Kellwood's garments hang on racks everywhere from Wal-Mart to Saks Fifth Avenue -- but the empire is invisible.
At the JC Penney in Hampton Village, you walk straight into sale racks of pastel acrylic and slick rayon, all bearing Kellwood's Sag Harbor label. Finger a few necklines, and you find they came from Taiwan, Malaysia, Hong Kong, Honduras, Guatemala, Indonesia, Korea, Australia and Sri Lanka. The size-large short-sleeved black sweater is made in Hong Kong, the medium in Cambodia, all the lavenders in Cambodia. The first purple wool jacket was "assembled in the Dominican Republic," the second "assembled in Mexico." The French-blue skirt by Koret (another Kellwood label) was made in Mexico, the print version in El Salvador, the matching sweater and vest in Macau. (In fact, there are quite a few garments from Macau, the decayed, corrupt Portuguese colony that just reverted to Chinese rule last month.)
Most St. Louisans haven't been to any of these places, haven't seen Kellwood's factories, can't name even five of their 150-plus labels, don't realize they're the fifth-largest publicly held apparel company in the country. We've only seen Kellwood's headquarters -- the dark-brown brick-and-glass rectangle off Highway 40 in Chesterfield, out where multinationals stand like cool eighth-graders on the edge of the playground. About 160 of Kellwood's 19,200 employees work there, lending such dry support as legal counsel, financial planning and enough PR to murmur the news when last year's sales hit $2.15 billion. But the actual product is manufactured by more than 700 overseas contractors, with a smaller share (20 percent and dropping) at Kellwood's own fast-closing factories here and abroad. (Kellwood just budgeted $6.8 million to close five more domestic plants, promising shareholders it would soon be "sourcing" overseas exclusively.)
In other words, Kellwood is a textbook example of the large U.S. corporations that now manufacture globally, housing only their computerized brainpower, marketing and distribution operations back home. According to the firm's 1999 annual report, the formula's working: Once you get past the middle-class models cavorting on white seamless backgrounds in shiny, overbright clothes, you'll find the strongest balance sheet in years, with 10 percent annual growth, a 16 percent increase that took operating earnings up to $101.5 million; a 17 percent rise in net income; and a $76 million reduction in debt.
Kellwood's not exactly blue-chip, but it's always stayed just ahead of the curve, first by buying up technological bells and whistles, then by buying up brand-name companies, then by outsourcing a full 80 percent of its manufacturing (22 percentage points above the industry average). Oddly enough, nobody seems to notice; in the International Social Responsibility Research Service report on Kellwood, the media-coverage section is blank -- except for the wry observation that "the company has not been subject to media or public scrutiny." The research department of St. Louis-based A.G. Edwards doesn't even track Kellwood; on CNBC this fall, Michael Santoli of Barron's remarked that because the company is "kind of unglitzy in general as an apparel stock, it's kind of ignored."
The unglitziness is an accident of history. Merged out of 15 suppliers to Sears, Roebuck and Co., Kellwood took its name from two former Sears executives, Charles H. Kellstadt and Robert E. Wood. For years, the company focused on cheap, sensible, private-label clothes for large chain retailers, keeping Sears as its best customer. Then Sears' fat orders and shrinking profit margins began to strain the relationship. When Sears plucked home furnishings from their catalog in 1979, depriving Kellwood of all those ruffled-curtain orders, the manufacturer started playing the field, courting and supplying other retailers.
As appearance-conscious as a recent divorcée, Kellwood even opened a New York office to monitor fashion trends. It also began edging toward brand names, and by 1985, it was gulping down smaller firms -- first Cape Cod-Cricket Lane, Parsons Place Apparel (now Sag Harbor), Robert Scott Ltd., David Brooks Ltd.; then, in the '90s, Décorp, California Ivy (now Ivy), Halmode, David Dart, Fritzi California, Koret. Meanwhile, Kellwood also acquired significant manufacturing licenses, including the coveted master license from Lambchop Productions Ltd. to make Kathie Lee products for Wal-Mart.
Kathie Lee's name quadrupled Kellwood's Wal-Mart sales. Kellwood's own name, however, wasn't the brand of anything. Seldom linked, in the consumer mind, with its ever-widening maze of subsidiaries, divisions, licenses and brands, Kellwood grew huge -- and remained anonymous.
The way Kellwood produces apparel accounts for a newer aspect of Kellwood's anonymity: its refusal to address activists' questions about factory conditions, or participate in the White House Anti-Sweatshop Task Force or the Fair Labor Association, or open its inspections to human-rights groups. Ironically, Kellwood has a comparatively clean record and spends more than $1 million monitoring its own contractors. But the company was burned by U.S. Department of Labor citations in 1996; a few Kathie Lee brushfires that came too close for comfort; and a burst of allegations this fall from the National Labor Committee (NLC), a human-rights advocacy group based in New York. Now, Kellwood's spokespeople refuse to answer even the most basic questions about their company's manufacturing.
Transparency might be hip in junior blouses, but it's dangerous to global business.
Kellwood used to be plain-Jane, but its new milieu is the fashion industry -- a realm that is itself increasingly anonymous. Once demurely monogrammed with the wearer's initials, clothes today wear a rainbow of logos and labels -- yet they all look pretty much the same. Kellwood stands smack in the middle of this Gap-ification, thanks to its flexible, high-speed manufacture and its emphasis on marketing rather than aesthetic innovation. The result is democratic, casual, easy to wear and affordable -- but in critics' eyes, it's bland chaos. Company designers might still gaze at the runways in Paris and Milan for inspiration, but they come home and blunt the high design into mass-market appeal, interpret it in cheap fabric and send the pattern to Third World countries for rapid, secretive assembly.
In the old days, it was the design side that lived like Garbo, shrouded in secrecy. American manufacturers used to visit Paris twice a year, paying a fee called a "caution" to enter the showrooms. Guests could take discreet notes, but reporters gladly embargoed the season's news until the first Paris creations landed at JFK airport, sending frissons up women's spines all across the land.
Today, all you have to do is flip on cable, and a Vogue editor takes you inside. The secrets don't really matter so much anymore, because, as longtime Wall Street Journal fashion reporter Teri Agins writes, "It's not only the end of the millennium, but the end of fashion as we once knew it."
Agins' new book, The End of Fashion: The Mass Marketing of the Clothing Business, chronicles the fall. Designers failed to sell women on short skirts; fads misfired; couture made a fool of itself, turning runway shows into performance art and presenting clothes as unwearable as Balinese theatrical costumes. Women started shopping downmarket, deciding it was not only sensible but chic to buy knockoffs at discount stores. By 1996, discounters accounted for about 41 percent of general retail sales, up from 27 percent in 1987, and Wal-Mart was selling more apparel than all department stores combined. "The forces of fashion," Agins concludes, "had lost their ability to dictate trends."
The power reverted to us: clueless consumers who grew up in extra-large sweatshirts and wouldn't know tulle from burlap. Jeigh Singleton, fashion-design coordinator at the Washington University School of Art, deplores the result. "Before, at least you had a designer making a declaration and being responsible for it, saying, "This is the way it is supposed to be now, and here's why,'" he sighs. "Listening to the customer might seem more democratic -- but it ends up with people not looking so great."
Fashion's artful ensembles have been replaced with the mix-and-match of personal style. "T-shirts with ballgown skirts -- that's tacky," snaps Singleton. "Casual Fridays -- what is that? Some companies stopped it because people were showing up in their pajamas. There is no gauge; there is no standard. The see-through, shrink-wrapped look of celebutantes, that MTV slut-thug look -- I think this is because the masses are making the decisions."
The irony is that, with technology scaling new heights and the richness of the entire globe to tap for inspiration, we're ending up someplace where "all the choices are the same." Fashion, once about uniqueness and exclusivity, now strives only for inclusion -- the kind Ralph Lauren and Tommy Hilfiger promise to preps and homeboys alike. The result is sameness, what Singleton calls a "nobody was present" kind of garment, shaped less by design principles than by economics, technology and a marketer's notion of the masses' dreams. "Things are done all over the world -- they're designed here, manufactured in Sri Lanka, sold in New York City and they end up in Boise," continues Singleton. "Everything's electronic, and things are not designed for people as much as for the presentation. They're designed for the hanger, for the fold, for the package. So unless you have this body that looks like a hanger ... things end up looking quite generic."
Kellwood's a mirror for these changes: Instead of an old-fashioned design house with a single authoritative aesthetic, it's a loose amalgamation of brand names and private labels. The old design rules are indeed gone, yet there's little risk-taking, little manipulation of a garment's shape and line. Instead, the "design" comes in embellishment, trim, anything that will be perceived as "novelty" without terrifying copycat consumers.
Kellwood's highest design comes from its David Dart label, one of the "bridge" collections created in the mid-'80s, when high fashion stopped selling and retailers wanted designer names priced about 30 percent lower. Sold at Neiman Marcus (but on the ground floor, not at the altitude of couture), Dart's Millennium collection "takes texture to the limit with pleated mesh, metallic mohair and crinkle knit pieces" and trims a sheath in rooster feathers. (No change in shape, just add-on rooster feathers.) Another Kellwood label, Ivy, mimics the softly draped, easygoing clothes sold by Kiko or C.P. Shades but pares down the prices.
How? Economies of scale and technology. Tax breaks, freebies and eased regulations in the "free-trade zones" created by poor countries to seduce U.S. manufacturers. Thrifty fabric buys. Last May, Kellwood CEO Hal J. Upbin called his designers "unsung heroes" because they had to work with $3-a-yard fabric, not $30- or $300-a-yard material. (Korea was once the company's main source for fabric, but lately they've been casting a wider net, fishing for the stretch, novelty and "surface interest" that command higher prices.)
Beyond the brands lies the 30 percent of Kellwood that's private-label, manufactured to bear a retailer's exclusive "brand" name. Private-label used to mean uninspired knockoffs of last season's bestsellers, but today, stores want their label to become a coveted brand in its own right. What customers forget is that Polo Ralph Lauren doesn't make Polo Ralph Lauren belts; they sell the manufacturing license to Kellwood, which contracts them out. Kellwood's Smart Shirts subsidiary makes Nautica dress shirts and $30-something woven shirts for Land's End; other divisions make clothes for L.L. Bean, Talbots, Dayton-Hudson (Target), JC Penney and Dillard's. Last season's hot news was a contract to make women's sportswear for Perry Ellis International.
In its prosaic years, Kellwood never bothered to advertise. But now they have the license for Levi's Slates (producing such "fashion-forward" garb as a $45 see-through hooded jelly jacket), and suddenly there are ads by fashion photographer Richard Avedon -- portraits of Gen X men talking about changing their careers in Out, P.O.V., Rolling Stone, GQ and Wired. The French would cringe; they've always believed good design should sell itself. But Kellwood knows that today, money and marketing alone can create a strong brand.
The company's even "branding" itself: Last year, top executives hired a firm to study perceptions of Kellwood, reevaluating even its name and logo; they plan to launch a "global-imaging campaign" early in 2000, ending their anonymity.
STITCHES IN TIME
Kellwood grew up as a manufacturer, then reinvented itself as an apparel-marketing company, investing in software instead of high-speed sewing machines and using sophisticated electronic linkages to keep its long, complicated supply chains flexible. Today, Kellwood may not pump its own sewing-machine pedals, but it can shift suppliers at the drop of a pin, enjoying free-trade-zone incentives and cheap labor while avoiding civil wars and export quotas. Overseas factories still cloud with lint, their floors littered with scraps of Tencel and stretch jersey. But what Kellwood emphasizes is the clean high-tech of concept, trend forecasting, marketing, management and global sourcing expertise.
"We manufacture less and less," Upbin boasted to an industry audience last May, emphasizing how fast Kellwood clothes fly onto the warehouse racks. The factories run through more than 200 million yards of fabric a year, constantly nagging mills for shorter runs so they can churn out the current formula before customers tire of it. The whole industry's moving at warp speed: Clothes hit a season ahead of themselves and get marked down in nine weeks; the leftovers are shipped to apparel hell soon after. Fresh designs don't have time to catch on.
But Upbin -- described by one associate as "a nice guy with vision, a big-picture thinker" -- likes the pace. Dividing his time between St. Louis and his native New York, he makes $1.66 million a year masterminding the manufacture of affordable clothes -- and buys his own suits at Sam Cavato, Plaza Frontenac, because, as he told one interviewer, "dressing sharp, including head-to-toe grooming, is impactful." In the same interview (in the Daily News Record, April 16, 1999), he admitted to a closet tie fetish: "I'm always culling, but I never have fewer than a hundred."
CEO since 1997 and recently named chairman of the board as well, Upbin has guided Kellwood's spate of acquisitions since his arrival in 1988. But his real baby is Vision 2000, a massive $40 million "information system and supply chain management reengineering project" that's setting industry precedents. Vision 2000 ties everything together, zapping instant information, digitized patterns, warehouse inventory and buyer feedback all over the world.
It's a bit different than the '50s, when a Maplewood clothier drove down to the Washington Avenue garment district every morning to buy one or two dresses, depending on how many had sold the day before. Kellwood supplies thousands at a time -- but it wants the same feedback, flexibility and precision the 1950s clothier enjoyed. Luckily, the technology's here to provide it. Upbin predicts that Internet linkage will have an impact on his industry as profound as "what the railroads did to this country." He also promises that in another decade, they'll use body-scanning and digitizing to dress us individually.
"Us" means the U.S.; Kellwood has enough trouble keeping up with "tribes" distinguished by age, marital status and coffee-bean selection, let alone trying to market worldwide. "The barriers of taste and product and packages and languages ... are almost insurmountable," Upbin told Apparel Industry Magazine last month. Besides, the clothes don't travel electronically; by selling American, Kellwood's been able to consolidate its distribution centers into a handful of colossuses, all on home soil. (In California's City of Industry, for example, various Kellwood divisions share a 630,000-square-foot edifice on Temple Avenue, reverently sited at the intersection of four freeways. There they share gizmos -- the Intellitrak overhead power monorail trolley, the Salpomec Magic Tube slick rail -- but design and market independently, each for its own niche.)
SILENT AND SEAMLESS
When The Riverfront Times asked to profile Kellwood by following a few products from concept to consumer, the company hesitated for two weeks, then offered a David Dart publicist. Great start -- now what about a Nautica shirt from Smart Shirts Ltd., a Kellwood subsidiary that operates nine of its own plants in Hong Kong, Sri Lanka, China and Costa Rica? And an example from a lower price point -- maybe Crowntuft, the "vertically-integrated manufacturer of chenille robes"?
Out of the question, replied Christine Fowler, Kellwood's St. Louis spokeswoman, using words like "strategy" and "positioning."
Could we at least interview a few employees in other parts of the company? Not directly, said Fowler -- it's too hard to control -- "but maybe if you sent some questions, we could find the answers for you." We sent detailed questions spanning design, production, textiles, business goals and, yes, factory conditions. This time, the response came from New York: "If you are interested in our contractor-compliance program, you can get that off our Web site," spokeswoman Donna Weaver said curtly, canceling all cooperation.
The stonewall wasn't new: When the Clinton administration made its first attempt to establish global labor standards, the White House Anti-Sweatshop Task Force, Kellwood politely declined to join, wary of being railroaded into standards set by human-rights and labor groups. Upbin told reporters that Kellwood had its own monitoring program, thank you very much; they'd already conducted thousands of audits and terminated relationships with more than 100 contractors. But they wanted the process to remain private.
Above all, they didn't want to answer the public's questions. When Steve Coates, executive director of the U.S./Labor Education in the Americas, contacted Kellwood about a prominent factory in Guatemala several years ago, he says, "it was like sending a letter into the Twilight Zone. They are one of the least responsive companies out there." Bill Ramsey, director of St. Louis' nonprofit Human Rights Action Service, tried three times to ascertain Kellwood's involvement in various Kathie Lee scandals and never received an answer.
Kellwood probably wasn't directly involved; its subsidiary, Halmode Apparel, oversees all fashion and merchandising for Kathie Lee but only manufactures dresses, skirts, rompers and such, licensing out the rest of the line. Hence Kellwood's narrow escape in 1996, when scandal broke about a Honduran Kathie Lee factory where 14-year-olds were said to be working 20-hour days for 40 cents an hour. Turned out those clothes were supposed to be manufactured by a New York company called Bonewco, which subcontracted some of the work to a manufacturer in Alabama, which sub-subcontracted part of the order to New Jersey based Universal Apparel, which in turn sub-sub-subcontracted it.
Last September, a report struck closer to home. The National Labor Committee held press conferences with two employees fired from the Caribbean Apparel maquiladora (the term for any assembly factory in a Latin American free-trade zone) near Santa Ana, El Salvador. Fired for union activities, the women described intense heat, poor ventilation, screaming bosses, mandatory pregnancy tests that cost them two days' wages. They also rattled off labels they'd sewn -- and the list included Kellwood's Components, Koret and Kathie Lee.
Robert W. Adler, the tanned, immaculately tailored president of Halmode, leapt to his feet, recalls NLC director Charles Kernaghan, saying, ""I own the Kathie Lee Gifford label, and Kathie Lee Gifford is the Joan of Arc of sweatshops.'" The next morning, Adler and Frank Gifford flew to Washington, D.C., to crash the press conference there. "We gave Gifford a chance to speak," says Kernaghan, "and he started crying, saying, "She's a woman, she's my wife, she's done more to help people than anyone else.' Now, this is supposed to be a civil press conference, but I start yelling: "What about the 13-cent wages in China -- aren't they people, too?'"
Cameramen were shouting questions, and Kernaghan could see reporters holding cell phones up in the air so the people back at their newsrooms could listen. According to Kernaghan, Adler said, "The pregnancy tests you're talking about, that's a cultural issue -- that's El Salvador's culture. The armed guards, they are U.S. Customs officials; these are free-trade zones. The 60-cent wages, there's nothing we can do about them; that's the legal minimum wage. It's the entire global economy you are questioning."
The head of United Students Against Sweatshops approached the microphone, so angry he was shaking, and halfway through his diatribe, Adler left the room. Kernaghan left, too, and in the hall he says he saw "their PR guy with his arm around Adler's shoulders, saying, "Bob, it's time you go home.'"
Kernaghan's chuckling; he embraces his role as shit-disturber and doesn't hesitate to focus his attacks where they'll draw the most attention. "Workers never even collected labels until we asked them to," he remarks, noting that many don't even know whose clothes they're sewing, making it incredibly difficult to trace specific abuses back up the kinked supply chain to the multinational. "Now, if a label's missing, the company charges them $1," he adds. "We started looking at garbage dumps; now they burn the garbage."
The NLC has three goals: a living wage for overseas workers; truly independent monitoring; and public disclosure of factory locations -- to which Kellwood came tantalizingly close at the Caribbean Apparel press conference. "We will absolutely disclose it," said Adler. "There are no secret cabals here, there are no secret factories." But the very next day, Kellwood issued a statement expressing confidence in its monitoring and retracting Adler's offer: "While the company for competitive reasons cannot publish a list of its contractors, we continue to insist that each of them respect the dignity of workers."
Obviously, if a huge manufacturer finds a great supplier, it doesn't want rivals flocking to the same door. Still, Kernaghan thinks the competition argument is lame: "All these (competing) labels are produced right next to each other, and one of the ways the maquilas promote themselves is they have all the different clothes they make hanging on the walls. Everybody already knows who's where; the only people left out of the loop are the consumers."
To figure out where Kellwood's factories are, you have to play Chinese checkers, moving almost randomly through hundreds of labor, government and activist groups. Most know of Kellwood but aren't sure of its labels and subsidiaries and would never consider directing a campaign its way. With budgets the size of thimbles, they must travel to each country, hunt down the factories, finagle their way inside and slowly earn the workers' trust. Wanting instant impact, they plan their campaigns around jazzy brand names like Gap, Nike and Reebok, not corporate abstractions like Kellwood.
So you call, and you call, and you call. Turns out there's a nun in Hartford, Conn., Dr. Ruth Rosenbaum, who's a member of the Independent Monitoring Working Group that's helping the Gap clean up its act. Using a database from the Mexican government, she pulls up three Kellwood locations, one in Piedras Negras and two in Puebla. Ricardo Hernandez, who works with the American Friends Service Committee and its border workers' effort, brings up two more: the Lader maquiladora in Plaxcala (300 employees) and Grupo Maquilador de Jalapa in Jalapa, Vera Cruz (1,200 employees).
Carlos Lopez, at the San Antonio-based Coalition for Justice in the Maquiladoras, says he came across Kellwood when one of its contractors, a Korean-owned maquiladora in Mexico, abruptly closed its doors. The owners couldn't pay their rent -- so they left without paying their 240 workers. "It's weird," says Lopez, "because the maquiladora was Korean-owned, but Kellwood was making sportswear there for Koret of California and Napa Valley. We initiated a campaign, and letters were sent to Kellwood ... but the workers are still sitting outside the plant."
Julie Su of the Asian Pacific-American Legal Center in Los Angeles, remembers Kellwood's Sag Harbor labels made under questionable conditions in LA factories about four years ago. The Chicago-based U.S./Labor Education in the Americas project has record of Kellwood's using two Guatemalan factories, Kol Nidrei and Calimero, around that time. The NLC found Kellwood in Haiti in 1996 -- and can't resist pointing out that they were one of 87 firms that stayed during the coup, asking the Bush Administration for a loophole through the OAS embargo. The NLC says that during the coup, wages were slashed to 14 cents an hour -- and later, when the Haitian government set a new minimum wage, Excel Apparel Exports, jointly owned and operated by Kellwood, compensated by increasing worker quotas by 133 percent.
In October, union organizer Yannick Etienne and Haitian garment worker Therese Denestant spoke here in St. Louis for Amnesty International, noting that one Haitian factory is very much like another: "The managers all know each other -- they socialize, live in the same neighborhoods, go to the same schools," Denestant told The Riverfront Times. "So they have the same system." Workers, meanwhile, suffer "back pain, ulcers, lung problems, carpal tunnel, eye problems because you are focused so small" -- yet "garment factories just have to put up a sign that they are hiring people and hundreds come every day." Aren't there other options? "Be a maid or a street vendor, or work in a pawnshop."
Yannick spoke about the unusually high number of children who show up in Haitian clinics badly burned because, with their parents away from home 16 hours a day, they try to fix themselves food. "The infants drink coffee," she added, "because the mom has to leave home at 5:15 a.m. and can't breastfeed again until 7 p.m." What about formula? "A pound of good imported powdered milk costs 150 gourdes (about five days' pay)." A breast pump? She smiled wryly. "Where would they keep the milk? There is no refrigerator, and it is very hot."
CRACKING THE CODE
Kellwood opened its international division back in 1977; by 1992, it had cut its U.S. workforce 59 percent. The same year, Kellwood adopted a policy on business conduct -- but didn't ask contractors to comply with it until 1995, after the U.S. Department of Labor made a sweep of Southern California garment contractors and found 11 Kellwood contractors violating wage and hour laws. In 1996, the Labor Department reprimanded two Kellwood subsidiaries for contractor violations: David Brooks' supplier owed workers $58,000 in unpaid overtime, and deCorp (which made dresses for JC Penney) was using Truong Sewing in Dallas, which wasn't paying overtime at all. Kellwood said they'd known this for five months, through their own internal monitoring, and had been working with Truong. Undertone: They did not need the Labor Department interfering.
Unmoved, the Labor Department elicited the promise that giant Kellwood would become a model of monitoring for the entire industry.
Today, by comparison with most garment makers, they are. They have a lengthy code of contractor compliance posted at their Web site, and they say it's on factory bulletin boards, too. They spend more than $1 million each year monitoring compliance, sending division staff, buyers and even external, hired auditors to inspect their contractors. Legally, their record's squeaky-clean.
So why did the Council on Economic Priorities, a 30-year-old socially responsible research firm based in New York, give Kellwood a lousy "C" when they graded its corporate code in 1997? Well, for starters, that code's a little vague. Governmental, labor and human-rights guidelines consistently suggest 48 hours per week and 12 hours of overtime as maximums. Kellwood's code simply says suppliers must operate "based on prevailing local work hours," with overtime set "according to local labor laws." Instead of mandating at least one day off each week, Kellwood's code only suggests a "reasonable" time off. And it doesn't even require such basic amenities as fresh water, ventilation and clean bathrooms.
As for pay, Kellwood mandates the legal minimum wage. In Sri Lanka, that's about $38 a month; in Indonesia, it's about $17 a month, despite the recent 70 percent inflation. In Haiti, minimum wage is 36 gourdes a day -- which, after breakfast, lunch and bus transportation, leaves 2 gourdes (about 12 cents U.S.) for shelter, health care, clothes, schooling, child care and the evening's dinner.
Kellwood's code does say it won't condone any type of harassment, abuse or corporal, mental or physical punishment, an admirable blanket statement that covers the screaming as well as the sexual harassment and forced intercourse common in many overseas factories. But because Kellwood won't allow outsiders to inspect, won't release its own inspection reports and won't answer questions about monitoring procedures, it's hard to feel comforted.
In its most recent addition to the code, Kellwood says it expects business partners to respect employees' lawful rights of free association. It doesn't mention that virtually none of Kellwood's own employees is unionized, and it doesn't make any provision for employees in countries where unions are illegal, corrupt or hamstrung. A recent report released by the New Economy Information Service think tank notes that U.S. corporations are choosing authoritarian or only partly democratic countries for their manufacturing: Wages tend to be lower and workers more docile. Unions don't fly well in such places; either they're illegal in the free-trade zones (Bangladesh), or the military cracks down (Indonesia); or they're too weak to raise their voice above the din of poverty (Haiti). In China, the only legal union is led by a member of the ruling Communist Party. In Mexico, the U.S. State Department found registered unions run by extortionists falsely claiming to represent workers.
Posting employees' rights in their own language, as Kellwood promises it does, is indeed a huge step forward. Unfortunately, almost 74 percent of women in Bangladesh are illiterate. In Honduras, more women can read, but they often have to cross huge distances to eat or go to the bathroom, and if they do take a second to stand at the bulletin board, it's politically suspect. In Honduras last year, the U.S. State Department found "credible reports, particularly in the Export Processing Zone sector, that some inspectors had gone so far as to sell the names of employees involved in forming a union to companies that then dismissed union organizers before the Ministry could recognize the unions." In Haiti, where 50 percent to 75 percent of the population is unemployed or underemployed, anti-union sentiment runs high. "Workers are afraid just to talk to each other about unions," explained Denestant. "They don't know who is going to be the traitor. Also, Haiti has many people involved in drug trafficking; your manager might be involved with drug dealers who can threaten you."
In a 1996 survey of 42 U.S. apparel companies sourcing overseas -- including Kellwood -- the Labor Department's international team visited El Salvador, the Dominican Republic, Honduras, India, the Philippines and Guatemala. They found that "relatively few workers are aware of the existence of codes of conduct, and even fewer understand their implications." The report also noted that, because it's customary to post rules for workers on bulletin boards, they don't always realize that these codes refer to their bosses' behavior.
But after conducting inspections in 30 countries, Verite (a nonprofit monitoring organization based in Amherst, Mass.) feels safe estimating that "80 percent of factories that claim to abide by their U.S. clients' codes of conduct, don't." According to the U.S. State Department's 1998 human-rights report: In Guatemala, "labor courts responsible for enforcing labor laws continued to be generally ineffective." In Honduras, "the Government has acknowledged that it does not yet adhere completely to international labor standards." In Indonesia, "despite laws that provide women with a three-month maternity leave, the Government has acknowledged that pregnant women often are dismissed or are replaced while on leave." In Sri Lanka, "several laws protect the safety and health of industrial workers. However, the Department of Labor's small staff of inspectors is inadequate to enforce compliance with the laws."
Two years ago, the Episcopal Church counted up its Kellwood stock and put a resolution on Kellwood's August 1998 proxy, urging the company to take justice into their own hands by adjusting salaries to a living wage, increasing workers' minimum age to 15 and consulting with local NGOs for monitoring. Kellwood argued that it would be impossible even to agree on a living wage, let alone pay one. According to the St. Louis Post-Dispatch (Aug. 28, 1998), "Upbin said that while it is "right and proper' for the Episcopal church to concern itself with social issues, Kellwood's primary focus is building value for shareholders. In the highly competitive apparel business, Upbin said, it isn't prudent to require contractors to pay higher wages." He also said that no NGOs were qualified to do independent monitoring.
The resolution was soundly defeated. But since then, Nike and Reebok have increased wages in Indonesia by 40 percent, sharing the cost with their suppliers. After years of insisting that it was absolutely impossible to disclose factory locations, Nike gave in to college students this October and revealed the 42 factories where college-logo products are made. The same month, Reebok released the first independent factory audit by a human-rights group, and so did one of Kellwood's top two competitors, Liz Claiborne. The latter allowed the Commission for the Verification of Corporate Codes of Conduct (COVERCO), a coalition of Guatemalan human-rights and religious organizations, to inspect one of its suppliers' factories, and bravely published the report, which included an account of a pregnant worker whose supervisor refused to let her leave the floor when she went into labor. (Her baby was stillborn the next day.)
Kellwood has used Pricewaterhouse Cooper, Ernst & Young and, now, STR of Enfield, Conn., a firm that does apparel quality testing as well as monitoring of fair labor practices. Asked how they inspect and monitor labor conditions, operations manager Ed Kozloski replies, "I don't have any information at all that I could actually provide to you." But Kellwood insists they're doing a good job -- why be "transparent" to human-rights groups?
The groups counter with questions: How often are inspections unannounced? Do they go beyond a perfunctory tour of the factory floor? Are workers interviewed in private, away from their supervisors? Does Kellwood consult with local people about the cultural norms? (In Indonesia, industrial relations are governed by the principle of Pancasila, emphasizing harmony and consensus over individual rights -- and that changes the way workers answer Western questions.) Above all, can the monitors win workers' trust? Kernaghan recalls "hundreds of interviews with workers who tell us they lie.... They are told before the monitors get there, "You have to be very careful; there are people in the U.S. trying to steal your jobs."
Apparel corporations fast earned the nickname "swallow companies" because they so easily fly away to another country when the climate shifts. Inspections can easily be perfunctory; buyers and supervisors and even hired auditors all have incentives to preserve the status quo.
Take JC Penney, one of Kellwood's biggest customers. "Absolutely we've had our inspectors in there," rebounds JC Penney spokesman Duncan Muir, sounding a bit like Tigger. "They have a pretty sophisticated monitoring program themselves. They're a good supplier." So when was the last JC Penney inspection? "There is no really easy answer," Muir says. "They have 11 suppliers, which in turn have numerous factories. All I can tell you is that there are three suppliers either owned by or associated with Kellwood where factory evaluations are pending." Supplier-retailer confidentiality, a force akin to the Roman Catholic confessional, prevents Muir from divulging names, dates, locations, inspection methods or results, but he does admit it's JC Penney staff, not independent auditors, who go in. "They look first for the quality of the production of the merchandise, certainly. But they also check for any violation of labor laws." Who sees their report? "It goes to the buyer for that kind of apparel, and the buyer decides whether the conditions are acceptable."
But what if the buyer wants those cheap cashmere sweaters really bad?
Kernaghan's first insight into the Kellwood mindset came back in 1995, when he showed up at the Miami Conference on the Caribbean and found himself sitting next to James Jacobsen, the company's executive vice president. Jacobsen confided how moved he'd been at the plight of Indians in this country, and how he'd suggested putting a Kellwood factory on a reservation and subsidizing meals to help the workers.
Then he found out they'd have to pay minimum wage.
"Can you believe it that government regulations apply to Indian reservations?" he reportedly asked Kernaghan. "Here's an incident of government regulations hurting workers and hurting human rights."
At the time, Kellwood was paying Haitians 17 cents an hour -- one-twentyfifth of what they would have had to pay the Indians.
Is the global economy Kellwood's fault? Apparel manufacturing has always thrived where the women are poor, with no other options. In the 1930s, St. Louis' garment district leaned -- hard -- on immigrant Italian hand-sewers who went home at night and threaded the next day's needles, gaining maybe 15 cents. By the time the International Ladies Garment Workers' Union had won fair wages and air-conditioned factories, there was a shortage of women willing to do the work.
Today, the women in developing countries line up eagerly, and so do their governments. Sri Lanka, which proudly lists Kellwood among its resident multinationals, pushes workers forward like parents bragging about shy children. "The high degree of manual dexterity and hand-to-eye coordination displayed by the workers is ideal for precision production.... Foreign expatriates are able to enjoy a high quality of life ... memberships of resorts and golf clubs, prime office rentals and condominiums are among the lowest priced in the Asian region."
It's easy for corporations to feel they're doing these countries a favor and pleasing their stockholders. Yet former Kellwood CEO William McKenna, who's also a Roman Catholic deacon, has admitted that when you're sourcing in poor countries overseas, problems are inevitable. "I would prefer to have our total production in the U.S. in wholly owned Kellwood plants where we could more fully control activities," he wrote a concerned parish priest, the Rev. Steve Robeson, back in 1996, "but that is impossible. If I were to do that tomorrow, I would put Kellwood out of business and adversely affect the lives of, by my count, over 50,000 persons. That is not part of my Christian ministry." Even Scott Littlehale, an economic researcher for the Union of Needletrades, Industrial and Textile Employees (UNITE), concedes that though "Kellwood's in a position to change the treatment of workers, they're in less of a position to afford people a living wage. What Kellwood pays its contractors is in large part determined by what the retailer pays them." That's why many activist groups have shifted their attention to retailers and why economists insist it's ultimately the consumer's choice. "If you bought that blouse for $12 at Wal-Mart because it was made by El Salvadoran women who are thrilled to be paid six dol -- sixty cents an hour," Kathie Lee Gifford said on the Nov. 16 Dateline NBC (nearly slipping up and substituting a U.S.-style wage), "if you took that work from them, and brought it to America, and put it in a union shop, you would then probably have to pay $60 or $70 for that blouse. Now that's a choice only the American consumer can make."
Besides, "the nations of the world will improve to the extent that trade exists," insists Russell Roberts, an economist at Washington University's Center for American Business. He's confident that progress will continue "as long as we don't punish people poorer than us by expecting them to have the same standards we do. Anytime you want to impose standards that are more than the ones in place, you are basically prejudicing those workers in the eyes of the rest of the world. And people line up to get those oppressive jobs; it makes you wonder how oppressive they really are."
Unless, of course, you've been there.
Lorena del Carmen Hernandez was one of the workers fired this September from Caribbean Apparel, the Kellwood contractor in El Salvador's Americas free-trade zone. Hernandez had worked as a production-line operator, "Monday-Saturday from 6:50 a.m.-6:10 p.m., and at times until 9:40 p.m," she told reporters at the NLC press conference. Her base wage was 1250 colones a month (about $145, rising to $160 with overtime), and workers were locked into the factory, then strip-searched when they left. "They screamed and would hit the tables when the production was not enough," said Hernandez. "The chief of production, Mr. Lee, screamed the most. They only allowed us to drink water once in the morning and once in the afternoon" (same for using the bathroom, a frequency that increases the rate of urinary-tract infections). "When the monitors come from the U.S., the factory is painted. They clean everything. Then, when the monitors are about to arrive, the treatment becomes excellent." Hernandez said they were forced to work overtime afterward to make up for time lost to the inspection.
Contrast that with the experience of Ruby Richardson, who worked more than 20 years for the Kellwood factory in Little Rock, Ark., staying until the factory closed in 1983. She started at $1.25 an hour in 1963, and her pay eventually rose to $5.50 an hour. "Of course, they closed a few years after the union came in, just like they said they would," she says in a phone interview. "But even before they closed they were having us cut the pieces and send them overseas to be sewn."
How were working conditions before that -- any problems with Arkansas' summer heat? "No, not unless something went down," she answers, puzzled. "Sometimes they'd have a problem with the air conditioning." What about sexual harassment? "Never saw any." Did they do pregnancy tests? "Goodness, no. If you got pregnant, Kellwood would give you a maternity leave, and when you came back you got your job back." Working hours? "Eight hours a day; sometimes overtime on Saturday if we had a big run." Did management lock the workers in? "Oh my, no. They did have security guards, but the only incident I remember was when a man came in to hit his wife and they escorted him out."
Richardson walked the picket line once and got her job back with no problems. But when Hernandez tried to organize, she was fired. Then, she said, the manager, Martin Yun, grilled her for hours: "You know why they took your job? You are sneaky. You were with a group. You know what group. Through the computer, I received information from the Ministry of Labor." Hernandez said Yun offered her a job in another factory, at higher wages, if she would name other unionists. "He threatened that if I didn't speak within three days, he would communicate with all the maquila companies in the country and give them my name so that I would never again find a job."
Kellwood promised to investigate.
But they won't be disclosing the results.
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