By  on May 24, 1994

NEW YORK -- Considered of one of the last bastions of domestic production, wool coat makers are turning to global sourcing in a big way.

The main target of new manufacturing is the relatively untapped and unproven production grounds of Russia and Ukraine, as well as other Eastern European countries such as Romania, Bulgaria and Hungary.

Mix in quite a bit of 807 coat production, particularly in the Dominican Republic, and the scenario begins to unfold, at least for moderate-priced basic merchandise: U.S. manufacturing may dwindle down to an extremely limited existence.

In the higher end of the coat market, domestic manufacturing continues to maintain a foothold.

Gerald Solomon, president of Fairbrook Enterprises, which makes the Calvin Klein and Perry Ellis wool lines, said he has sourced and sampled from Russia and Ukraine, but for now he's staying home.

"Our company is more of a fashion and reorder business, and you can't do that over there," Solomon said. "At our price level, it's not realistic right now," he explained, because cuttings have to be planned on short cycles and involve multifabric production rather than long runs of single-fabric styles, which the overseas plants are geared to.

However, many coat makers -- those in the more mainstream popular-to-moderate-priced market -- say the costs of production and operations here are too high and the availability of quality wool fabric is increasing in other parts of the world, most notably Russia and Ukraine, where a core mill and sewing factory industry is hungry for work.

Coat executives point out that many of these factories had been making clothes for the once-huge Soviet army, and have well-trained, experienced workers.

Neil Haimm, vice president of Lou Levy & Sons Fashions in charge of the firm's Donnybrook division, said the company's production program in Ukraine has become "the most important part of our business, and it's growing by leaps and bounds."

Haimm said company president Donald Levy spent much time in the past few years developing fabric resources and factories in the former Soviet state, with first production beginning in 1992. About 150,000 units were produced that year, followed by about 325,000 units last year.This year, Haimm said, the company will produce a combined 1 million coats, jackets and blazers using a 95 percent wool, 5 percent nylon fabric, produced at several factories.

"The only problem we have is that we can't supply enough," Haimm said. "We've been completely sold out since Jan. 15. The quality is sensational. We have our own production people over there doing quality control. The workers in Ukraine are trained tailors, not just sewers, who have experience in making men's and women's suits."

He said the styles produced in Ukraine last year were some of the firm's bestsellers and have been the top bookers this year, as retailers are drawn to the combination of price and quality. Coats and jackets wholesale for $45 to $60, with blazers from $25 to $30.

Haimm said a coat that's being made in Ukraine for $50 wholesale would have to be sold for $85 if it were produced in the U.S., keeping some stores from buying it. Haimm said Lou Levy continues to make wool coats domestically, but they are mostly novelty and fashion-forward items.

"The main thing that draws us there is the availability of piece goods, and cheaper production," Haimm said. "We can't duplicate what we're getting from there domestically. For the first time, we've already started to book goods for 1995, a year ahead of time, and we're looking at a couple of million units.This year only wool coats under the Donnybrook label will be made in Ukraine, but next year the company is planning to expand that program into other outerwear categories, such as rainwear and activewear, and into the firm's other labels -- Lou Levy, Braetan, Braefair, and Braetan Kids. In addition, the coats will use an upgraded 100 percent wool fabric.

Barry Kay, co-president of Herman Kay Coat Co., said his firm's domestic production of wool coats has dropped to 40 percent of overall manufacturing this year from 100 percent a decade ago.

The company is currently running a program for basic wools -- what Kay calls commodity coats -- from Ukraine, wholesaling for $59 to $79, with a coordinating equestrian-print scarf. The firm's licensed Leslie Fay Coats division is producing a line of better quality, more fashionable styles made in Russia, with slightly higher price points. Kay said the combined programs should produce about 200,000 units this year.Herman Kay also owns two factories in the Dominican Republic, which it uses both as a backup source for basic goods that require shorter lead times, and for separate styles groups, particularly its programs for J.C. Penney. Kay explained that Penney's prefers 807 production because it has its own quality control inspectors in the region, and because it offers tighter production cycles.

Kay noted the company is sourcing wool and active outerwear in 19 countries, including Indonesia, Thailand, Korea, Hong Kong and China.

"For years, wool coats were only made domestically," Kay said. "The opportunities opening up in places like Russia, Ukraine, Bulgaria and Hungary, combined with 807 production, is changing the wool market dramatically."

Kay said the same coats being made oversees would cost 33 percent more if produced in the U.S. Kay, who heads sales for the company, and his brother, Richard, who is in charge of production, make periodic trips to inspect factories and buy piece goods. In addition, in-house technicians visit the plants once a month for a 10-day stint.

"If someone would have told me three years ago that we would be selling 100 percent wool coats for under $99 retail I wouldn't have believed it," Kay said. He noted that there is "some nervousness" about the low price points cutting into overall dollar sales, "but so far the units are there to make it worthwhile."

Kay said there are some problems with roads and slow customs procedures in Russia and Ukraine, but he sees those conditions slowly improving.

Billy Winter, president of the Billycoat division of G-III Apparel Group, said Billycoat has been producing at its factory in Tennessee since the company was started in 1980. Last year, the company was bought by G-III, the publicly owned outerwear firm here that specializes in leathers sourced globally.

"Having domestic production was always a big thing, but now we're able to be more diversified," Winter said.

Winter said the Russian production takes proven bodies and manufactures large quantities in a blend of 95 percent wool, 5 percent nylon. Key items from Russia include blazers, toggle coats, anoraks and long reefers. Short coats wholesale for $45 to $65, while long styles sell for $48 to $75.After some initial production runs last year, Winter hopes the new production capabilities can double the firm's volume, which was about $7 million last year, over the next couple of years.

Winter said except for some tardy deliveries, the quality has been "very impressive."

"We want to be known as a domestic supplier and importer, with the flexibility and capability to do both," Winter said.

Frank Bergman, owner of Four Seasons Design Group, has been making wool coats, jackets, pants and skirts under the Thalian label in Romania for about five years. Each year, the scope of production has grown, he said, with projections this year for 50,000 units of women's and children's wear for the Thalian label, and another 50,000 pieces of private label goods.

Bergman owns two factories in Romania with a Romanian-born French partner, who transformed the plant to a state-of-the-art facility after the revolution there in 1989.

"The legacy the Communists left behind in the Eastern Block countries are people who have great handcraft skills," Bergman said. Morton Holtzman, president of Harve Benard Ltd., said his company has been doing some Russian manufacturing the past two years, and his brother, Benard, chairman and chief designer of the firm, is in Russia right now sourcing fabric and factories.

"We're being very careful over there because unless you know the ropes there are a lot of potential problems," Holtzman said. "Trucks have been known to be hijacked and the roads are difficult."

Holtzman said the company will still produce about 90 percent of its coats in the U.S. this year because it wants shorter production cycles.

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