Longtime sneaker manufacturer Vans Inc. announced Monday that it will shut down plants in Orange and San Diego counties for two weeks starting Friday, idling nearly 2,000 workers. Observers said it could be a prelude to a possible permanent closure or transfer of some production overseas.
Vans, one of the few remaining companies still making shoes in the United States, could decide the longer-term fate of its manufacturing plants in the cities of Orange and Vista later this year.
"At some point . . . we're going to have to decide if two plants is too many plants," said Vans President Christopher Staff. Employees were told of the impending two-week closing on Monday.
Teamsters Union officials complained that the move was part of the company's attempt to squelch union organizing. But Staff linked the two-week shutdown and a March 7 layoff of 400 workers to increased consumer demand for a new type of shoe that Orange-based Vans can't manufacture in the United States because of environmental regulations.
More than 40% of Vans' order backlog is for a new "International" line of men's shoes that debuted in December. The shoes are manufactured on a contract basis in plants in South Korea, but the process involves glues and a heat-treatment process that can't be used in the United States because of environmental regulations, Staff said.
In contrast, production capacity for Vans' traditional tennis shoes manufactured in Orange and Vista is "just too high for (demand) we see in the future," Staff said. "We decided to temporarily suspend production at our two plants.
"We're going to look at (our plants) very carefully over the next three to four months to see if this (demand) trend continues," Staff said. Vans has about 1,600 employees at its Orange facility and about 300 employees in the Vista plant, which opened in 1992.
Municipal officials in Orange said the shutdown would hurt the economy because Vans is the largest manufacturer in the city.
"It's obviously something that we don't need," said Orange Economic Development Director David McElroy. "There's the lost payroll, because many of these people live here in Orange, and the fact that (other employees who live elsewhere) spend their payroll here in town."
The fact that Vans can't manufacture the new line of shoes in Orange County is reminiscent, McElroy said, of the company's decision in the early 1990s to built a new plant in northern San Diego County. Said McElroy: "This might be another example of where they can't deal with an air quality issue here because of South Coast Air Quality Management District regulations."
The two-week closing didn't surprise analysts in the domestic shoe industry.
"By the turn of the century, the only place you'll be able to find a U.S.-manufactured shoe is in the Smithsonian," said Alan Milstein, editor of a New York-based fashion industry newsletter. "The imports have virtually wiped out the domestic shoe industry."
Competition has been exceptionally tough in the athletic footwear segment where Vans competes. "The athletic footwear industry primarily grew up overseas, and most manufacturing has been overseas for quite a while," said Gregg Hartley, spokesman for the Athletic Footwear Assn. in North Palm Beach, Fla.
Second Reef Surf Shop in Laguna Beach reports strong demand for Vans shoes from high school students. "The name is good," said shop manager Tristam Miller. "People are going out to get Vans because it says Vans on them, because they're good shoes--not because mom's stoked on them because they're inexpensive."
But consumers seldom ask where shoes are made, said Tom Campion,owner of Zumiez,a Seattle-based clothing and apparel chain that sells Vans' shoes: "They want shoes that look good and meet their pocketbook demands. Airwalk and Simple (two Vans' competitors) are from overseas plants and that doesn't stop consumers from buying them."
Vans will reopen its Orange and Vista plants April 17. Employees will be able to apply for unemployment benefits during the shutdown.
Word of the closing prompted harsh words from union officials who last year mounted an unsuccessful effort to win union representation at Vans' plants.
"I have my suspicions as to why they're closing down," said Raul Lopez, secretary-treasurer of Teamsters Local 396 in Los Angeles, which lost the representation election. The union is seeking National Labor Relations Board approval to stage a second election.
"They're doing everything possible to scare the daylights out of their people," Lopez said. "They know that their people want the union. We're telling them that the American public will support (Vans) if they make this a union-made shoe."
But Tony Cherbak, a Costa Mesa-based retail observer with Deloitte & Touche, the accounting firm, said that "for most people, shoes are a pocketbook and style issue. There might be some people who buy American, but most buy for value and price."
Vans shares rose 12.5 cents to $4.875 in Nasdaq trading. On Friday, Vans' shares fell 22%, losing $1.375 a share to close at $4.75. One analyst suggested that the Friday price decline was "a delayed reaction" to Vans' layoff earlier this month of 380 workers.
Vans also reported a $392,000 net profit for the third quarter ended Feb. 25 on revenue that rose by 21.3% to $21.7 million. A year ago, the company reported a $504,000 net loss on $17.9 million in revenue. Vans reported a $1.8-million net profit on $63.5 million in revenue for the nine-month period ended Feb. 25, compared to a $481,000 net profit on $57.5 million in revenue a year earlier.
Staff linked the profit and revenue growth to heavy demand for the new International line of shoes. "Since December, our backlog for this (imported) line has gone from zero to 42% of backlog," Staff said. "That's amazing growth."
Times Correspondent Hope Hamashige contributed to this story.
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Vans' Earnings Downturn
Vans' 1994 sales and net income fell below that of the previous two years, prompting layoffs at its plant in Orange. Sales and net income in millions:
Source: Bloomberg Business News