MONTREAL — Gildan Activewear Inc. said Thursday it is closing its El Progreso sewing plant in Honduras on Sept. 30 and laying off 1,800 workers because the factory is no longer cost-effective.

The site is one of three that Montreal-based Gildan operates in Honduras. The plant has been the focus of allegations that the company fired some workers in 2002 for trying to form a union. Gildan has denied that the workers were cut for union-related reasons.

The shutdown was driven by economic, not union issues, said Laurence Sellyn, Gildan’s executive vice president of finance. The plant produces several T-shirt types and Gildan needs more efficient single-product plants to lower its cost base, he said.

A Toronto-based workers’ rights group charged that the plant closing is an effort to avoid unionization.

“Gildan’s announcement sends a clear message to workers in all the company’s offshore factories that if they attempt to organize they will be fired, and if they complain about violations of their rights, Gildan will close their factory and eliminate their jobs,” said Lynda Yanz, co-coordinator of the Maquila Solidarity Network.

However, Sellyn said that El Progreso has become the company’s highest-cost facility and that the machinery at the plant will be transferred to Gildan’s operations in Haiti and Nicaragua.

“The lease at El Progreso expires on Sept. 30 and rather than renew it, we decided to consolidate production in Haiti and Nicaragua,” he said.

El Progreso produces about 36 million T-shirts a year. Two-thirds of production will be shifted to Haiti and the remaining third to Nicaragua. Once full production is under way, Gildan expects an annual cost savings of $1.5 million, Sellyn said.

“Another factor in our decision to move production is that we are starting a new textile manufacturing facility in the Dominican Republic in the fourth quarter, which will feed our facilities in Haiti and Nicaragua,” he said.

Sellyn added that militant action by workers in neighboring, unrelated plants in the same industrial park where El Progreso operates was another reason Gildan decided to close the plant.

“Workers at other factories would often block access to the park,” he said.

This story first appeared in the July 16, 2004 issue of WWD. Subscribe Today.

Gildan last year became a member of the Washington-based Fair Labor Association. Sellyn said the company has already addressed several concerns raised in an initial FLA assessment of its Honduran operations.

The union-backed Quebec Solidarity Fund in November sold its 11.2 percent stake in Gildan after conducting its own investigation last year. It said it had concluded the company fired about 40 workers for union activity, which Gildan denied.

The head of FLA said Gildan could face a 90-day probationary period or expulsion from the group if it is deemed to not respect the organization’s goals.

“Here’s a company that says it wants to do the right thing and then turns around and closes its factory,” said FLA executive director Rut Tufts. “We have concerns about that.”