Money, Machines, and Men
This is a story told “…with a sigh / Somewhere ages and ages hence…” as Frost put it. A story in a life of stories; an object-lesson in consequences. The difference between Frost’s narrator and our hero is that this is not a story of choosing one path over another; it’s what happens when you don’t choose.
Time has softened the agony of it, as it will; and my life has turned out better, I truly believe, than it would have had my excruciating desires of those years been granted. The jolly tone I've tried to maintain in these stories would vanish if I were trying to recapture the fear and self-loathing I felt in those days -- the novice skipper of a torpedoed ship in an undersized and outclassed fleet, making all the decisions, all the moves in frantic effort to make it to port, thinking it wasn’t that bad; we’d get over the next swell; the bulkheads below would hold; we weren’t that far out at sea; someone would come to our rescue.
Meanwhile I’d just begun to design and produce a collection under my own name. The retail establishment and the national press had just begun to recognize me as an (dare I say it?) emerging talent. That our sales were increasing contributed to my sketchy optimism, intensifying my schizophrenic confusion between being a designer and a manufacturing CEO. A huge difference in talent and focus is required of these positions; steering a leaky boat while redecorating the staterooms. Designer or manufacturer? Did I have a choice?
What happened is the entire US men’s tailored clothing industry capsized and sank in about a decade. I couldn’t see it coming for the reasons I just gave, and because we were an early casualty: an under-capitalized, highly skill-dependent, specialty manufacturer with mostly under-capitalized specialty store customers. Low-hanging fruit. Failure, to youth (I was in my late 30s,) is never inevitable. A wiser man might have recognized the signs. If you’re making widgets today and the folks in Vietnam or someplace can make just as good a widget at half your price, once you’ve read Nick Hilton’s cautionary tale you’ll cash your chips and find a new game. I took the road more traveled by: the obsessive, oedipal-complex-driven, damn the torpedoes road. And right to the bottom.
This isn’t economics or history; it’s a chronicle of impressions, glimpses from the windows of a train moving through a couple of decades, the last years in which the United States would have been listed among the countries with a “thriving” or even “existing” tailored clothing industry. I need to lead with that because I am about to describe what it was like to manage a clothing manufacturing plant – employing 350 souls producing 1200 garments in the average week, with annual revenue of about 12 million dollars – during a time when the writing was on the wall, when globalization was a fact of life, like so many economic trends, fully developed before it even had a name, (Industrial Devolution?) When the very idea of running a tailored clothing factory was, probably, to the disinterested observer, a business writer, say, or a sociologist, ridiculous. Or let’s be generous and call it quixotic: idealistic, noble, misguided: doomed.
It’s ages and ages since that road divided. It’s not that I have point to prove; the axe is beyond grinding. History is written by the winners, right? Not in this case. I mean to present the mouse’s view of the approaching cat, if only to warn the generations of mice of some inevitable truths about cats. They’re patient, persistent, and deadly. Darwinian deadly. Of course there are countless reasons, countless efforts we were taking as a company, countless unknown factors, but that god damned cat just kept coming. The whole saga may be illustrated by three stories. All of it comes down to machines, men and money, a microcosm of American industrial history.
The fine woolen cloth industry offered a warning, had I been able to realize it. The once-indomitable British woolen trade was laid siege to by the Italians. Pathetic as they might have been in 20th century wars with guns, the Italians, led by Generalissimos Ermenegildo Zegna, Franco Loro Piana and Carlo Barbera, among others, laid waste to the Yorkshire weaving trade with ever-improving technology for spinning and finishing, producing lighter-weight, more luxurious suit and jacket fabrics. The giants of Huddersfield and Leeds, names like Hield Brothers, Broadhead and Graves, Learoyd, stars of the Norman Hilton suit and jacket collections, who insisted on “more robust” (i.e., heavier) 2-ply yarns and flatter finishes, great for wearing in the colder, damper English climate. Their cloth made better suits because it was easier to tailor and it lasted longer. Problem was, nobody cared. Men wanted more luxurious and lighter weight stuff. Within a decade the mojo in textiles had moved to Biella, and Huddersfield and Leeds were dead mice. These Italian cloths were harder to press. The finishes Loro Piana so carefully created were difficult to sew because they were unstable, and more difficult to press. We needed new pressing machines like the Italian manufacturers had, machines with steam vacuum that lifted and restored the finish of the cloth, rather than the old-style, heavy clunkers my great-grandfather had bought. Frank Cuzzola and I went up to Newark, to our friends at Seickel and Sons, our pressing machinery supplier, and got the lowdown.
“One hundred and eighty-five thousand dollars a pair,” Joe Seickel said.
“Oh, but Mr. Hilton, you have to understand, these are computer-operated, with timers and micro-sensors, and…” By that time I couldn’t hear him. “…Blah blah blah.”
“But I need left and right front and a left and right back,” I think I said, in a mathematical stupor. “That’s two pair. That’s… What is that? Three hundred and sev-…”
“For your production level you’d need two pairs of each,” Seickel said. “So that's..."
"About three quarters of a million bucks," Frank said. "Plus the installation, Joe?”
"Give or take," Seickel said.
“Give or take? Jesus!” I had no idea. “Are you kidding? What are other guys doing?” I asked, knowing there were no other guys. “That’s – “
At that point Seickel cut me off to say, Well Mr. Hilton, the US government has just announced they’re offering interest-free twenty-year loans for machinery purchases to keep manufacturers competitive and to keep America great, so we don’t have to try to make it great again, thirty years from now, in 2016!
No. That’s not what he said. He said, Well Mr. Hilton the US government has just announced that in addition to the interest-free loans they’re offering to keep manufacturing from collapsing and sending all these jobs overseas, they’re going to give you employee training stipends and tax-credits to help you afford to take in apprentice workers and pay them less while you’re teaching them the skills they need. The union is going to help, too, by not making them join or pay dues until they’re fully trained, to keep America great, so we don’t have to try to make it great again, thirty years from now, in 2016!
No. That’s not what he said either. He said, Well Mr. Hilton the US government has just announced that addition to the interest-free loans and the apprenticeship credits, they’re eliminating the 35% ad valorem tariff on Super 100s and Super 120s fabrics from Italy, so you can compete successfully with the Canadians, (whose government has already done that,) and sell these fabrics (which you can’t press very well) to keep America great, so we don’t have to try to make it great again, thirty years from now, in 2016!
He didn’t say any of that. He said, “Yeah. I know. Give me a call if you think you can swing it.”
“Swing what?” I said.
Frankie, behind the wheel on the ride back to Linden, said, “’Swing it.’ Hah! What an asshole. Here, swing this.” We were quiet then, listening to oldies and the news. Something about President Reagan and It’s Morning in America. In Frankie’s Cadillac.
The union that most of our employees belonged to was known as the Amalgamated Clothing and Textile Workers of America; “amalgamated” some time earlier, a trend that continued as employment in apparel shrank by over 17% from 1973 on. By 1989 the total employment in apparel had shrunk from 1.4 million workers to around 800,000, and in the high-priced, highly unionized New York labor market the percentages were worse. But the union reps hung on, like guys standing between two icebergs, wondering which would melt first; trying to take it easy on the feeble manufacturers who were left while nominally fighting for the wages and benefits for their members. Being a 60s-style Woody Guthrie fan I never had a beef with the union; I wasn’t by nature a capitalist; I bet you’ve gathered that already. I relied on our financial guy, Bob Slotnick, who was by nature an ass-kicker, and Rocco to argue with the union guys, but it was never about anything substantial. Mostly it seemed we were arbitrating disputes between the workers, stuff like moving the fans to or from, off or on some poor sweltering or wind-buffeted sleeve-seam sewer or, on our part, things like “Could you please get the women to stop throwing the toilet paper all over the floor?” That was it. Wages, benefits and major grievances were decided by the collective bargaining sessions, by the union boss and the big manufacturers. Not knowing the proverbial shit from the proverbial Shinola, I listened to the union guys, and the youngest and smartest especially, Sal Romulo, who recognized my sympathy for their cause and the innocence of my manufacturing mentality. He advised me to get involved with the CMA, the manufacturers’ trade organization that carried on the bargaining sessions with the union. I guess he thought they’d teach me how to fight. So I got all dressed up like a Boss and went to a couple of meetings. It was all “Hey Charlie! How you doin’?” for the most part, a lot of old pals, guys I didn’t know, all hale fellow well met stuff, bullshit over cocktails. Handouts, tables, graphs, statistics, etc. As boring as algebra.
I remember one meeting. The last I went to. In a conference room in a New York hotel, plenty of smoke and ice-clinking high-ball glasses, on the topic: Increasing the Percentage of Product the Union Should Allow the Big Manufacturers – the Hart Schaffner and Marxes, the Joseph and Feisses, etc. – to Have Made Overseas. What? That’s right. They were discussing what they were going to give up to get the union to allow them to bring in more clothing made in China or the Dominican Republic. I thought maybe the whiskey and the cigars had fogged these guys’ brains. It sounded to me like they were asking permission to kill themselves. But there was a reason. I don’t want to bore you with details, but there were a bunch of Federal ERISA statutes that prevented you from closing your business without paying a huge penalty in severance and unfunded pension liability. A huge penalty that, as we shall see in this story, attached to the owner of the company like an unkillable pilot fish. So these guys would have shuttered their plants in a minute and kicked all those union workers out except for the fact that the union’s pension fund was umpteen million dollars underwater and they were obligated by Federal law to pay their share in order to be able to close. So instead they wanted to try to compete in a small way with the importers. It sounded to me like small daily doses of arsenic versus a pistol shot to the brain. But what did I know?
In 1992 Jennifer and I took the kids to Martha’s Vineyard for two weeks in July and I remember having to bring along a big, clunky fax machine because I was going to have to be reading, rewriting and re-reading, signing dating and repeating the endless forms necessary to secure financing for the immediate and long-term future. Some vacation. MidLantic Commercial Corporation, who’d been our factor for twenty years, announced that spring that they were closing the factoring division, that part of the bank that financed companies like ours by buying our receivables and advancing us the funds we needed to operate until they collected the payments from our customers. Simply put, I sold Barneys ten thousand dollars’ worth of stuff, gave the invoice to MidLantic, who said, OK, we’ll accept this credit, and then deposited nine thousand seven hundred bucks in our account. All good. Except that everybody knew that it was taking our customers – not Barneys, their problems were yet to come – a lot longer to pay than it had previously. Some of the credit decisions were wishful thinking at best and the MidLantic management (the bank who owned the factor) were busy applying lipstick to the outfit as regulators and collateral requirements made it harder and harder to remain independent. Just like that it was Bank To Hilton: Drop Dead. We found some no-name lending outfit in the Carolinas who were eager to sign us, or rather I should say the sales team were eager to sign us, which they did after wrecking my vacation with computers, FedEx documents and faxes. It didn’t take long, however, before the reality of the situation, and the careless ways of MidLantic became clear. Nearly every single specialty store credit was an argument. and a subsequent decision as to whether we would make the sale ourselves and guarantee the payment to the lender if the customer stood us up. Meaning that if Smith, Jones and Co. didn’t pay the bill we had to pay the money back which the bank had advanced us.
“But if I had the money to pay you I wouldn’t need you in the first place,” I said.
Slotnick, after twenty years of making all of the company’s financial arrangements, handled all of this as well as he could. He retired.
“Good luck, kid,” he said, with an ironic smile, and went off to become a docent at the American Museum of Natural History, which was fitting in a way, leaving a scene of history in the making.