AAFA RIFT LEADS TO LAYOFFS
Byline: Kristi Ellis
WASHINGTON — The American Apparel & Footwear Association, which is in a dispute with a leading trade show producer, has been forced to downsize.
Kevin Burke, president and chief operating officer of the AAFA, said he shuttered the association’s New York office Friday and laid off three employees there, as well as three others in the association’s corporate offices in Arlington, Va.
Burke blamed the financial difficulties on a contractual dispute the AAFA has with VNU Business Media, the owner of Bobbin trade shows. For the time being, AAFA has not cut any other programs, including its annual meeting in Bermuda May 2-4.
The AAFA initiated arbitration proceedings against VNU Expositions, a division of VNU Business Media, on Jan. 28, before the American Arbitration Association. Then, on April 4, the AAFA filed for injunctive action against VNU in Los Angeles Superior Court.
At the center of the dispute is a breach of contract, according to Burke, who claimed VNU has missed four monthly payments of $100,000 each since Jan. 15. VNU has also postponed The Bobbin Americas Show, scheduled for Sept. 25-27 in Atlanta, which the AAFA claimed is a breach of contract.
“In addition to providing a venue for AAFA members to market their goods and services, Bobbin serves as an important source of revenue for AAFA,” said Burke in the letter to AAFA members dated April 12.
Industry sources claim the contract with the Bobbin shows provides $1 million in annual revenue to AAFA. The money is part of a contractual agreement made several years ago between Miller Freeman and AAFA’s predecessor company, the American Apparel Manufacturers Association, the AAFA said. VNU acquired Bobbin through Miller Freeman in September 2000, according to a VNU spokeswoman.
AAFA receives payments for supporting and promoting the shows and sponsoring membership events there, according to sources.
“It was a formal contract that VNU was not living up to,” said Jack Ward, chairman of the AAFA and chairman and chief executive officer of Russell Corp. “They put us in a difficult financial situation and we’ve had to move to restructure the association while going through arbitration.”
According to court papers filed for the injunctive relief, AAFA charged that VNU refused to “continue and promote the Bobbin Shows unless AAFA agrees to renegotiate the [contractual] agreement on terms more favorable to VNU.”
A spokeswoman at VNU said, “The matter is in arbitration and we do not comment on any pending legal matters.”
Burke attributed AAFA’s financial difficulties to VNU’s alleged default on the payments. “The fact that VNU is four months behind on payments has put a tremendous strain on AAFA’s finances,” said Burke in the letter. “Despite all of the major changes we have made over the past year — staff reductions, space consolidation and other cost-cutting measures — we cannot sustain the same level of operations in the future in these new and very serious circumstances.”
Burke, who took the helm of AAFA 11 months ago, immediately reduced the organization’s head count to 25 and made improving efficiencies, cutting costs and returning the organization to profitability top priorities.
The AAFA was formed through a merger of three trade groups more than a year ago. Total AAFA membership stands at around 800 companies.
“The unfortunate thing was that this merger was going beautifully and we were meeting all of our objectives, we had unprecedented resources and the opportunities were vast,” said Eric Hertz, former director of communications and marketing in New York who was let go in the downsizing, but said the parting was “amicable.”
“This financial issue has undercut all those opportunities,” Hertz said.
Burke claimed VNU postponed The Bobbin Americas Show because it was unsatisfied with AAFA’s contract and refused to reposition the show at AAFA’s request.
“We said early on we needed to reposition the show and bring in a new type of audience with sourcing components and a new venue such as Miami,” Burke said. “They were initially open to new ideas, but then they made the decision they didn’t want to put on the show.”
VNU announced in a press release last Thursday that it was postponing The Bobbin Americas Show in September “pending a possible repositioning to best align the show with evolving apparel industry needs.”
“Bobbin Americas was originally conceived as an event for the Western Hemisphere apparel industry, with emphasis on both equipment and technology,” said Joe Randall, VNU Expo Group president in the statement. “But since the show’s founding, the industry has undergone many changes, including an accelerated pace of production outsourcing and even greater reliance on new technologies to help manage global operations.”
He added that VNU is reevaluating the show’s format and timing and is continuing to seek input.
Burke said he is looking for other opportunities for his members to show and market their goods and services.
“We hope these necessary actions will stem the losses we are incurring pending the outcome of the arbitration and that no further steps along these lines will be necessary once this situation is settled,” Burke wrote in the letter.
AAFA members took the news in stride, with many noting the association will rebound from this one-time financial issue.
“Every company and association has financial problems,” said Michael Gale, an apparel industry consultant in Washington and part-time lobbyist for Warnaco. “This time it’s the AAFA, but Kevin Burke is making the hard decisions and has it under control.”