HMX Group is becoming a political issue once again.
This story first appeared in the October 19, 2012 issue of WWD. Subscribe Today.
Workers United on Thursday unveiled plans for a national campaign to save the jobs in HMX’s manufacturing plants as the men’s apparel company mulls whether to file a voluntary Chapter 11 petition. The effort comes with only 18 days left in the presidential election campaign, in which both President Obama and challenger Mitt Romney have vowed to revive American jobs and the manufacturing sector.
The union represents 100,000 American and Canadian workers in the textile, commercial laundry and gaming industries. Four years ago, it fought a similar battle when HMX’s predecessor, Hartmarx Corp., faced liquidation while in the midst of bankruptcy court proceedings.
Executives at HMX declined comment Thursday.
Noel Beasley, Workers United president, said, “We are launching a North American campaign to keep HMX from liquidating our jobs along with the company’s assets.”
He didn’t provide a timetable for the campaign, but said the union will be holding press conferences, as well as sit-ins as needed.
“We are sending a message to those bidding that we will support any buyer who comes along who can supply cash and assets to bring [HMX] back to profitability,” Beasley said.
He also said if a buyer intends to acquire the firm with the intent of destroying manufacturing jobs, the union is prepared to tell everyone that outsourcing will destroy the iconic nature of the HMX brands regarding the product being “Made in America.”
“They will pay a price and we are prepared to call for an international boycott of the brands,” Beasley said.
The union is also looking at other options, such as trying to find a buyer for the company. According to Beasley, the union has reached out to potential financial and strategic buyers about the need to keep the factories open. The union president declined to comment either on their identities or specifically on Ron Burkle’s Yucaipa Cos.
As reported Tuesday, private equity firm Yucaipa, a former bidder, is eyeing HMX’s brands.
A spokesman for Yucaipa said, “Ron has great relationships with the unions and they asked him to take a look.”
Burkle’s firm was in the bidding in 2009 for Hartmarx’s assets. Back then, the private equity firm was interested just in the tailored apparel brands, according to investment bankers at the time.
Four years ago, 600 workers at the Des Plaines, Ill., Hartmarx plant outside Chicago and the 500 workers at the Rochester, N.Y., plant of Hickey Freeman voted to occupy their factories. They were joined by civil rights advocates, celebrities, congressional leaders and other elected officials. Also joining the cause were union members at Coppley, the HMX brand manufactured in Canada.
While the union again is taking a proactive approach in its effort to save factory jobs, there’s no guarantee it’ll be successful the second time around.
According to financial and market sources, the three potential buyers who have signed confidentiality agreements are two brand management firms, Authentic Brands Group and Iconix Brand Group, and private equity firm Bluestar Alliance. All three are said to be interested primarily in the intellectual property assets — the brands and labels — owned by HMX.
Should HMX elect to file a Chapter 11 petition instead, it would be a bankruptcy court that would determine which bidder ultimately makes the best offer for the company. While saving manufacturing jobs could be part of the criteria, typically a bankruptcy court’s primary goal in evaluating the best offer is focused on determining which one provides the highest amount for the benefit of settling creditor claims.
That’s not to say that HMX hasn’t tried to keep jobs in America. If anything, the company has stuck by its “Made in America” stance, employing more than 1,000 at its two plants.
Earlier this year, HMX had plans to reopen the Seaford Clothing Co. plant in Rock Island, Ill., and city officials had obtained a $3.4 million grant from the Illinois Department of Commerce and Economic Community, on behalf of Hart Schaffner Marx, to upgrade the facility. Seaford was shuttered in August 2009, shortly after the operating division of Hartmarx was acquired out of bankruptcy by Mumbai-based firm S. Kumars Nationwide Ltd., which holds a 90 percent stake in the renamed HMX Group. London-based investment firm Emerisque Brands owns a minority interest, and is not involved in HMX’s day-to-day operations.
The Seaford plan, which would have resulted in 100 jobs to start, was scuttled in the summer when HMX undertook the restructuring of its debt. Reportedly, HMX agreed to not expand operations as a condition of its August refinancing with Salus Capital Group.
HMX’s financial struggles in the summer garnered some attention from lawmakers on Capitol Hill.
Sen. Charles Schumer (D., N.Y.) said he worked with HMX and its lenders to close a deal for the company to secure a new facility with Salus and stay open for business “for years to come.”
Congress is not in session and Schumer could not be reached for comment Thursday on the latest in the HMX saga.
Rep. Louise Slaughter, (D., N.Y.) also intervened in August and sent letters to the company’s key creditors, calling for the lenders to continue working with HMX to provide access to credit.
HMX recently lost the Robert Graham tailored clothing and Ivanka Trump women’s line licenses. The Robert Graham license was signed last year, and the Ivanka Trump license was pulled before HMX was able to recoup its investment in the line. It also shuttered its new retail concept Streets of Beverly Hills on North Beverly Drive in Los Angeles, which opened in August. A second location called Streets of Georgetown located on Wisconsin Avenue in Washington, D.C., remains open.
“It clearly would be a blow to ‘Made in America,’” said Gary Hufbauer, senior fellow at the Peterson Institute for International Economics, speaking of HMX potentially closing its U.S. plants. “The U.S. has long given up on [making] things like socks, underwear and T-shirts, but suits and women’s fashion apparel are still made here, so if that size of a company goes under, that is quite a statement.
“A bankruptcy of that size, which is pretty big in a hard-hit city like Rochester, N.Y. for example, is news,” Hufbauer said. “It can’t be good news for the president to lose a company of that size.”
Phillip Swagel, a political science professor at the University of Maryland, said details about why HMX could be going bankrupt matter in the political realm, a point Hufbauer also made.
“It will depend on why they are closing,” Swagel said. “If it turns out they made mistakes, that is one thing. But if it turns out they were clobbered by cheap Chinese imports, that will play into the narrative Gov. Romney is putting forward.”