Up to 813 permanent employees are set to lose their jobs after textile and apparel group Seardel Investment Corporation proposed closing down Intimate Apparel SA, a division which manufactures and distributes ladies lingerie and swimwear, as a result of significant ongoing losses.

Seardel CEO Stuart Queen said the board of directors had made a principle decision, subject to consultation and any viable alternatives, to close the affected division citing margin pressures, which had eroded selling prices and making it impossible to recover the costs of raw material inputs, labour and other overheads.

“The challenges that exist in the manufacture of niche clothing products in South Africa are well documented,” Queen said.

He pointed out that the manufacturing process of brassieres was complex and labour intensive.

“The garments produced are generally of a very high minute rate with low selling prices making it extremely difficult to recover the costs of labour inputs.”

Furthermore, as brassieres are a close skin fitting item of clothing they require a significant investment in design, pre production technical resources and quality processes to assure fit and function.

“This investment in technical personnel is particularly expensive given their unique skills and cannot be recovered in the selling price of the garments unless significant volumes with acceptable margins are achieved,” he said.

The group also noted that wage and other differentials with its international competitors made local production uncompetitive with the average imported landed cost of a brassiere typically being 20 percent lower than a locally manufactured item.

“The strategy to source fashion brassieres and core brassiere lines from offshore companies by retailers in order to realise the targeted retail margins has overcome the affected division’s ability to compete.”

“These factors make it all but impossible to compete as a purely commercial enterprise,” Queen said.

He added that Intimate Apparel SA had over a number of years, looked at every possible avenue to remedy this situation including major reorganisations, restructuring and the downsizing of operations.

“As there is no indication that there will be any improvement in the trading conditions or performance of the affected division in the foreseeable future, management is of the view that it is left with no viable alternative but to consider closing the affected division,” Queen said.

Seardel Investment Corporation said consultations with the Trade Union (SACTWU) on behalf of the respective Bargaining Units and Individual Employees, who are not represented by the respective Bargaining Units, had begun.

“It is expected that the affected division will be closed at the end of November 2010. Every effort will be made to honour the orders on hand,” Queen concluded.

Source: Business Report – INet Bridge