While the weakening U.S. dollar may hit American travelers hard, it's opening up whole new markets for George Rudes.
As chief executive of Vernon-based Not Your Daughter's Jeans, Rudes sees firsthand how the falling dollar is making his company's trademark Tummy Tuck jeans cheaper and more in demand in Europe.
A few years back, a strong U.S. dollar priced the jeans out of reach of many Europeans, even as they were deemed a hot fashion accessory. But now, with the euro at a record high of $1.43 in U.S. dollars, the jeans which retail domestically for about $100 are much more affordable overseas.
"It has benefited us tremendously," Rudes said of the falling dollar. "Our distributors are snapping up larger and larger quantities of the jeans and selling them all."
Indeed, the market for Tummy Tuck jeans has been so strong that the company has expanded its European presence to 10 countries from six a year ago. And, as of January, it is planning on distributing the jeans for the first time in the four Scandinavian countries.
The dollar is down about 17 percent against the euro from a year ago. That means an American item that sold for $100 then could sell for $83 now. And the decline is even steeper over a longer span of time.
Rudes is hardly alone in his euphoria over the falling U.S. dollar. Dozens of local companies are seizing on the opportunity created by the lower dollar. They are expanding their sales overseas and also winning back domestic customers who had switched to foreign suppliers.
Indeed, despite a relative lull in overall cargo container activity at the twin ports of Los Angeles and Long Beach, exports have been the sole bright spot, increasing by double digit percentages compared to last year. In September, 134,842 containers were exported out of the Port of Long Beach, a 36 percent jump over September 2006 levels. The growth at the Port of Los Angeles was a more modest 10 percent.
The resurgence in exports could help stem the job losses in L.A.'s manufacturing sector. While Los Angeles County is still the nation's leader in manufacturing with about 455,000 jobs, that number has dropped by nearly half since 1990 when it boasted 800,000 jobs.
While exporters to Europe have been getting the biggest boost, the impact has been felt by companies doing business across the globe.
"As the dollar has fallen, it has obviously made our exporters more price competitive. That's resulted in this very strong growth," said Paul Bingham, an economist who tracks port activity for Waltham, Mass.-based Global Insight Inc.
Apparel companies, machine tool makers and computer component manufacturers are among those that have greatly expanded their sales in the past year, Bingham said.
The soaring euro has been a tremendous boon to local machine tool maker MJC Engineering & Tech Inc. The Huntington Beach-based company is a double beneficiary: Not only has it grown its exports nearly 20-fold in the past three years as it has penetrated markets previously closed by the strong dollar, but it has also won over customers in the U.S. that had imported machines from its competitors.
MJC Engineering makes computer-controlled metal spinning equipment used to shape metal parts used in such diverse products as commercial light reflectors, jet engine parts and heating/ventilation/air conditioning parts. According to vice president of sales and marketing David Grupenhagen, MJC is the only U.S. manufacturer of this type of machine tool at a cost of about $1.1 million per unit and has been competing for market dominance for years against European makers.
"The falling dollar and rising euro has hurt their sales and helped ours," Grupenhagen said. The tide began to turn in MJC's favor about a year ago, when the euro hit $1.20. Now that the euro has topped $1.40, he said the phones are constantly ringing with inquiries, many of which are turning into orders.
One battleground has been in India, where MJC's machines are used to make cylinders for compressed natural gas storage.
"Three years ago, all the Indian companies were buying their equipment from Europe and not from us, because the dollar was so high. Now, we've got about 50 percent of the market and it's growing every quarter."
Grupenhagen said MJC has also been selling more of its equipment to U.S. companies that are now finding the European machines too expensive. He added he hopes the dollar stays weak for quite a while. "If the euro ever came back to one-to-one with the dollar, my job would be a whole lot tougher."
A similar trend of local companies switching to U.S. suppliers is playing out in the steel industry, according to David Hannah, chief executive of L.A.-based Reliance Steel & Aluminum Co., a distributor of finished metals.
"The weaker dollar has played a role in keeping imports into our country at a lower level. Our suppliers who make metal domestically are now finding that their prices are no longer being undercut by low-cost imports," Hannah said.
Meanwhile, the lower value of the dollar against the euro has given a tremendous boost to the local apparel industry far beyond Not Your Daughter's Jeans. Clothes designed in Southern California and showing the local influence in their designs have become increasingly sought after around the globe, especially in Europe.
"The lower price point is giving the American designers the edge over the European designers. Now European buyers are looking for American product and they are inspired to carry more American products in their stores," said Barbara Kramer, the L.A.-based co-producer of the Designer and Agents trade show, which focuses on clothing designs for the young contemporary market.
Kramer said that interest in American designs had steadily increased over the years, but that the lower value of the dollar has given European buyers the incentive now to actually place orders.
Europe has not been the only place where the cheaper U.S. dollar has taken hold. For decades, the Canadian dollar, also known as the loonie, had been trading at well under the value of one U.S. dollar. But on Sept. 20, the two currencies matched for the first time in more than 30 years; as of Oct. 24, the loonie was trading at $1.03.
This has opened up an opportunity for Los Angeles-based apparel maker YMI Jeanswear Inc., which makes jeans for teenage girls. "We recently opened a distribution agreement with Canada and it's going very well for us," said spokeswoman Dina DeFazio. "We have seen the momentum shift."
The company said it was too soon to tell how much additional revenue would result from the distribution agreement.
The Japanese market has also proved increasingly receptive to apparel from Southern California, thanks to the relative weakness of the dollar to the yen. Five years ago, the yen peaked at 134 to the dollar; today, it's 114 yen to the dollar. "The Japanese have been buying stronger, especially in the last few months," Kramer said.
The global weakness of the dollar has helped the L.A. maker of Farmer John-branded pork products in Asian countries as well. (Farmer John's operations have been acquired by Austin, Minn.-based Hormel Foods Corp.)
Foreign sales have increased about 15 percent over the last several months as the value of the dollar has declined against other currencies, according to the company. Among the foreign markets where Farmer John products are sold: China, Vietnam, Australia and New Zealand.
And while currencies constantly fluctuate in value, most projections have the dollar weak well into next year, which should mean the good times for exporters aren't ending soon. By that time, a number of agreements between U.S. exporters and their foreign buyers will be expiring.
"The decline in value of the dollar will have more impact in the future as those contracts come up for renewal. Foreign buyers will likely agree to purchase greater quantities of U.S. products," said John Stafford, spokesman for San Francisco-based Bank of the West, which has a trade finance group based in Los Angeles. "As a result, we expect to see greater increases in exports in future quarters."
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