Even Mexican Labor Costs Too High: Gildan To Move Production To Central America

Discussion in 'Economics' started by ByLoSellHi, Mar 27, 2007.

  1. Ahhh, the pungent odor of the return of the true sweatshops...

    I can hear the whips cracking, and smell the sickly sweet aroma of pig hooves being chopped for the gruel that comprises the lunch for the 'employees,' chained to their sewing stations.

    Gildan to Close Five Plants, Eliminate 1,830 Workers (Update2)

    By Kevin Bell


    March 27 (Bloomberg) --
    Gildan Activewear Inc., North America's biggest T-shirt maker, will close five plants in Canada, the U.S. and Mexico and eliminate 1,830 workers to move production to lower-cost facilities in Central America.

    The company will shut two textile facilities in Montreal, two sewing plants in Mexico and a cutting factory in Bombay, New York, it said today in a statement. Gildan will record a restructuring charge of $21.5 million, or 35 cents a share, in fiscal 2007 ending in September.

    Gildan, based in Montreal, is shifting production from older plants in North America to newer factories in Central America, where costs are typically about 25 percent lower. It expects to save $45 million a year starting in fiscal 2008 from lower expenses for production, shipping and duties.

    ``It's an indication that things are going very well for the company offshore,'' Jessy Hayem, an analyst with Desjardins Securities Inc. in Montreal. ``The extent of the savings is very positive news in terms of 2008. The $45 million figure seems very substantial.''

    Analysts were expecting Gildan to eventually close the Canadian plants, its last two in the country, Hayem said. The early closure signals that it is successfully ramping up its fourth production facility in Central America, she said.

    Gildan shares slipped 1 cent to C$65.81 as of 9:45 a.m. in trading on the Toronto Stock Exchange. They have gained 18 percent over the past year.

    Earnings Estimate

    The company expects earnings in the current fiscal year of $2.61 a share, excluding costs for the plant closures and 6 cents a share for accelerated depreciation. The average estimate of 11 analysts surveyed by Bloomberg is $2.63 a share.

    About 1,365 employees in Mexico will be affected by the immediate closures in that country and 465 in Canada and the U.S., the company said. The Canadian plants and the U.S. factory will be closed by the end of September.

    The company, which sells primarily to wholesalers, said in December it expects to cut prices this year by 2.5 percent from lower production costs as it tries to take customers from rivals such as Fruit of the Loom Ltd. and Hanesbrands Inc. Gildan has also begun making socks, following an acquisition of Kentucky Derby Hosiery Co. in July, and has begun selling its branded products through retailers.

    ``They've definitely led the pack in moving facilities, and they're quite ahead of their competitors,'' Hayem said. The analyst rates Gildan shares ``buy'' and doesn't own the stock.
  2. I belive that Americans would not find a factory to work with in the close future....

    Pitiless Competitive Capitalism...
    Goverment should do something about it...
  3. Globalization is a wonderful thing. Soon nobody will be cheap enough and eventually factory work will return home for good. Believe it.
  4. All the shipping costs will eat up any future profits; beside it isn't efficient at all.
  5. So once Central America starts demanding higher wages, we can have chimpanzees perform every single job in the world. They won't cost us much, just a few bananas here and there. Us humans can all go back to living in caves. I think a few wealthy individuals wouldn't mind seeing that happen.
  6. I was thinking penguins. They are further south, and dress better. And it's too cold to sweat.
  7. I don't understand, why would we want the factory jobs to come "home". I sure as hell don't want to work in a factory. I'm all for moving the menial shit somewhere else for good. With 90% of the factory jobs gone and unemployment at historic lows, why has globalization been considered such a failure?
  8. My dad worked in a factory for 31 years, a Ford plant. Factories give many people in this country jobs, people that don't want to go to college.
  9. maxpi


    Mexicans should lower their costs by outsourcing.
  10. And then the country that they outsource their jobs too will be able to find cheaper manufacturing costs elsewhere.

    My prediction: Invest in Ethiopia - lowest manufacturing costs evah, ftw!
    #10     Mar 30, 2007