By  on April 26, 2010

Hugo Boss and the union representing the Cleveland suit factory it had planned to shutter have reached an agreement, saving most of the facility’s 300 jobs and ending a rancorous, yearlong battle between the two parties — one that swelled from a local dispute to a well-publicized imbroglio that stretched from Hollywood to New York City pension funds.

The reversal will keep Hugo Boss’ suit production in the U.S. and more than 200 of the factory’s union jobs. The bargaining agreement also calls for a compromise to keep hourly wages above $10, a loss of some vacation time, enforceable minimum work weeks for employees, continued full health care coverage and pension benefits and improved severance for workers who would not continue with the factory.

The agreement between Hugo Boss and Workers United is an unexpected outcome of a confrontation that began more than a year ago when the Metzingen, Germany-based company said it was considering closing the facility. In December, the company formally revealed plans to close the factory in April and move its suit production overseas.

The decision to keep the factory open is surprising since Hugo Boss appeared intractable throughout the last three months — even after actor Danny Glover got involved and led a boycott of Hugo Boss at the Oscars in early March. As late as March 23, the company maintained its intention to close the factory.

But pressure from Hugo Boss investors and politicians appears to have changed the mood within the company. Starting as early as Feb. 24, investors in Hugo Boss’ owner, Permira, communicated to the private equity fund that they were displeased with the plans to shutter the factory and warned that its closure would pose risk to those investments. At least five state and local pension funds, including the public employees retirement systems for Ohio, California, Maryland and Pennsylvania, as well as the custodian for the New York City police and fire department pensions, wrote letters to Permira — most dated in April. California invested $347 million in the Permira fund that acquired a majority stake in Hugo Boss in 2007. Pennsylvania has invested $126 million. That state’s treasurer, Robert McCord, wrote in his letter that the factory closure poses “a serious — and unnecessary — risk to [the fund’s] investment in Permira IV. I urge you…to do everything you can to ensure that the renewed negotiations result in continued production at the Ohio plant.”

Several more state and local pension funds called or wrote Permira, according to Workers United.

Responding to queries about the impact of these complaints on Hugo Boss’ plans for the plant, Permira said: “Negotiations have taken place between the Hugo Boss management and the unions about the competitiveness of the Cleveland plant for more than a year. We have not been involved in those discussions.”

But Workers United president Bruce Raynor said the investor complaints helped bring Hugo Boss back to the table. “These are the people [Permira] will go to for future funds. If you raise objections, that’s a powerful thing.”

Politicians also recently entered the fray. Sen. Sherrod Brown (D., Ohio) said in March he would conduct a hearing to examine the circumstances surrounding the Hugo Boss factory, and called Permira directors as witnesses. The hearing was scheduled for April 29, two days after the factory was supposed to have closed.

Raynor said the tenor of conversations between the union and Hugo Boss changed Wednesday, the second day of resumed negotiations, which followed threats from the National Labor Relations Board, which requested in late March that Hugo Boss return to the bargaining table.

The factory had effectively ceased operations three weeks ago and stopped taking fabric shipments months before. It will take four to eight weeks to get up and running, according to the union.

But members from the parties, which included Hugo Boss AG chief executive officer Claus-Dietrich Lars, who, having been hemmed in by the Iceland volcano, spoke during the negotiations via phone, started to hammer out a deal. After bargaining through most of the night Thursday, a tentative deal was announced Friday morning and ratified by the factory workers by mid-day.

“We are delighted that — together with the trade union and our employees — we have managed to find a way of keeping our Cleveland location open while we attempt to attack the competitive imbalance at this facility,” said Andreas Stockert, chief operating officer of Hugo Boss.

“We won’t be as cheap as Slovenia or Turkey,” said Raynor. “But it will operate more efficiently now. We’re looking forward to working together with Hugo Boss.”

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