Hanesbrands Inc. will close nine plants in the U.S., Mexico and the Caribbean Basin in the next year, eliminating approximately 8,100 jobs and ending production of knit textiles in the U.S.
“We are making significant progress in expanding our supply chain capability in Asia and consolidating into fewer, larger facilities located in lower-cost countries around the world,” said Richard Noll, chief executive officer of the Winston-Salem, N.C.-based innerwear and hosiery firm. “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.”
The company said that as a result of the closures, it would incur restructuring charges of approximately $76 million, about two-thirds of them to be taken in the third quarter, which ends this month. This would lift the company’s restructuring charges since its 2006 spin-off from Sara Lee Corp. to $204 million of the $250 million it projected it would incur in its first three years as a stand-alone company.
The closures include five U.S. facilities, including its last knit textile plant, and one in Mexico. Hanesbrands is winding down operations in a sewing plant in El Salvador, with 1,900 jobs already terminated and another 700 to end when operations cease by the end of the first quarter of 2009. A sewing plant in Costa Rica has ceased production, idling 1,250 workers, and another in Honduras will end its work by the end of the year at a cost of another 1,250 jobs.
In the U.S., production will end this week at a knit textile plant in Forest City, N.C., which employs 470, and a yarn plant in Gastonia, N.C., which employs 140. A hosiery warehouse in Rockingham, N.C., with 15 employees, is scheduled to close by the end of November, while closure of an Eden, N.C., yarn plant employing 120 is slated before the end of the year.
The firm’s last knit textile plant, in Eden, N.C., will close next year, at a cost of 600 jobs, while a sewing plant in Mexico employing 1,650 will also be shuttered by the end of next summer.
The company said knit textile production would be absorbed into facilities in Central America, where it expects to continue to expand capacity for knit fabrics. Sewing functions will be picked up by four facilities acquired or opened in Asia, two in Vietnam and two in Thailand. The company expects its workforce in Asia to grow by 50 percent, to 6,000, by the end of the current year.
“Since acquiring our first sewing operation in Chonburi, Thailand, in 2006, we have doubled production at that plant with the same number of operators, as we bring to bear our production and plant operations expertise,” said Gerald Evans, president and chief global supply chain officer for Hanesbrands. “Operations in Vietnam are starting very fast with excellent quality from a very capable workforce.”
The company is building a textile fabric plant in Nanjing, China, which should be online next year and help supply raw materials to Hanesbrands’ expanding production network.
During the first six months of 2008, Hanesbrands’ net income grew 149.4 percent to $93.4 million from $37.4 million in the comparable 2007 period. Pretax restructuring charges were $4 million this year but $42.5 million in the prior-year period. Net sales declined 4.7 percent to $2.06 billion.
Shares of Hanesbrands closed at $23.27, down 56 cents, or 2.4 percent, in New York Stock Exchange trading Wednesday.�
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