WILKES-BARRE, Pa. — The Securities and Exchange Commission plans to expedite its investigation into The Leslie Fay Cos., it was revealed here Tuesday at a Congressional hearing into the company’s plan to shut down its U.S. production.
The session, called by the House Subcommittee on Labor Management Relations, heard government and labor officials condemn Leslie Fay’s decision to close its factories, which are primarily located in this area. The shutdown proposal is the prime issue in the strike against the company by the ILGWU on June 1, after negotiations for a new labor contract stalemated.
Jay Mazur, president of the ILGWU, said after the hearing that both sides have agreed to sit down Friday with a federal mediator to try to get their negotiations back on track. The session also heard proposals — including financial assistance — from state government to keep the production in Pennsylvania.
United States production accounts for 28 percent of Leslie Fay’s business, according to the company, which says it needs to move this production overseas as well, to remain competitive.
Meanwhile, Rep. Paul E. Kanjorski (D., Pa), who represents the Wilkes- Barre district, presented to the hearing the letter he had received from Joseph I. Goldstein, SEC associate director, in response to the subcommittee’s request for a status report on the probe.
The investigation began in the wake of disclosures of fraudulent accounting, which pushed Leslie Fay into Chapter 11 in April 1993.
“Due to the kinds of concerns you raise in your letter, the commission is sensitive that its investigation can impact the lives of many individuals and communities,” Goldstein wrote in a letter dated June 3. “Thus, we understand the need for the commission to conclude its investigation involving the Leslie Fay companies as expeditiously as possible.
“It is our intent to do so because of our mutual interest in maintaining the independence of the commission’s investigative and enforcement processes. However, I am not in a position to comment or to provide any further information on the status of this matter.”
At the hearing, government officials, union leaders and industry experts said Leslie Fay’s decision to close its factories is a classic example of the pitfalls of free trade, where companies move production to low-wage countries, displacing workers at home.
State and federal officials vowed to encourage Leslie Fay to change its mind and to propose trade policies and labor laws that would allow for safeguards against continued job loss in the U.S. apparel industry.
Rep. Ron Klink (D., Pa.), who chaired the hearing, said in his opening remarks, “Our witnesses today will describe a scenario we hope will never happen. We already know this plan will cost some 1,200 Leslie Fay workers to lose their jobs. Indirect job loss will likely be over 3,000.”
Klink cited a study this year by the Midwest Center for Labor Research, which estimated that local, state and federal government revenues will decline by $14.7 million if Leslie Fay leaves, while government expenditures will increase by $11.9 million for unemployment and welfare costs. That same study estimated that in two years the dislocated workers from the Leslie Fay factories will be earning only 74 percent of their former salaries.
“But these statistics don’t tell the whole story,” Klink said. “They don’t tell about the heartache and anguish these workers and their families will endure.”
Klink said situations such as this are an example why he thinks the North American Free Trade Agreement is a bad idea for the U.S.
“Good jobs are moving out of the country, and while this is not related to NAFTA, I think it is part of the future of manufacturing in the U.S.”
Klink noted that Leslie Fay officials declined to testify at the hearing, which he called unfortunate. John Pomerantz, Leslie Fay’s chairman, wrote a letter stating that the company felt it was inappropriate for the subcommittee to hold hearings in an attempt to influence private sector collective bargaining.
“We on the committee,” Klink said, “would like to know how a company that was making such good profits several years ago producing garments in Pennsylvania would have to resort to closing plants in order to be profitable. At the same time, they present a new compensation package for top executives that pay them $350,000 to $800,000 a year while they remain in bankruptcy,” Klink said.
Kanjorski said the issue cannot be looked at from a purely local view since Leslie Fay’s decision appears to be a symptom of a much larger national problem. He said that from 1980 to 1992 the American textile, apparel and fiber industries lost approximately 500,000 jobs, and it’s estimated that an additional 35,000 were lost in 1993.
Kanjorski said he has proposed legislation calling for an international minimum wage and greater enforcement and provisions for international labor practices.
Jennifer Hillman, U.S. chief textile negotiator, said “all too many facilities have closed,” citing 186,000 jobs lost in the last 10 years in the apparel industry.
She said in the last 30 years government has tried to stem the tide of imports by imposing tariffs and quotas. She noted that under agreements such as NAFTA and GATT those tariffs and quotas will be eliminated. She said the Clinton administration is now trying to help workers by lowering health care costs, creating reemployment programs and removing trade barriers to promote exports.
“The President is committed…under the World Trade Organization, to create a system of international labor standards and respect for internationally recognized rights,” Hillman said.
Andrew J. Samet, associate deputy under secretary for international affairs for the U.S. Department of Labor, agreed: “The accelerating integration of the global economy makes it ever less possible to wall ourselves off from labor practices in other countries.”
“As economies become increasingly interwoven with each other, we must either actively accept some share of responsibility for how our economic partners conduct their affairs or else passively accept complicity,” Samet said.
Samet said many U.S. trade laws already recognize this principle, including the Caribbean Basin Economic Recovery Act, the Generalized System of Preferences Renewal Act and the Overseas Private Investment Corporation.
Samet said he understood that Leslie Fay management is proposing moving production facilities from the U.S. to Guatemala. He said a review of worker rights in Guatemala done in 1992 revealed serious problems such as violence, harassment against union members, the need for reform of labor laws and cumbersome union registration requirements.
He said the worker rights review is still ongoing and the results should be released at the end of this month.
Samet also pointed out that workers from the dress division of Leslie Fay’s plant have already been certified for trade adjustment assistance. These workers are also eligible for training, a job search allowance, a relocation allowance and other reemployment services. He said these rights were granted the workers under the Trade Adjustment Assistance Act.
Kanjorski asked Hillman, “Is the domestic apparel industry dead?”
“If it’s not, we can’t sit idly by and watch it die,” he said.
Hillman responded that some parts of the domestic industry are doing quite well, “based on a high level of productivity and investment in technology and capital expenditures.” She also said that exports have improved, but admitted that the industry continues to be “hurt by a constant influx of imports.”
Mazur told the hearing that the dispute between Leslie Fay and its workers is not about wages or hours or benefits. “It is about unrestrained corporate greed, and what it is doing to our economy,” Mazur said. “It is about the obscene exploitation of workers here and abroad.”
Mazur said the ILGWU has done everything it could to avoid the conflict. He said Leslie Fay workers have made concessions to the company in an effort to restore its economic health. Mazur said workers have accepted lower piece rates and longer hours.
“The union granted the company’s request to allow it greater flexibility and to consolidate operations at a cost of hundreds of jobs,” Mazur said.
“The ILGWU believes there is a way to keep these jobs in Pennsylvania,” he continued. “It will take extraordinary cooperation of labor, management and government. We are certainly ready to play our part. It is time to draw the line. Our country cannot continue to hemorrhage jobs and survive as a democratic society.
“We need new policies that will once and for all stop Leslie Fay and other corporate outlaws from enriching themselves by victimizing honest people in this way,” Mazur said to the standing applause of about 100 union members.
Pennsylvania Secretary of Commerce Andrew T. Greenberg said Gov. Robert P. Casey has directed his department to develop a package of financial assistance and has met with the leadership of Leslie Fay and the union on this commitment. The package of assistance includes:
A low interest loan of up to $500,000 from the Machinery and Equipment Loan Fund to help defray the cost of a unit production system.
Tax exempt bond financing through the Pennsylvania Economic Development Finance Authority for the acquisition of the production system.
A grant of $500,000 in Customized Job Training funds to upgrade workers’ skills to fit the company’s production needs.
Technical assistance in developing a state-of-the-art apparel manufacturing facility.
Greenberg said that while Leslie Fay officials have not officially responded to this offer, “we believe they take the offer seriously.”