Future of London Fog plants remains uncertain

June 19, 1994|By Ross Hetrick | Ross Hetrick,Sun Staff Writer

Arnold P. Cohen doesn't waste time.

In his first nine months as chairman and chief executive officer of London Fog Corp., the 38-year-old retailing executive has moved a coveted corporate headquarters from Eldersburg to Connecticut, shut down a pilot Mexican plant, acquired a West Coast outerwear company and closed three factories in Maryland and Virginia -- eliminating 575 jobs.

Now, he appears to be on the brink of ending more than 70 years of London Fog history as a major Maryland manufacturer.

After a three-month impasse with the Amalgamated Clothing and Textile Workers Union, Mr. Cohen said the company has withdrawn a proposal for the three remaining Maryland plants.

The fate of the plants -- and their 700 jobs -- is now being decided.

"We're evaluating as we speak," Mr. Cohen said Friday.

The union remains contentious.

"They are going to have to make that decision, and the union is not going to take the blame," said Carmen S. Papale, international vice president and the top Maryland official for the ACTWU.

The situation has attracted the avid attention of Gov. William Donald Schaefer, who has met with both sides, urging that an agreement be reached to preserve the remaining jobs and one of Maryland's most famous trademarks. Founded in Baltimore in 1922, the company also employs another 650 people at its distribution center and administrative offices in Eldersburg.

The governor stands ready to intervene, according to Mark L. Wasserman, secretary of the Department of Economic and Employment Development. "If both parties are willing, we have signaled to both that the governor would like to be a part of a last-ditch effort to stave off the unthinkable," Mr. Wasserman said.

To both sides, the issues appear deceptively simple.

For Mr. Cohen, it's the bottom line. It costs $18 to $20 more to produce a coat in its Maryland factories than it does overseas, he said. That adds up to millions a year in lost profits.

Mr. Cohen said his plan was a way to reduce that gap by broadening the product line made here and increasing output, thus cutting the cost per unit.

"Our intent was to change the way these factories produced and be able to come back and look everybody in the eye . . . and say, 'Here's what we've done.' "

But Mr. Papale asserted that Mr. Cohen's objective is, and has been from Day 1, to close the plants and make the union a scapegoat.

"They have to have somebody to blame for what they are going to do," Mr. Papale said.

Complicating the conflict are the bitter relations between the two men, who have never met. The company wanted its proposal put to a vote; Mr. Papale refused. Mr. Cohen, furious, said Mr. Papale has called him a liar.

"I wouldn't meet with him today. I wouldn't meet with him tomorrow. No interest," Mr. Cohen said.

Caught in the middle are the 700 workers whose $7.60-an-hour jobs are threatened.

"They are putting everybody out of work . . . because two people can't come to an agreement," said Betty Buchanan, a seamstress at the company's plant on Carlins Park Drive in Baltimore. "That's ridiculous."

"If my job is in jeopardy, sure, I want to vote on whether I'm going to work or not."

The origin of the conflict dates to last fall when Merrill Lynch Capital Partners, which owns most of London Fog, tapped Mr. Cohen, the former president and chief operating officer of J. Crew Group Inc., to revitalize and expand the company. His goal: to make London Fog the nation's foremost rainwear and outerwear maker.

"I'm not here to turn around the company," said Mr. Cohen, who holds what he described as a "meaningful" equity stake in London Fog. "I'm here for enhancement."

The vulnerability of the domestic plants is evident in the numbers. Although famous for its raincoats, the company's top-of-the-line London Fog raincoats -- the ones made here -- account for only about 10 percent of annual sales, which reached $316.6 million for the year ended Feb. 28, 1993. (The company would not disclose figures for its last fiscal year.)

Shift in demand

And demand for these coats has fallen dramatically; sales have dropped by about two-thirds, from 1.3 million coats in 1980 to 450,000 now, Mr. Cohen said.

"There has been a real shift in consumer purchasing," he said.

Ninety percent of the company's sales come from other products -- jackets, knit shirts, sweaters, woven shirts, knitwear as well as cheaper raincoats sold under the Towne brand -- manufactured overseas by factories under contract to London Fog. London Fog closed the only foreign factory it owned -- in Mexico -- last February after about 9 months in operation.

London Fog remains a dominant force in the raincoat market. In department stores, the company's products account for 80 percent of men's raincoat sales and 60 percent of women's.

And department stores account for the majority of raincoat sales in the country, Mr. Cohen said.

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