Londontown to close city factory Firm seeks union concessions to keep open raincoat plants in Boonsboro and Va.

November 09, 1993|By Kim Clark | Kim Clark,Staff Writer

Londontown Corp. said yesterday that it will shut down a Baltimore factory and might close two raincoat plants elsewhere if unionized workers do not agree to concessions and the company can't improve orders for its London Fog clothing.

In one of the first major moves by the company's new chief executive, Arnold P. Cohen, Eldersburg-based Londontown said it would close its 70-worker cutting facility on Brookhill Road in Northwest Baltimore by early January.

It also said it wants to negotiate new terms to its contract with the Amalgamated Clothing and Textile Workers Union (ACTWU) aimed at keeping its Boonsboro, Md., and Portsmouth, Va., factories open.

Each of the threatened factories employs about 300 people. Londontown employs 3,500 people nationwide, about 1,500 of them in Maryland.

Carmen Papale, a spokesman for the ACTWU in Maryland, said yesterday that the workers were surprised by the announcement, though they had known for months that sales had been dropping and the company had steep debt payments.

"They are very shocked, very upset," he said.

Although the company hasn't released details, Mr. Papale said he expected Londontown to ask for concessions from workers to save the more than 600 threatened jobs.

He said he would consider the company's proposal, but added that "the problem here is not the workers," who earn between $7 and $11 an hour. "This is a highly leveraged company that is trying to cut costs and so is hurting the people who helped to build the company."

In 1988, the company's top executives took Londontown private in a $178 million leveraged buyout. The company has since been purchased by Merrill Lynch Capital Partners, but still is faced with the financial legacy of paying off the high-interest junk bonds used to finance the takeover.

In its fiscal year ending Feb. 27, 1992, the company reported that while overall sales had risen 6.4 percent, to $316.6 million, it reported a net loss of $262,000 -- primarily because of a $24 million debt payment and $5.9 million in retirement payments to the executives who had taken the company private.

The company said that increases in knitwear and sportswear sales were primarily responsible for the overall revenue improvement. However, the recession and increasing competition have driven down prices in the raincoat business, the company said.

Cheryl A. Cucco, Londontown's director of personnel, said the company hopes that the restructuring would also allow it to bring some products made overseas back to the United States for production.

But she declined to say how much the company currently contracts out to overseas factories, or how much could be returned to the United States.

It was not clear yesterday whether the move was part of a larger companywide restructuring plan hinted at previously by Mr. Cohen, who took over as chief executive officer two months ago.

Mr. Cohen, who came to London Fog after working at Bloomingdale's, Gucci and J. Crew, said earlier this year that he hoped to create upscale London Fog boutiques, make and sell more-expensive rainwear and launch a company catalog.

Mr. Cohen could not be reached for comment yesterday. Ms. Cucco declined to say whether yesterday's moves were linked to Mr. Cohen's other plans.

Ms. Cucco downplayed the danger to the Boonsboro and Portsmouth plants, saying she was confident the company would succeed in saving them.

If the union agrees, and Londontown is able to improve sales, Ms. Cucco said, the company plans to close down the two plants, revamp them, and then reopen them in April. Boonsboro would continue to make London Fog's well-known raincoats, while Portsmouth would be revamped to make a new line of coats.

She said Londontown's primary owner, Merrill Lynch, has agreed to make a "significant" new investment in the operations if all goes as planned.

Ms. Cucco said the manufacturing restructuring was needed because sales of the company's traditional raincoats have fallen.

Londontown is the nation's biggest maker of raincoats, accounting for 60 percent of the men's raincoat market in the United States.

And the company must restructure its remaining manufacturing operations to reduce costs to help pay off the company's large debt.

"Our high debt load certainly does not allow us to carry a high overhead," she said.

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