New executives launch ad blitz, seek labor peace

FRESH AIR AT LONDON FOG 2

September 25, 1994|By Ross Hetrick | Ross Hetrick,Sun Staff Writer

DARIEN, Conn. -- Over the last 10 years, James D. Milligan has established a reputation as a hard-nosed cost-buster, hired by Wall Street investors to ride herd on troubled companies -- cutting expenses, beefing up profits and then selling out to the highest bidder.

John Varvatos has a track record in the fashion industry of successfully refashioning product lines and revitalizing companies that live or die on consumer trends.

Now the investor-owners of London Fog Corp. have handed the two men another job -- rescuing the struggling raincoat and outerwear company left shellshocked by a frantic effort to reinvent it.

"There are too many weary, tired eyes," said Mr. Milligan, London Fog's new chief executive officer. "We going to have to settle down now and go to work."

Mr. Milligan and Mr. Varvatos, the new chairman, were named to the top jobs Aug. 23 after the ouster of the chairman and CEO of just a year, Arnold P. Cohen. Their immediate goal: to bring stability to a company widely perceived to be in crisis.

As part of achieving stability, the two say they are optimistic about discussions with the Amalgamated Clothing and Textile Workers Union to save at least some of the company's three Maryland manufacturing plants, which have 700 workers. Mr. Cohen had targeted the three plants for closing next month.

They have also launched a multimillion dollar advertising campaign to reintroduce London Fog products to an audience that was straying.

Most of all, the two men want to get London Fog's management and 2,700 employees -- of which 1,200 are in Maryland -- to begin working toward the same goal of creating a competitive and efficient company.

In an interview at London Fog's headquarters here, the two men indicated that the company's major investors -- GKH Partners and Merrill Lynch Capital Partners -- were upset by the pace, and in some cases the direction -- of changes Mr. Cohen was imposing, including ending the firm's role as a manufacturer.

In just one year, Mr. Cohen brought more changes to the company than it had seen in a decade. The company's headquarters was moved from Eldersburg to Darien, 100 management and sales personnel were eliminated, its Mexican factory was closed after just nine months in operation, three U.S. factories in Maryland and Virginia with 575 workers were shut down and the remaining three Maryland plants threatened with closure.

In the next month, Mr. Milligan and Mr. Varvatos plan to meet with workers in an effort to regain their confidence. They have also declared a moratorium on any more gut-wrenching changes.

"We have no further major organizational initiatives," Mr. Milligan said.

Under the new management structure, Mr. Milligan is in charge of financing and operations, while Mr. Varvatos concentrates on marketing and product design. The task they face is making the company consistently profitable so it can be spun off as a public company -- which would bring a lucrative return for its major investors.

That will involve bolstering the company's two main brands -- London Fog and Towne -- and then trying to extend the brands to related products through licensing and other joint arrangements, Mr. Milligan said.

This strategy is shared by Daniel W. Lufkin, a London Fog board member and a longtime financial backer of Mr. Milligan.

Ideally, Mr. Lufkin said, in five years London Fog will have "franchising and licensees in a number of related lines." There will be a range of brands from "Cadillac to Chevrolet," and the company will be international and its stock sold on the New York Stock Exchange.

And while he praised Mr. Cohen for his abilities, Mr. Lufkin said he was pushing too hard.

"Basically, this is a company that needs help," Mr. Lufkin said. "This is a company that is a delicate child that needs to be properly nurtured, properly cared for, properly brought along.

"You just can't just say, 'let's take it out and run 100-yard --es with it every day.' "

Of more immediate concern to employees, however, is the fate of their jobs.

After months of fitful negotiations with the union, the company in July announced that it planned to close plants in Baltimore, Hancock and Williamsport in October, although it retained the slim chance some compromise might be worked out.

That possibility now seems less remote.

Discussions continue

"Discussions continue and, frankly, it has been positive on both sides," said Mr. Milligan. "So we're optimistic that something can be concluded."

He added that, "we're pressing to get this thing resolved in the next two weeks."

More so than his predecessor, Mr. Milligan sees value in retaining a domestic manufacturing capability. Once that's given he said, it's difficult to get back.

"There's an advantage, and we're willing to take some pain as a result of preserving that advantage," he said. "So that's what really has gotten [the negotiations] back on the proper footing."

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