Byline: Sara Gay Forden

MILAN--When Giorgio Armani first bought a minority stake in Simint SpA, the producer of his jeans line, in 1989, it seemed the perfect vehicle to plow some profits back into one of his businesses. For a time, it was. But as market conditions changed and the Simint-operated A/X Armani Exchange business in the U.S. started to flounder, the tables turned. And over the past year, as Simint lost money and was stripped of once-lucrative licenses, Armani had to seize control and pump more than $62 million (100 billion lire) into putting the sportswear maker back on its feet.
Now, under Armani's management, a lot of changes are happening at Simint, including slashing the work force from more than 440 to 220. But one of the most significant is that Simint--now almost entirely devoted to making the Armani Jeans and Armani Junior lines--is pulling production back to Italy.
"The most important features of our management are the quality of the product and the deliveries," explained Simint chairman Giorgio Gabbiani, who took the helm at the company last year amid mounting debts and disputes with former management over the company's accounts. Gabbiani is also financial director of Giorgio Armani SpA and has been given the task of turning Simint around.
"There have been complaints about both these issues, and we have to be in a position to guarantee these things. That means we need to control all the procedures," he said.
Simint formerly outsourced in a number of places, including Egypt, Morocco and Eastern Europe, explained Gabbiani, who shuttles between his Armani offices in Milan and Simint headquarters in Modena several times a week.
Under the new production strategy, Simint will continue to outsource, but to local factories and workshops in Italy. Simint produces about three million units a year for annual sales of about $142 million (230 billion lire). The choice to produce in Italy was made possible also by the more competitive cost of labor here as a result of the low value of the lira against foreign currencies such as the dollar and the mark, Gabbiani noted.
In previous interviews, Armani has admitted he didn't bargain on going into the manufacturing business, but nonetheless he has stood behind Simint from the very beginning with financial muscle and business know-how. In addition to assigning Gabbiani to oversee Simint's turnaround, he has loaned the company Renato Guardini, managing director of Antinea, the Armani-owned manufacturing company that produces the Emporio Armani collection.
"Guardini is directly overseeing the improvement of Simint's production system," said Gabbiani.
"This is an area where he has particular experience," he added, saying that the fruits of these labors should be evident starting with the fall-winter '95-'96 collection.
Although Simint previously produced sportswear for a number of leading designer names, including Giorgio Armani, these licenses were terminated during the tumultuous events of the past year, during which Simint reported $140 million (226.5 billion lire) in losses and opened an investigation into the liability of its former management.
The company was also forced to sell off its U.S. subsidiary at a loss to Club 21, which is controlled by Singapore financier Ong Beng Seng, who has also increased his stake in Simint. Armani has kept the A/X name and now licenses it directly to Club 21.
In the meantime, Simint has undergone a complex financial restructuring package, which included rescheduling some $47 million (76 billion lire) in debts. As a result of the various capital operations, Giorgio Armani's stake in Simint has settled at 36 percent. Ong Beng Seng's Finar financial holding owns another 17 percent, and the two have formed a shareholder's pact that controls the company. Minority financial shareholders include Ifigest and Gemina Europe Bank SA. The rest of the company is listed on the Milan stock market. (For more on Club 21 and its plans for Armani, see Euroflash on this page.)
Currently, some 90 percent of Simint's production is composed of the Armani Jeans and Armani Junior lines. Simint also produces its own label of athletic suits and leisure apparel called American Systems, while it is winding down another sporstswear license, Closed. Simint will stop producing Closed after the fall-winter 95-96 collection, but will continue to distribute the line until the year 2000, Gabbiani said. But Gabbiani is also eyeing new licenses for Simint's future. He is currently in talks to sign a new sportswear license, and there will probably be others farther down the road.
Although 1994-95 yearend results haven't yet been released, Gabbiani said the company expects to post a small loss, though he noted that operating results are encouraging and orders are up despite Simint's problems.
"Our customers have shown a lot of faith in us," he said.--Fairchild News Service

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