THE DWINDLING WORK FORCE
Byline: Sara Gay Forden / Katherine Weisman / Melissa Drier / James Fallon
Employment in the European apparel and textile sector is in flux, and in most countries, the situation is not improving.
Across the Continent, some 60,000 to 150,000 textile and apparel jobs are lost each year; levels were down 4.2 percent last year.
Some of the changes in employment are a result of redistribution. For example, Italy is losing some jobs to lower-wage countries in Eastern Europe.
Germany has been suffering its worst job losses across the board since the end of World War II.
French employment in apparel and textiles continues on its decade-long downward spiral, although women’s ready-to-wear has been hurt less than other areas.
In a bit of positive news, however, Great Britain, which already went through major downsizing in the past decade, has emerged leaner and stronger, with a booming economy — the strongest in Europe — and stable job rates.
MILAN — Nearly 10 years ago, Jack Zaninoni saw the writing on the wall.
An Italian sportswear and activewear manufacturer for such top European names as K-2, Fila, Ellesse and Berghaus, Zaninoni predicted skyrocketing labor and manufacturing costs would put him right out of business.
“I started looking around at countries where costs were lower,” said Zaninoni, “but I didn’t want to compromise on quality, organization or control.”
Zaninoni is a determined guy, and he’s won his battle. Three months ago, he opened a state-of-the-art, 173,000-square-foot factory that employs 1,500 in the Moldavian town of Bacau. Every week, two trucks make the 2 1/2-day journey from Zaninoni’s headquarters in Bergamo, outside Milan, to Bacau, filled with patterns, fabrics, instructions and all the accessories necessary to turn the materials into clothing. The trucks unload, hook up fresh trailers of finished goods and turn around for the long trip back.
“The drivers don’t even stop to sleep. They are the real heroes,” said Zaninoni.
As competition in the global apparel industry gets stiffer, Europe’s top clothing manufacturers are scrambling to follow Jack Zaninoni’s lead. Since the crumbling of the former communist block at the end of the Eighties, Western European companies are increasingly turning to Eastern Europe as a source of cheaper labor, with its logistic advantage of being close and the historical strength of its manufacturing tradition.
“Once, the manufacturers of Eastern Europe were making jackets for the Red Army,” said Enrico Grillo Pasquarelli, an expert in textile and apparel with the European Community in Brussels. “Now, they are making jackets for Hugo Boss.”
Italy, which produces 30 percent of Europe’s textile and apparel output, is turning to Romania, Slovakia, Albania and Hungary to do sewing and other assembly tasks for goods that are then finished, quality-checked and shipped from Italy. With Italian labor costs running around 24,000 lire an hour ($14) and negotiations with unions growing more troubled, the outprocessing trade seems key to keeping Italian goods competitive.
“There is an irreversible process of jobs being transferred to countries with lower production costs,” said professor Salvo Testa, who teaches at the “Sistema Moda” fashion program of Milan’s prestigious Bocconi University business school.
In Europe, textile and apparel jobs are disappearing at the rate of 60,000 to 150,000 each year, and were down 4.2 percent last year.
In Italy, the number of apparel jobs dropped 1 percent in 1996 to 297,000 from 300,000 in 1995. Italian textile and apparel sales, however, rose 1.8 percent to 54 trillion lire ($30 billion) from 53 trillion lire ($29.6 billion), as productivity increased through outsourcing.
“The brains of the operation — meaning product development, fabric sourcing, marketing, merchandising, finishing and distribution — are still Italian,” said Testa, “but the labor-intensive phases, such as sewing, are shipped out.”
The rapid growth of this practice has kindled a heated debate over whether or not Italy — and the lower European Community — should try to stem the loss of jobs.
According to statistics from Moda-Industria, Italy’s apparel and knitwear association, Romania processes the lion’s share of Italian apparel products, amounting to some 14 thousand tons, or 450 billion lire ($264 million) worth of Italian goods last year. That represents an increase of 24 percent from 1995.
Albania is a distant second, though the volume of Italian goods processed jumped 40 percent last year to 4,000 tons, or 50 billion lire ($29 million). Slovakia is also gaining at lighting speed, with an increase of 50 percent. Hungary’s processing trade is stable, though the country remains in third place.
PARIS — Employment in France’s apparel industry has been on a downward trend for more than a decade, and the industry is not looking forward to a recovery anytime soon.
The number of employees dropped 52 percent between 1983 and 1995 to 110,279, according to two studies from the Union Francaise des Industries del’Habillement (UFIH), the French apparel industry association. And the number of companies making women’s wear, men’s wear or children’s wear employing more than 20 people declined 16 percent to about 1,800 in the same period.
The UFIH attributed these declines to several trends that have resulted in a vicious cycle manufacturers are striving to break. One current problem is the lack of consumer confidence in France. Since the Gulf War, French consumers have closed their purses and are simply not buying soft goods.
Last year, this trend appeared to have stabilized — consumption neither improved nor declined — after several years with annual decreases of 2 to 3 percent.
And when consumers do buy clothes, they wait for sales promotions, which now represent one-third of apparel purchases in France.
At the same time, given that consumer purchases are price-driven, much buying has shifted from traditional independent stores to specialized chains, hypermarkets, supermarkets and large mail-order companies, whose buying power results in lower retail prices. According to the UFIH study, 37 percent of apparel purchases were made in independent stores in 1985, but by 1995, that figure was reduced to 27 percent.
The interest in lower prices also means retailers are importing a lot of goods from low-wage markets. Citing French Customs figures, UFIH concluded that between 1985 and 1995, imports from developing countries rose 156 percent in francs, adjusted for inflation, for a value of roughly $2.7 billion at current exchange rates. Last year, imports from these countries soared to $4.7 billion, while French apparel exports totalled only $2.9 billion.
The narrower sector of women’s rtw has not been hit as hard as the industry as a whole. The annual Facts and Perspectives Study 1996-1997, published by the French Women’s Ready-to-Wear Federation, notes that while employment in apparel declined 31 percent between 1989 and 1995, jobs in women’s rtw were down only 1.5 percent to 46,397.
Women’s rtw represents 24 percent of France’s apparel market, according to Federation figures. The Federation said rtw companies have been able to better weather the storm because many of them make very focused merchandise, or target a specific market, and they have more flexible manufacturing capacity than other apparel makers.
The entire industry was dealt a blow earlier this year when the European Commission said a French government assistance plan for the textile, apparel and footwear industries, called the Plan Borotra, did not comply with European competition rules. The plan, put in place last year, reduced social charges, such as fees for health care or pension funds, for textile, apparel and footwear companies. The Brussels-based EC turned it down because it was too sector-specific, and it has asked the French government to try to develop a similar plan that would apply to a wider range of industries.
“While we don’t see any long-term improvement for employment, we do think we can try to lose fewer jobs,” observed Francois-Marie Grau, the director of Economic Affairs for the UFIH. “The Borotra plan helped, but we need to find a new solution.”
BERLIN — Germany’s apparel and textile sectors have been losing jobs steadily for the last two decades. In light of Germany’s overall employment picture, with a jobless rate in July of 4,354,000, or 11 percent, the highest in Germany’s postwar history, there’s no clear end in sight.
Klaus Steilmann, Germany’s largest apparel manufacturer, has seen his workforce shrink to 4,000 from 8,000 in the last 10 years.
“The situation is pretty much the same in the clothing and textile industries. It’s a matter of increased competition, combined with the spread of poverty [from undeveloped to developed nations],” said Steilmann, who is based in Bochum-Wattenscheid. “It’s a downward spiral that hasn’t ended.”
Steilmann said his company has no plans to decrease jobs further in the next 12 months, “but with our political situation, who knows?
“It’s unbelievable, this taking no decisions and just fighting for power,” he fumed, joining in the business community’s widespread disapproval of the German government’s stalemate on what it says is much needed tax reform.
According to the German Association of Women’s Apparel Manufacturers in Cologne, “The decline of the German fashion industry continues — for the fashion industry in general as well as for each separate sector.”
In the first quarter of this year, the number of employees diminished by 11.3 percent, or 11,063 jobs, and the number of enterprises fell by 15.8 percent, leaving 85,749 employees and 957 companies and production facilities currently operating in Germany.
In 1986, the Association of Apparel Manufacturers in Cologne reported 185,510 workers were employed in 2,388 apparel enterprises in Germany. The 1986 figures, it should be noted, do not include the former East Germany, while those for 1997 do, making the drop even more dramatic.
Germany’s textile industry also has been hard hit, and many production sites have closed their doors in the last few years. Figures released by the Association of the German Textile Industry place the number of employees at 139,000 in 1996, compared with 227,600 in 1986.
LONDON — Not all the employment news in Europe is bad.
As a result of two dramatic recessions, the British textile and apparel industries underwent a Richter-scale shakeout years ago, a process their cousins in Continental Europe are now struggling through.
Employment in the British apparel industry dropped to 163,500 in 1996 from 211,900 in 1989, while textile jobs dropped to 154,100 last year from 196,500 in 1989, according to the British Apparel & Textile Confederation.
The first wave of job losses occurred in the mid-Eighties, when imports from low-cost countries soared and British manufacturers were unable to compete.
Then, just as the industry thought it had sorted itself out, Britain was hit in the late Eighties and early Nineties by its deepest recession since the end of World War II. Further factory closings resulted as manufacturers had to slash capacity to match lower demand.
Continued pressure from low-cost imports caused manufacturers to switch more and more production offshore. Courtaulds Textiles, for example, closed almost all its cotton spinning capacity because of high losses, and such sectors as knitwear and man-made fibers also were badly hit.
But the situation has vastly improved.
Now the industry is enjoying relatively good times as a result of a buoyant British economy — the best-performing in Europe — and the strongest retail sales in years.
Retailers like Marks & Spencer PLC, Burton Group PLC, John Lewis Partnership and Next PLC have reported strong growth in profits and sales in the last 18 months, and this has trickled down to their suppliers, since the top five or six British retailers account for close to 80 percent of British apparel sales.
Also, British apparel and textile producers recognize that they must strike a balance between domestic and offshore manufacturing if they are to meet the needs of their customers. With retailers demanding up to six collections a season and faster reorders on bestsellers, manufacturers have been forced to maintain a strong presence in the U.K. to provide quick response on low-volume, higher-priced items.
Meanwhile, they’ve shifted production of high-volume, labor-intensive lines to northern Africa, the Far East and, in a few cases, Eastern Europe.
“Courtaulds Textiles, Claremont and Dewhurst all have factories in northern Africa now,” said Peter Henderson, director of the British Apparel & Textile Confederation. “S.R. Gent has a plant in Sri Lanka for embroidery because it’s so labor-intensive. Some are going to Eastern Europe, but it’s of less interest to British companies than to German ones because of the language difference.”
The confederation recognizes more work needs to be done, however.
While France, Italy and Germany still must undergo the restructurings the U.K. went through over the last decade, Britain lags the U.S. in terms of supplier-retailer links. The confederation, the Department of Trade and Industry and the British Retail Consortium have launched an initiative called the Apparel and Textile Challenge to get manufacturers and retailers to work more closely on supply chain matters.
“A lot of mutual suspicion needs to be broken down,” Henderson said. “The message is coming through, especially on the retail side, but we are a long way behind the U.S. It’s easier for this to occur in the U.K. than in Italy, though, because of the retail structure here and the dominance of the major department stores.”
But industry executives believe the British textile and apparel sectors generally are in their best health in more than a decade. Jobs losses between 1995 and 1996 were the lowest in years; total employment dropped by just 400 jobs, to 371,800 from 372,200.
There are uncertainties, such as the impact of the new Labor government’s proposed national minimum wage, but overall employment should be relatively stable for the next several years — provided the economy continues to perform well.
“The U.K. industry is a bit more settled, at least for the moment,” said Henderson.