Hanesbrands: Hecho en Asia (HBI)

Apparently labor costs throughout Latin America are getting too pricey, if you can believe it.  Hanesbrands Inc. (NYSE: HBI) is updating its "consolidation and globalization cost-reduction strategy."  While this includes increasing production in Asia, it is ditching many Latin American facilities and workers.  The company plans to have closed nine plants in five countries by the end of Summer in 2009.  Approximately 8,100 jobs will be lost.

By the end of 2008 alone, the company expects to have substantially closed seven plants throughout Latin America and the U.S.:

• a sewing plant in El Salvador, affecting 2,600 employees;
• a sewing plant in Honduras, affecting 1,250 employees;
• a sewing plant in Costa Rica, affecting 1,250 employees;
• two yarn plants, a knit-fabric textile plant and an inventory storage warehouse in the United States, affecting 745 employees.

By next summer it expects to have closed a sewing plant in Mexico,affecting 1,650 employees; and expects to have closed its last largeknit-fabric textile plant in the United States, affecting 600 employees.

The restructuring and related charges for these actions includingseverance and contract termination costs, accelerated depreciation offixed assets, and inventory write-offs are expected to come to about$76 million. Approximately two-thirds of these charges are expected tobe incurred in the third quarter of 2008.  That will take the tally toapproximately $204 million of the $250 million in restructuring chargesthe company expected to incur in the three years following the spin-off.

This isn’t an entire exodus out of Central America.  It has reachedplanned fabric production levels at textile facilities in the DominicanRepublic and El Salvador, with further expansion planned in CentralAmerica.  Most of the sewing production from the Central Americanplants that will close is being moved to Hanesbrands’ new Asianfacilities. It has opened or acquired four sewing plants in the pasttwo years, with two in Thailand and two in Vietnam, and the companyexpects to increase its workforce in Asia from 4,000 today to 6,000 bythe end of 2008.

Companies take criticism locally for job cuts, that much is sure.  Theinterests of businesses and of Wall Street (shareholders) often differfrom those of employees.  That has been proven time after time. 

Shares are up almost 0.5% at $23.98 on last look and its 52-week trading range is $21.38 to $37.73.

Jon C. Ogg
September 24, 2008