Low sales force Levi to make deep cuts.

Byline: Bloomberg News and The Register-Guard

SAN FRANCISCO - Levi Strauss & Co., whose sales are falling for a sixth year, will fire 3,600 people and close six U.S. plants as it shifts production to lower-wage countries, such as Mexico.

``It's a painful but necessary business decision done for competitive reasons,'' Chief Financial Officer Bill Chiasson said. The job cuts equal 22 percent of Levi's work force.

Levi said it will shut three factories in Texas and one each in Georgia, California and Tennessee. That will leave the closely held company with two U.S. plants, in San Antonio, down from 31 in 1997, spokeswoman Linda Butler said.

A company spokeswoman told The Register-Guard that the cuts will not affect the company's shared-services center on Chad Drive in Eugene. The center, which handles financial functions, has about 150 employees.

Phil Marineau, Levi's chief executive since 1999, is expanding a program that his predecessor Robert Haas started to focus on marketing and design instead of production. Other apparel and shoe companies already had begun moving production overseas. Nike Inc. shifted all whole-shoe manufacturing operations to Asia in the early 1990s.

``In this industry, if you don't restructure and constantly lower costs, you won't make it,'' said Carla Casella, a fixed-income analyst at J.P. Morgan Securities Inc.

Levi, which began making jeans for gold miners in 1887, is still trying to determine the cost of shutting the plants, Butler said. The maker of Levi's jeans and Dockers slacks has 21 plants worldwide and employs 16,600, including 4,400 U.S. factory workers. Monday's cuts will leave Levi with fewer than 1,000 factory workers in the United States, compared with 17,100 in 1997, Butler said.

The company, which is controlled by the Haas family, releases financial data because its bonds are registered with the U.S. Securities and Exchange Commission.

Levi's bond prices have risen, analysts said. For example, the price on the company's 11 5/8 percent coupon bond maturing in 2008 has increased to $1,049 per $1,000 face value, from a year low of $693 reached in October, according to Bloomberg data.

San Francisco-based Levi said it is the largest single jeans brand by market share in the world.

Low-cost manufacturers abroad have forced U.S. clothing and textile companies from T-shirt maker Russell Corp. to underwear producer Fruit of the Loom Inc. to close their own plants and farm out production, analysts said.

``The Indonesias and Chinas of the world can produce these goods much cheaper than in the U.S. (because of) cheaper labor costs and the strong dollar,'' said Jay Bryson, chief international economist at Wachovia Securities Corp. in Charlotte. ``Fifty years from now, there may not be a textile or apparel industry in this country at all. We may be importing everything.''

About 28 percent of Levi's jeans for its U.S. business have been made at its own plants in the U.S., down from about two-thirds in 1997. With today's announcement, that percentage will decline ``significantly,'' Butler said. The company doesn't have percentage of that on an overseas basis, she said.

Levi plans to shut plants in Blue Ridge, Ga., and San Francisco by the end of June, and the factories in Brownsville and San Benito, Texas, in August. The plants in Powell, Tenn., and El Paso, Texas, will be closed in October.

A sewing plant, with 600 workers, and a finishing plant, with 530, will remain, Levi said. Levi expects to cut about 300 jobs from the finishing plant, Butler said.

Levi said it has negotiated an employee-separation package with the United Food and Commercial Workers union, which represents workers at the Tennessee and San Francisco plants. Talks are still in progress with the Union of Needletrades Industrial and Textile Employees, which represents the other four plants.

Marineau already has been trimming advertising costs and inventory and getting better fabric prices to help reduce costs.

He also has been adding products such as low-rise jeans to win back teen-agers and young adults, many of whom switched to the styles of Italian clothing maker Diesel SpA and the cheaper brands of stores such as J.C. Penney Co., analysts said.

``Their business was strictly reliant on a basic commodity: five-pocket jeans, when the market was moving into more fashionable washes and cuts,'' said Mark Minsky, senior vice president of merchandising at Doneger Group, a fashion merchandising and consulting firm in New York.

Levi's sales have dropped every year from a record $7.14 billion in 1996. Last year, they were $4.26 billion.

This year, sales, excluding the effect of foreign-currency translations, are expected to fall at a low-single-digit percentage rate, Levi said last month.

Levi had total debt of $1.96 billion as of Feb. 24, Butler said.