LOS ANGELES — It’s only natural that an aging action-movie star, a right-wing columnist, a porn star and a diminutive former kid actor running for governor of California would generate enough late-night talk show jokes to fill a library.
But there are genuine issues. Or why else would a majority of Californians believe current Gov. Gray Davis should be recalled?
As is the nature of politics, most issues boil down to voters’ wallets. The bottom line is ever-present on the minds of West Coast apparel and retail executives in talking about California’s gubernatorial recall election on Tuesday. And, as they say, as goes California, perhaps so goes the nation. After all, the state now is the largest center of apparel manufacturing in the U.S. and is America’s largest single retail market.
For the industry, now counting 235,000 employees statewide, reforms can’t come fast enough. A rough economy, combined with ballooning business costs, and consumer confidence threatened by tripling state car taxes are chipping away at profits.
Among the top concerns — so-called “job killers,” according to several employers — are Senate Bill 2 and the state of workers’ compensation reform. SB2, the mandatory health care bill that passed the legislature in September, would require employers of 50 or more people to provide and pay for health care packages. An employer with 200 or more employees must cover health care for the employee and dependents. Davis is expected to sign the bill into law, though many businesses vehemently decry its costs.
Two bills containing reforms to reduce workers’ comp insurance system costs by an estimated $5 billion to $6 billion annually also passed the legislature last month. The bills, establishing a medical fee schedule and a repeal of existing vocational rehabilitation statutes, was signed by Davis Tuesday. But Republican legislators and many business owners oppose the proposals because they fall short of the comprehensive reforms needed to bring cost relief to employers.
Here, key California apparel and retail executives and lobbyists weigh in on these and other issues.
Max Azria, founder, BCBG Max Azria: A key employer and revenue generator, with 96 stores in the U.S., domestic production and more than $300 million in combined retail and wholesale sales.“From a business perspective, the key issues facing any incoming governor are disproportionately high taxes, workers’ compensation and the overly strict immigration laws — which I think are detrimental to industry. Relaxing them would ultimately be of benefit to the economy. Immigration is very powerful for the state. There’s confusion when it comes to immigration. We’re giving driver’s licenses to immigrants and at the same time we won’t let them work. We have to be clear.”Dick Baker, ceo, Ocean Pacific: As a $200 million licensor of surf-inspired sportswear and activewear for men, women and children, Irvine, Calif.-based Op believes its business model can withstand the economic issues facing the nation. “Op is not as affected as other companies. If you’re a California company and your operations are inclusive in California, then it’s a bigger issue. But if you’re a global company with operations elsewhere, it’s not as big an issue.…I haven’t made up my mind about who to vote for. The debate further exacerbated the issue. I wouldn’t vote for Arianna [Huffington, Independent]. I liken her to Al Sharpton — they’re in the same category: abrasive and bitter.”
John Paul Beltran, co-owner, John Paul Richard: Like other firms, this $130 million misses’ resource had to lay off about 10 percent of its workforce to cope with rising workers’ compensation premiums. “Workers’ comp has to be attacked. We’re going to lose more businesses otherwise. And it puts pressure on middle to older-aged workers to find jobs. Employers won’t hire them because of the risk. From 2002 to 2004, our bill has tripled…I’d like to see a non-career politician in office. In the debate, Arnold [Schwarzenegger] attacked Cruz [Bustamante] and told him he just signs the back of the checks and not the front of them.”
Dov Charney, senior partner, American Apparel: With the mantra “sweatshop free” at his $80 million T-shirt manufacturing company, Charney pays wages averaging $12 an hour and provides health insurance. But to further his cause, he needs the state’s support. “What needs to be resolved is the immigration question. What’s being covered up is illegal immigration — everybody flirts with the issue, but nobody takes it on. We need to legalize workers here and put in a fast-track immigration policy. I’m an immigrant with a green card. I’m in solidarity with these workers….All these clowns are old-thinkers except [Arianna] Huffington, but she’s too much of a star, and [Peter] Camejo is good. But they won’t get it. They don’t have political steam.”Bill Dombrowski, president, California Retailers Association: Representing 9,000 stores and $100 billion in sales annually, the organization is lobbying against SB2. “SB2 is the number-one job- killer bill for the business community and, in particular, for retail and any industry that has a large number of employees. It’s being backed by organized labor and being opposed by every business group that I know of. We’re trying to get a veto. If [Davis] signs it, we’ll be looking at whether there are grounds for litigation to overturn it. We believe there is a federal preemption as well.”
Brad Farmer, co-president, Draper’s & Damon’s: To help curb rising workers’ compensation insurance costs, the $100 million moderate retailer — operating 40 units in the U.S., half of those in California — has stepped up its employee training on safety measures. “The solutions have to come from the state. There is no one candidate that appears to have an answer. Reform is needed. Our costs have in the last three years almost tripled. When you’re taking bottom- line dollars away, it can affect your profitability. Hopefully, through our safety and training, we can diminish our claims.”
John Kyees, cfo, Bebe Stores Inc.: In a state not known to roll out the welcome mat to businesses, California could ease up a bit, Kyees asserts, alluding to regulations such as AB-633, which extends labor law violations along the supply chain. The $316 million retailer/manufacturer claimed victory in a ruling last year that it wasn’t jointly liable for labor violations that occurred at its contractors. “Clearly, we have anxiety when retailers are made responsible for manufacturers' errors. It’s like saying the governor is responsible for people who cheat on taxes. It’s a tough environment for manufacturers to make a commitment to California — 70 percent of our goods are made here. It’s like a message to take business out to the Far East.…Certainly a governor who’s left us in this position is not one I’d vote for.”
Ilse Metchek, executive director, California Fashion Association: CFA’s 260 members are actively lobbying against SB2. “Everyone I speak to with over 50 employees is thinking about getting out of the business. If they have property, they’re going to float along on what they have, perhaps try to get into property management, real estate or financial services. I would say 20 percent of the legitimate operators will reconsider growth.”Robert Mettler, chairman and ceo, Macy’s West: Executives at the 141-store, $4 billion department store chain are concerned about rising energy costs and urging relief of workers’ compensation insurance costs. Workers’ comp rates are twice those of Macy’s East and costs prohibit store improvements and the hiring of more salespeople. “How does a state that’s currently in a billion-dollar deficit take on the additional $66 million for a recall? It’s very frustrating that we’re going through this. It’s a distraction from moving ahead and solving issues like the budget and what it’s going to take to get Northern California with higher unemployment and high-tech losses back into growth mode.”
Allen B. Schwartz, founder and design director, ABS by Allen Schwartz: The knockoff king gets his 15 minutes after awards shows when his design team replicates the hottest red-carpet looks. The rest of the year, he runs his $40 million contemporary business. “It’s important that whoever gets elected instills some consumer confidence. As someone who has three retail stores in Southern California, business is flat here. Yet on the East Coast, business is better. The car tax is going up. Those are things that are negative and take people away from buying new dresses. When people get hit with taxes, they stop traveling, stop spending and the spontaneity is gone from life.”
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