NEW YORK -- After a nine-month pilot program in Mexico, London Fog, the Eldersburg, Md.-based rainwear maker, has pulled out. "It was a big disappointment," said Ed Frey, vice president of operations at the company, citing high absenteeism and a high turnover rate as the two main problems that drove costs up.

"We are very highly labor-intensive, and it just didn't make sense," he said.

Frey said the company phased out its operations by the end of January. The project was a joint effort with American Industries Inc., in Mexico, which works with American businesses seeking to do business south of the border. American Industries owns the plant, which is in Chihuahua. For London Fog, it produced unbranded men's trenchcoats.

If the operation had been successful, London Fog had plans to expand it, intending to divert some of its production away from the Far East.

"We wanted to increase efficiency and delivery time, but it just didn't work out," Frey said.

To offset the high absentee rate, Frey noted that the company was forced to hire 70 employees -- 20 more than what was needed. He also cited a high turnover rate.

"There were a lot of factors driving up the cost," he said, noting that company officials even had to offer raffle tickets and bonuses as incentives for its employees to show up for work.

"I think it would have been less of a problem if we were not dealing with such a complicated product," he said, noting that it takes 120 minutes to make a trenchcoat, and the training curve involves 12 to 20 weeks.

Some industry observers, like Andrew Jassin of Marketing Management Group in New York, who works with Mexican-American ventures, noted that the scenario was more of an anomaly. He pointed to GFT Corp.'s successful experience in Mexico with making intricate four-button suits for Andrew Fezza Collection since 1986. GFT officials also confirmed that it has been a successful venture.

London Fog's move into Mexico in April 1993, which came shortly before the closing of three manufacturing facilities in Maryland, was heavily used by opponents of the North American Free Trade Agreement to fuel their argument that the pact would lead to job losses. Company officials had maintained that it was an isolated event.

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