A stream of worried apparel manufacturers has been lining up to talk to Bruce Berton at his Santa Monica office.
Berton, an accountant who advises several major clothing makers in town, is acting more like a psychiatrist than a business consultant in wake of the terrorist attacks on the World Trade Center.
“The No. 1 thing we discuss is what niche do they fill,” said Berton, who is trying to keep as many L.A. manufacturers as possible from going out of business as an already troubled economy gets worse.
“Those who have been hanging on by their fingernails will have no way to climb out,” noted Ilse Metchek, executive director of the California Fashion Association, a local trade group for apparel manufacturers.
She predicts that as many as 20 percent of L.A.’s clothing manufacturers and the contractors they work with will be out of business by next spring.
The terrorist incidents have aggravated a variety of factors that are combining to squeeze the companies. Fashion is a fickle business governed not only by a person’s pocketbook, but by consumer whims, societal influences and evolving trends.
“Those in good shape with good cash flows and good positions with retailers will feel this like a hiccup and see it as a time to retrench,” Metchek said.
Smaller firms in jeopardy
Those going down the tubes will probably be smaller manufacturers with revenues under $2 million who either make basic items like T-shirts or edgy fashions worn for one season before being tossed out.
Berton, the director of Stonefield Josephson, a CPA consulting firm, has been encouraging smaller companies to diversify their product mix. As an example, he sites Hot Kiss, a local junior apparel company that had a heavy emphasis on knit tops but six months ago branched out to denim pants.
He is also telling manufacturers to get used to delivering goods with a quick turnaround time because nervous retailers don’t want to keep large inventories. This need actually will benefit local sewing contractors who are poised to pick up business that normally is assigned to overseas contractors.
Eliminating lead time
Manufacturers whose garments are sewn in far-flung countries like China and Myanmar will be looking to do business closer to home to eliminate the lead time needed to ship goods to the United States.
Also, apparel makers who once contracted with sewing shops in Muslim countries like Indonesia, Dubai and Pakistan will be rethinking their business connections, repositioning their manufacturing to Latin America, the Caribbean or here.
One local manufacturer who already made a switch is Tarrant Apparel Group, the $345-million blue jeans manufacturer who makes garments primarily for The Limited. The company earlier this year bought a manufacturing plant in Mexico to cut down on business in China.
While retailers will demand shorter lead times for their goods, they have canceled few orders between now and Christmas. One exception: Bergdorf Goodman, which notified vendors that it was canceling the remaining portion of its fall orders.
May Department Stores, which operates Robinsons-May, already had cut back by 10 percent its fall orders before the Sept. 11.
With retailers aggressively cutting prices to entice consumers, manufacturers already operating on a slim profit margins will be asked to reduce their prices.
“The ones who are going to make it are the ones who are able to adopt new technologies so they have a competitive advantage,” said Leila Mosaffari of the California Manufacturing Technology Center, based in Gardena. Those technologies range from advanced systems for cutting and bundling items to using computer aided design software.
