LARRY KANTER

Senior Reporter

The decision by Levi Strauss & Co. to ship much of its manufacturing work overseas came as no surprise to L.A.'s apparel community, which has seen a steady exodus of garment production work for many months.

That migration, long observed on an anecdotal level, finally showed up in state statistics last month. The number of apparel and textile jobs in L.A. County fell to 110,000 in 1998 from 111,900 a year earlier, according to the Employment Development Department.

While the drop is small less than 2 percent it is the first decline since 1993 and could be a harbinger of times to come, according to many in the industry.

Apparel firms "need to have a balanced sourcing strategy and Mexico or Central America is going to be a part of that," said John R. Calvert, a business consultant with the accounting firm Stonefield Josephson Inc.

Levi's move to close 11 plants in the United States and lay off 5,900 workers "continues to send the message that (moving production) outside of our borders is not a matter of 'do we do it?' but 'when do we do it?' " he added.

That's good news for Calvert, whose specialty is helping apparel companies take advantage of lower-cost, offshore manufacturers. It's considerably less welcome for folks like Jimmy Macias, president of Jay-Mar Apparel Manufacturing Inc. in Irwindale, one of the hundreds of small garment contractors scattered around L.A. struggling to survive in an economy in which the rules are fast being rewritten by the North American Free Trade Agreement and the plethora of low-cost producers in Asia.

With Mexican apparel workers earning as little as $1 an hour, work for local contractors is disappearing, Macias said. Since taking over the business from his parents in 1984, he has seen his client list dwindle to a lone women's-wear designer. Macias' 40 sewing-machine operators now spend all their time making a single item a pair of women's pants that sell in mass-market retail chains across the nation.

The production cost of that pair of pants, meanwhile, has fallen from about $1.90 a decade ago to $1.40 today the direct result of increased offshore competition.

Unable to compete on price, Macias instead touts speed and reliability. His staff can turn around an order in five days, compared with the several weeks it would take a Mexican contractor.

"We've gotten more efficient, more organized," he said. "Doing just one item, the operators can sew faster and get it out faster. Our volume is up it has to be to make money with these prices."

But even that advantage is beginning to diminish. Nafta is five years old and many of the problems faced by Mexican factories in the pact's early days production delays, worker absenteeism, corruption and crime are no longer as rampant as they once were, said Stan Levy, an attorney with Mannat Phelps & Phillips, who has a dozen apparel clients.

"The Mexican factories have had to learn to adjust to American schedules," Levy said. "As their production problems have been solved, the volume is increasing dramatically."

Lonnie Kane, president of the women's-wear manufacturer Karen Kane Inc., began experimenting with maquiladoras in Tijuana last year and plans to shift at least 20 percent of the company's production work to Mexico in 1999. So far, he said, Kane has seen cost savings of up to 60 percent.

"We are under a great deal of price and margin pressure," he said. "I can't raise prices. The consumer is very price conscious. I need to get the goods made for less, and the only way to do that is to go offshore."

Will others follow? This year, all tariffs on garment and textile work moving between the United States and Mexico will be removed another incentive for manufacturers to look southward.

Kane and other designers say they always will keep some production in Los Angeles particularly, the complex, high-fashion items that need to be produced rapidly and in small batches.

"We will keep our sophisticated items here in L.A.," said designer Max Azria, chief executive of BCBG. But anything that can be produced in large quantities "must be done in Mexico or the Orient," he said. About half of BCBG's clothes are manufactured offshore, according to Azria.

Ted Gibson, chief economist at the California Department of Finance, says that the state's apparel industry has been remarkably resilient. While more than 100,000 apparel and textile jobs have been lost nationwide in the five years since Nafta was implemented, the industry here has experienced steady growth for most of the '90s and the slight drop in 1998 should not be cause for alarm, he said.

"It's a positive story in that the job losses haven't been worse," Gibson said.

Still, many garment contractors can't help but feel that a day of reckoning is at hand. "For a while, we've been able to hold our own," said Joe Rodriguez, executive director of the Garment Contractors Association. "But maybe Nafta has finally caught up with us."

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