Technological divide grows as costs hurt small apparel firms. (Media & Technology).

In the cutting room of Karen Kane Inc., where whole cloth becomes pieces to be sewn, automated spreading machines roll out dozens of yards of material in layers up to 100 plies thick before a laser-guided cutter glides over and slices through it faster than a Ginzu chef.

It now takes 16 people in a room the size of a basketball court to do the work it once took 30 to do.

Tucked among warehouses south of downtown, Kane, which had $80 million in revenues last year, is among a number of larger apparel firms in L.A. that have embraced technologies cutting both time and cost from the production process.

Technology creates so-called flash fashion that can bring new designs into stores in under two weeks and, manufacturers hope, give their clothes an edge over foreign rivals that can take months to ship clothes from overseas.

It is a revolution of sorts, but one that has largely bypassed smaller shops. The equipment is expensive--a cutter, just one of many tools going high-tech, costs $200,000--making it impossible for many small apparel shops to upgrade.

The problem has sparked a debate among trade organizations looking for ways to help, and those who say that small shops are sure to die out in Los Angeles, even if they bad the best technology.

The problem is greatest at the sewing stage, where smaller businesses finish the clothes under contract from companies like Karen Kane. Large companies that make a variety of styles can't afford to do the work themselves because switching machine setups for each style is too expensive. Small contractors specialize in sewing one thing, like w omen's blouses, which they do for several larger companies.

There are perhaps 3,000 contractors in Los Angeles that employ fewer than 50 employees, according to several estimates. Most don't have enough capital to get bank loans for upgrades.

"The apparel industry is a cash business, which makes it difficult for them," said Garrett Gin, a spokesman for Merrill Lynch & Co. Inc., which in November 20Q0 commissioned a $150,000 series of studies by the Community Development Technologies Center to report on the problem.

Will it help?

Joe Rodriguez, executive director of the Garment Contractors Association of Southern California, said that in his experience, contractors get very little financial help, and even if they were getting more, it probably wouldn't make much difference.

"The pitch made by the makers of high-tech equipment is if you buy it, you'll be able to compete with offshore production. But the reality is offshore prices are so, so low that you still can't compete," he said.

Sewing machine operators in Los Angeles typically make $7 or $8 an hour, compared to operators in Mexico who make about $1, he said. In China, they make even less.

To convince banks to finance upgrades, contractors usually have to mortgage everything but their first-born children, he said. "The contracting business is so up and down that for them to show a history that they can service a debt is rare."

Contractors survive in Los Angeles because they continue to get business from designers of high fashion who need to keep up with quickly changing trends and can't wait for a slow boat from China.

"To the extent that items are hot, fashionable and trendy, he's going to keep production here;' Rodriguez said of Kane.

He thinks it's only a matter of time before designers figure out how to quickly get items produced overseas. "In the eyes of many people, the future is not good," he said.

Compounding the problem is the preference of equipment and software companies to target middle market garment companies, those with revenues of $25 million to $50 million, while ignoring contractors that bring in less than $10 million, said Linda Wong, director of manufacturing for the Community Development Technologies Center.

"The challenge of technology providers is to figure out how to push their product down to smaller contractors," she said.

Tukatech, a Los Angeles company that produces software and computer-controlled factory equipment for the garment industry, has targeted small contractors with software that speeds production and tracks costs.

The product, which sells for $1,000 per workstation, also increases productivity by 20 percent, according to company founder Ram Sareen.

Still, he acknowledged that the smallest contractors often have difficulty coming up with the initial cash.

The chicken-and-egg problem of financing for small shops is one that Jean Gipe has been studying as director of the Apparel Technology & Research Center.

"They're so busy trying to get their Friday shipment out the door that they're not surfing the Web and knocking on government doors saying, 'Can you help me?'" she said.

Some larger manufacturers that rely on local shops for quick turn-around, like Guess Inc., have helped by guaranteeing bank loans, she said, but that doesn't happen often.