsey says.

Last November, when Levi Strauss announced it would close 11 American factories, administrators denied they were doing it in order to move production overseas in search of cheap labor.

That's why the company's announcement in April—widely reported in the national press but less so locally—that it might expand its operations in China raised eyebrows among lay-off victims here. Combined with a recent reports of Levi's increasing presence in Mexico, the China announcement illustrates the global market forces at play in modern corporate decision-making. Whether or not those forces directly led to the Knoxville lay-offs—and Levi officials adamantly insist they did not—they make for a fascinating case study.

Of the 2,221 Knoxville area residents who used to work at Levi, many have moved on while others are struggling to cope. Several feel betrayed by the company, which has long enjoyed a reputation for corporate good works.

"We built them as high as they can go," Munsey says. "They got to an all-time high. Now, instead of worrying about the quality of the product, all they care about is money."

Across the Border

Levi maintains that increasing business in China is not a move to replace the 6,395 U.S. workers laid off this year.

The company is divided into three major divisions: the Americas, Europe, and Asia Pacific. Levi spokesman Clarence Grebey says the garments Levi sews in each area are sold mainly in that area. Only the Asia Pacific Division will look to China for manufacturing, possibly in late 1999.

"One of our overriding goals is to produce within the region goods are sold. Proximity to market is critical," Grebey says.

"When we closed the [U.S.] plants this spring, that was an excess capacity issue. Those plants were not closed to shift production offshore," Grebey adds. "We had more capacity than demand for product."

"I'd like to think they're telling the truth," says David McIlwaine, head of the local United Food and Commercial Workers Garment Council. "But all these companies, especially in the garment industry, have packed up and gone offshore."

Even if Levi has no immediate plans to open foreign factories to replace the Knoxville plants, it has slowly been shifting jobs out of the United States, The Wall Street Journal reported in a May 20 article.

"A decade ago, none of its core business—jeans for the U.S. market—was done overseas. By 1991, approximately 15 percent of those jeans were manufactured abroad; now that figure is 45 percent, with many of the pants coming from Mexico," journalist Ralph T. King Jr. wrote for the paper.

A private company, Levi isn't required to release detailed sales figures and Grebey won't confirm or deny King's statistics. However, he questions the accuracy of King's reporting.

"He has pulled data from where, I don't know," he says. "The majority of our product sold in this country is made in this country."

Sales of Levi's brands—which include their classic 501 Jeans (which were made at Cherry Street), as well as Dockers and Slates pants (sewn at the Powell plant, which is still open)—are still high.

In 1997, Levi sold $6.9 billion in clothing, the company reported. More than half of that came from the company's Americas division. The 1997 sales figures were down 4 percent from 1996, when Levi hit a record $7.1 billion in sales.

The China announcement has also raised questions about Levi's carefully cultivated image as a socially responsible company. In 1993, it announced it was withdrawing from China because it discovered child and prison labor were being used by its contractors there. (Another concern was that counterfeiters were slapping Levi's labels on generic clothes.)

Although it never completely pulled out, Levi reduced production there from 2.6 million to 800,000 articles of clothing.

The move helped solidify the company's reputation. Levi has a strong history of supporting nonprofit social and charity groups and is well regarded by unions for its treatment of workers.

The company was pretty much alone in taking the high ground with China. Most of its competitors jumped at the chance to expand in the Chinese market.

Now, Levi's administrators say they believe they can trust and monitor local Chinese contractors to make clothes without breaking their corporate ethics code.

"It's clear to us that the environment is getting better there," Levi president and chief operating officer Peter A. Jacobi told The New York Times. "We basically felt that we should untie our hands."

Human rights groups and Chinese dissidents say things are far from better. The National Labor Committee, a nonprofit group, found in Chinese factories widespread physical abuse, forced overtime, shifts as long as 15 hours, and 13-cents-an-hour wages.

Medea Benjamin of the San Francisco-based Global Exchange—a nonprofit human rights group—says it's hard to know what conditions are like inside factories Levi now contracts with. The company does not allow independent groups to monitor them, she says. A campaign is now under way get them to allow such monitoring.

"It's pretty impossible to know because there's no independent verification," Benjamin says. "There have been numerous reports that show problems where people just happen to go. It makes you wonder whether there are problems happening in other places."

Grebey says Levi supports Global Exchange's mission and was meeting with the group this week. Levi's guidelines and checks are effective, he says, but adds the company is always looking for ways to improve.

"We will not, however, have one activist organization impose upon us their agenda on how we should do business," Grebey says.

'Like everyone else'

Even critics of Levi admit the company is in a quandary in the new "global marketplace." Free-trade agreements like NAFTA—which Levi officials raised concerns about publicly—have given less scrupulous companies an edge.

"It's pretty hard to compete against someone who is paying a fraction of the labor rates. If [a competitor] is manufacturing largely in Mexico and they're paying 35 cents an hour, and Levi is manufacturing domestically and paying $7.50 to $8, that's an unfair advantage," says Dave Johnson, president of National Apparel Garment and Textile Workers Council. "Especially if the American consumer is going to buy the cheaper products. All of a sudden, Levi has products on the shelf for $5 more and they can't compete."

"They are a victim of the global economy. A lot of [Levi's] factories in the U.S. were union factories," agrees the Global Ex-change's Benjamin. "With cut-throat competition and everyone going overseas, they've had to become more like everyone else."

When NAFTA was being pushed in Congress, Levi argued the agreement should have higher labor and environmental standards, protect all workers' rights, and be phased in slowly. In a 1991 memo, the company warned, "Without these provisions, [NAFTA] could lead to reduced U.S. and Canadian production and employment and greater environmental pollution." Levi spokesman Grebey says the free-trade agreements have taken their toll.

"Have changes in trade laws and tariffs led to a more competitive industry and subjected us to competitive pricing issues? Absolutely, they have," Grebey says. "While many companies have shifted jobs offshore, they've lowered pricing. That has impacted us."

None of this sits well with Knoxville workers who lost their jobs.

"I resent all these big American companies making billions a year walking away from American workers who have put them where they are, going to overseas countries just to increase profits," says Nancy Cate, who was laid off. She is now caring for her ill mother and plans to return to school. "I feel like I gave them 29 years of my life just for them to turn around and walk away from me."

Still, many employees say the marketplace is only part of the story. They blame many of the company's problems on Levi's own management.

In 1993, Levi switched to a team manufacturing concept. Instead of having each employee do one specialized task, it linked groups of employees who were responsible for finished garments. Where before each worker was paid according to his or her productivity, their pay was now linked to that of the team's output.

It had a disastrous effect, destroying morale and lowering productivity to 77 percent of what it was, according to the May 20 Wall Street Journal article. The pay of the best employees plunged, and workers were pitted against one another.

"It's just not the same company anymore. The perceived value of the individual and the concern for people just is not there," Herb Etheridge, a former regional production manager, told the Journal .

The new production method was poorly received in Knoxville, Cate says.

Before switching to the team concept, the Cherry Street sewing plant was the company's best, she says. "We had the best cost, the best output. We were tops in every category."

After the team concept was introduced, the Cherry Street plant "fell way down to the bottom," Cate says.

Ironically, she says, the plant was finally starting to adjust to the new concept and increase productivity when the layoffs were announced.

"Just as the corner was being turned was when they closed it," Cate says.