Be­fore the lights go out, an agency lends a hand

The Washington Post Sunday - - CAPITAL BUSINESS - BY LY­DIA DEPILLIS ly­dia.depillis@wash­post.com

owings mills, md. — The old fac­tory was lit by a few light bulbs. Desks were strewn with pa­pers as if peo­ple had left in a hurry. It felt like a mor­tu­ary, but as Suzy Ganz walked among the gi­ant textile looms, she re­garded them with af­fec­tion.

“We’re con­vinced Jimmy Hoffa’s un­der­neath one of them,” Ganz said of the hulk­ing steel ap­pa­ra­tuses. “This fac­tory will have a new life, but to close it with­out a new life? Bleh.”

A few years ago, these looms churned out the patches for the sleeves of Cus­toms and Bor­der Pa­trol agents — steady in­come that helped the 116-year-old Lion Broth­ers ride out busi­ness cy­cle ups and downs. But in late 2013, the agency changed the spec­i­fi­ca­tions in its con­tract from “Made in Amer­ica” to “Made in Amer­ica and by trad­ing part­ners.” Which, in prac­tice, meant “made some­where else.”

Los­ing the con­tract sent Lion Broth­ers reel­ing. Ganz shut down the looms and laid off dozens of peo­ple. But it wasn’t the end of the en­ter­prise: With the help of a small gov­ern­ment agency that ad­vises busi­nesses caught in the cross­cur­rents of in­ter­na­tional trade, she opened a much smaller, high-tech fa­cil­ity in leased space down the road and started look­ing to­ward new mar­kets. For Ganz, it was welcome re­lief.

“In­stead of, ‘ I’m from the gov­ern­ment and I’m here to hurt,’ it was ‘I’m from Mataac and I’m here to as­sist,’ ” she says, re­fer­ring to the Mid-At­lantic Trade Ad­just­ment As­sis­tance Cen­ter. “It al­lows us to do a cou­ple things at once rather than one thing at a time.”

Trade Ad­just­ment As­sis­tance has long been a bar­gain­ing chip in fights over free-trade agree­ments, with la­bor unions paci­fied by the money that goes to help re­train peo­ple who have lost jobs to im­port com­pe­ti­tion. The mas­sive fight over whether to grant Pres­i­dent Obama the power to “fast track” trade deals through Congress is no ex­cep­tion — lib­er­als say the pro­posed fund­ing level of $610 mil­lion a year is too low; while con­ser­va­tives say it’s an ex­pen­sive wel­fare pro­gram.

The part of the pro­gram that helps peo­ple — which uses most of its money— has shown lim­ited suc­cess in get­ting them back to work. When jobs are re­placed, they tend to pay less; a 2012 study com­mis­sioned by the La­bor Depart­ment found that the pro­gram’s costs out­weighed the ben­e­fits.

But the tiny slice that goes to help com­pa­nies, which has been funded at be­tween $10 mil­lion and $16 mil­lion a year since 2002 — and dropped to $12.5 mil­lion from $15.8 mil­lion in 2015— has a more promis­ing track record.

Ac­cord­ing to a Gov­ern­ment Ac­count­abil­ity Of­fice re­port from 2012, the pro­gram helped small firms boost sales and pro­duc­tiv­ity and re­tain em­ploy­ees, en­abling some to sur­vive where they oth­er­wise may have gone un­der.

Now, as the Obama ad­min­is­tra­tion works to sal­vage its plans to fin­ish the Trans-Pa­cific Part­ner­ship, a ma­jor trade deal with Pa­cific Rim coun­tries, the pro­gram’s de­fend­ers are won­der­ing why more money isn’t go­ing to­ward help­ing com­pa­nies ad­just to all of the new dis­rup­tive forces that might re­sult.

“Let’s say you have a firm with 250 em­ploy­ees and you can save those jobs, you don’t have to pay un­em­ploy­ment in­sur­ance or pay for re­train­ing and health care,” says Joni Waddell, who runs the Rocky Moun­tain Trade Ad­just­ment As­sis­tance Cen­ter in Den­ver. “It is kind of odd tim­ing that, just as the Trans-Pa­cific Part­ner­ship might be passed, our pro­gram has got­ten a pretty gi­gan­tic cut.”

As­sis­tance in ac­tion

Af­ter los­ing the con­tract with Cus­toms and Bor­der Pa­trol, Ganz kept the fac­tory open for months, hang­ing on to her em­ploy­ees in hopes that the agency would change its mind. Her long­time bankers aban­doned her. At times, she won­dered whether it was pos­si­ble to main­tain any do­mes­tic man­u­fac­tur­ing at all— no stranger to glob­al­iza­tion, Lion Broth­ers has had a fac­tory in China since the 1980s for more la­bor-in­ten­sive prod­ucts, in­clud­ing univer­sity logo-wear and jer­seys for ma­jor sports leagues.

But fi­nally, a part­ner­ship came through with a long-stand­ing client: The Girl Scouts of the United States of Amer­ica. Lion Broth­ers had long de­signed its merit badges and elab­o­rate cer­e­mo­nial patches, and the Girl Scouts agreed to bring all pro­duc­tion in China back to the United States.

That gave Ganz the where­withal to re­or­ga­nize: She leased space in a non­de­script of­fice park and filled it with high-tech ma­chines that do the stitch­ing, back­ing and fin­ish­ing. In fact, she doesn’t even call it a fac­tory.

“We wanted ev­ery­one to think of ‘ tiny,’ ” Ganz says. “We wanted to be ac­cu­rate in selling ex­pec­ta­tions. So in­stead of a fac­tory, we called it a ‘mi­cro-fa­cil­ity.’ ”

In busi­ness jar­gon, that kind of trans­for­ma­tion is known as “lean man­u­fac­tur­ing,” away tomake all pro­cesses as ef­fi­cient as pos­si­ble. The new fa­cil­ity de­liv­ers prod­ucts in a frac­tion of the time. That means less la­bor but also meant that Ganz had tomake some painful lay­offs — though many of her union­ized em­ploy­ees were close to re­tire­ment any­way. Those who stuck with her learned to do dif­fer­ent jobs, over­see­ing ma­chines rather than op­er­at­ing them.

Take Laura Wil­liams, a 28-year Lion Broth­ers vet­eran, as she lines up a cloth full of 9’s in a dig­i­tal cut­ting ma­chine and types in­struc­tions into the com­puter be­side it.

“You got to tell it what to do,” Wil­liams says with sat­is­fac­tion. “I en­joy it be­cause it’s a chal­lenge. And it comes out per­fect. No raggedy edges.”

That’s when Trade Ad­just­ment As­sis­tance came in. Ganz was strug­gling and needed some help to make sure that the new busi­ness model was sound. She had started do­ing more re­search and de­vel­op­ment at the fa­cil­ity, but she didn’t quite have the band­width to com­mer­cial­ize the tech­nolo­gies that they were com­ing up with. She also needed help fig­ur­ing out what other mar­kets might be ac­ces­si­ble be­yond ath­let­ics and other logo wear — per­haps fash­ion, with the shim­mer­ing ap­pliques they were learn­ing how to bake onto fab­ric.

As for jobs, Lion Broth­ers em­ploys only 10 per­cent of the 350 peo­ple it had at its peak pay­roll. But now, it is po­si­tioned to start ex­pand­ing again.

“Will we get back to 350? I’m not sure,” Ganz says. “But if it was at that level, we’d be pro­duc­ing a lot more goods.”

Those are only a fe­wof the ways in which the pro­gram helps turn around firms: It could be mar­ket­ing, or bet­ter fi­nan­cial man­age­ment, or fig­ur­ing out how to of­fer de­sign ser­vices or goods for sale. Of­ten, fac­to­ries that pro­duce com­mod­ity goods need to find more spe­cial­ized, higher val­ueadded prod­uct lines and look for clients that ben­e­fit from the flex­i­bil­ity and speed of hav­ing pro­duc­tion nearby.

The value of as­sis­tance is capped at $75,000 and must be matched by the re­cip­i­ents to make sure that they are also in­vested in their own suc­cess. Some­times firms need help un­der­stand­ing what is hap­pen­ing to them.

“These folks, once upon a time, they were quite suc­cess­ful. And when they get hit with im­ports, they don’t know it,” says Wil­liam Bu­ja­los, who leads the Mid-At­lantic Trade Ad­just­ment As­sis­tance Cen­ter. “Their im­me­di­ate re­ac­tion is to start us­ing work­ing cap­i­tal to re­duce their prices. By the time they re­al­ize that wasn’t what they should’ve been do­ing, three or four years go by, and they’re in­tro­duced to us.”

Oc­ca­sion­ally, the 11 Trade Ad­just­ment As­sis­tance cen­ters across the coun­try en­counter com­pa­nies they can’t save. But the Pa­cific North­west cen­ter’s David Hol­bert says there’s usu­ally some way to re­vive a busi­ness.

“Small com­pa­nies are sur­pris­ingly flex­i­ble, and they are ex­perts in their niche, and there’s al­most al­ways a di­rec­tion to go in to re­main vi­able,” he says. He thinks there are more firms out there to help. He refrains from advertising his ser­vices so that peo­ple don’t get their hopes up when there’s not enough money to go around.

Too lit­tle, too late

Of course, the larger truth around Trade Ad­just­ment As­sis­tance is that it’s prob­a­bly too lit­tle, too late. Many of the United States’ fac­to­ries and jobs were lost over the past 30 years as the North Amer­i­can Free Trade Agree­ment and then per­ma­nent nor­mal trade re­la­tions with China al­lowed in­dus­tri­al­ists to re­lo­cate pro­duc­tion over­seas.

The United States did lit­tle to retro­fit fac­to­ries to keep some pro­duc­tion at home, says Mike Gali­azzo, pres­i­dent of the Re­gional Man­u­fac­tur­ing In­sti­tute of Mary­land.

“They just kind of ca­pit­u­lated. They just said, ‘Oh, we can’t com­pete with the Chi­nese,’ ” Gali­azzo says. Now, the num­ber of firms around to save is dwin­dling. “There are good pro­grams, but we’re run­ning out of places to go knock on the door and ask them to turn in an ap­pli­ca­tion.”

That’s one tack that la­bor groups have taken to ham­mer the Trans-Pa­cific Part­ner­ship — in­ter­na­tional trade has gut­ted the man­u­fac­tur­ing bases of mid­dle­class cities, which has had an out­size im­pact on com­mu­ni­ties of color. In an video ad­ver­tise­ment that ran this week, the AFL-CIO fea­tured a steel­worker from Bal­ti­more who made the con­nec­tion about shut­tered fac­to­ries, racial in­equal­ity and ur­ban blight. Gali­azzo says there’s some truth to their re­la­tion.

“I be­lieve that we have to pay at­ten­tion to the peo­ple who were the ca­su­al­ties of all this,” he says. “And I think that just as African Amer­i­cans were be­gin­ning to be treated more equally at work, when we were hav­ing de­seg­re­ga­tion, we moved the damn fa­cil­i­ties.”

How­ever, Gali­azzo and Ganz are both ag­nos­tic on the Trans-Pa­cific Part­ner­ship. Do­mes­tic com­pa­nies need for­eign mar­kets, they say, so if the trade deal opens them up, that would help. Much re­search has been done on the po­ten­tial for metropoli­tan ar­eas to grow through ex­ports, if they fo­cus on the right prod­ucts and de­velop cut­tingedge tech­nol­ogy.

But ex­ist­ing com­pa­nies need help un­der­stand­ing the new land­scape of mak­ing and selling stuff in the global econ­omy.

PHOTOS BY LY­DIA DEPILLIS/THE WASHINGTON POST

TOP: Suzy Ganz, chief ex­ec­u­tive of Lion Broth­ers, looks through old draw­ings of the patches that the com­pany used to make in the old fac­tory. ABOVE: In the com­pany’s new “mi­cro-fa­cil­ity,” the em­broi­der­ing ma­chines do the stitch­ing, back­ing and fin­ish­ing.

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