Before the lights go out, an agency lends a hand
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.
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.