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American Made: Five Companies Bucking the Outsourcing Trend

September 3, 2010 | Author: admin

Atayne’s running shirt. Photo Courtesy of Atayne.

Labor Day, that traditional American holiday dating back to 1882, invokes a different kind of patriotism this year as Americans struggle to find jobs and a new “American Made” movement takes hold in Congress.

Since 2000, America has lost more than one third – roughly 5.4 million – of its manufacturing jobs. This year, China stands poised for the first time to surpass the United States in terms of manufacturing, according to the Alliance for American Manufacturing.

And, the loss of manufacturing jobs has greatly contributed to the country’s overall unemployment problem, according to Julie Reiser, Co-founder & President of Made in USA Certified, a company that certifies member companies as having truly American-made products.

“The lack of jobs is directly related to two decades of outsourcing and people are starting to realize that as we’ve obliterated our manufacturing base, we’ve obliterated jobs,” Reiser said.

Small businesses are leading the charge toward restoring the domestic manufacturing sector. BusinessNewsDaily spoke with a few who told us why they’ve stayed put and kept their companies operating in the United States against some pretty overwhelming odds.

Domestic Dumpster-diving. Jeremy Litchfield’s Brunswick, Maine-based company, Atayne, makes high-performing outdoor and athletic apparel from recycled plastic bottles and recycled fabric. And it does so in the United States. While garment manufacturers are fleeing the country for Turkey, India, Vietnam and China, Atayne is committed to sourcing and manufacturing its product domestically.

“Our fabrics are made in Tennessee and North Carolina and we do the cutting and sewing of our garments in North Carolina, Vermont and Massachusetts,” Litchfield said. “I am also spear-heading an initiative in Maine to combine our resources [with other companies] to establish a cooperative cutting and sewing facility.”

The company has only been selling its products for two years, but sales this year will exceed $100,000. While still small, the company’s sales have doubled each year, Litchfield said. Producing its products domestically is expected to help spur that growth.

“There’s a lot of waste in the traditional business model for manufacturing apparel,” Litchfield said. “Our model is to apply ‘just-in-time’ manufacturing to the process.” In other words, Atayne doesn’t make any of its products until they are ordered. Working with local manufacturers allows the company to do that.

“American manufacturers are willing to be innovative and flexible,” Litchfield said. “It also allows us to support jobs where our products are being sold.”

Making merry. Merry Lynch, owner of Eat, Drink and Be Merry, a personalized stationery line sold to major retailers, including Neiman Marcus, manufactures her products in Phoenix, Ariz., using local artists, designers, artisans and printers. Producing her products domestically allows her to offer customized goods without keeping inventory because she can turn an order around quickly, producing only what is ordered.

“The goal in forming my company was to be able to run it from my home without inventory,” Lynch said. “I have spent my career in retail and did not want the waste of products that are a result of having the wrong or too much inventory.”

Working locally has allowed her to do that. And while her business may be home-based, it’s growing fast. She’s working on a collection for Saks and will soon debut a line of framed artwork, placemats and pillows that will all be produced in the United States. Sales to Neiman Marcus, alone, were $100,000 this year.

Classic moves. Classic Products, of Piqua, Ohio, a second generation family-owned business, manufactures its specialty residential metal roofing systems in Ohio, Kentucky, Texas, and Iowa, and has annual sales of $20 million.

“Production inside the United States allows us to maintain positive and progressive relationships with our raw materials suppliers,” said company president Todd E. Miller. “Our operations team, and our U.S. distribution channels allow us to manufacture products that are consistently of the highest quality.”

Miller said he is unwilling to jeopardize his product quality through overseas production. The company also buys all of its raw materials and its ancillary items from other U.S. firms.

Scrubbing up. Father and daughter team Rodger and Dahlia Cohen produce their customizable nursing scrubs at the New York City garment factory their family has owned for three generations.

“Everything we do is local, we use only local designers, vendors, and factories to create our line of scrubs, lab coats, and accessories,” said Dahlia Cohen, who’s company is called Scrub Ink.

“There have been many challenges to manufacturing in the states,” Cohen said. “Finding the resources is a challenge in itself, because of the recession and outsourcing, resources are dwindling. Another challenge is producing garments at a competitive price when using American labor. Finding a consumer who appreciates an American-made product is hard as well. Many consumers do not understand the consequences of not supporting American companies.”

Nevertheless, the Cohens won’t be deterred. “Our factory is still going strong and we hope our scrub business will keep it alive for generations to come,” Cohen said.

Diving in. Diving Unlimited International designs and manufactures high-end scuba diving suits for recreational, military, commercial and scientific diving use. It employs 80 people at its San Diego, Calif., factory.

“We have more control over the product here and can ensure quality,” said Susan Long, who runs the company with her father and husband.

Because so many of the company’s diving suits are made-to-order, local manufacturing allows for a lot of flexibility, Long said.

But that’s not the only reason Diving Unlimited International is keeping its production in the United States in spite of the fact that most other diving suits are made overseas.

“To be honest, is pride,” Long said.  “We’ve been here since 1963.  “So many of our employees have been with us for years.  I like having a factory that actually makes things.”

U.S. Falls Short in Awarding Small-Business Contracts

September 2, 2010 | Author: admin

By EMILY MALTBY

A record number of federal dollars went to small businesses in 2009, although the federal government once again fell short of reaching its annual goal, according to a report from the Small Business Administration.

Nearly $97 billion or 21.9% of prime federal contracts went to small firms between Oct. 1, 2008 and Sept. 30, 2009. That’s up from the $93 billion that small businesses landed a year earlier, but still about $5 billion short of the 23% target established in a 1997 law.

[sbcontracts]Getty Images

“I think the goal is feasible for next year,” said Joe Jordan, the SBA’s associate administrator for government contracting and business development. The government has missed its target in recent years in part because some contracts, such as those for weapons systems or massive construction projects, are more suited to larger firms, he said.

The SBA’s fourth annual scorecard, issued Friday, evaluated 24 federal agencies on contracts awarded to small companies. For the first time, the agency used a letter-grade system in an effort to bring more transparency to the data. (See a complete list of agencies and their grades.)

Sixteen agencies received letter grades of A or B, meaning that they almost met or exceeded their goals for the year.

For example, the Department of Education got an A for surpassing its target of 12.8%, hitting 16.4%, or $244 million. The Social Security Administration received a B for nearly reaching its goal of 32.53%, with 32.47%, or $403 million.

The goals were negotiated by each agency and the SBA, and were based on both past performance and the number of feasible procurement opportunities available to small businesses.

Four of the agencies received a grade of D or F, including the Department of Justice, which awarded $1.9 billion or 24.5% of its prime contracts to small businesses, far from its 36.8% goal. The Office of Personnel Management awarded $224 million, or 14%, which was less than half of its goal, and received an F.

The SBA has previously been criticized by watchdog groups and the U.S. Government Accountability Office for failing to accurately track procured contracts, and for allowing large firms and fake companies to receive small-business contracts. The SBA says it has boosted efforts in the last year to remove fraud and errors in the procurement system, Mr. Jordan said.

Still, organizations such as the American Small Business League, which issued its own report on fiscal 2009 contract recipients, maintain that many government-hired firms claiming to be small are actually large businesses.

“Generally speaking, we are finding fraud and abuse at the same rate,” said Christopher Gunn, ASBL’s communications director.

The SBA says it plans to do more to make federal dollars available to small businesses, including “unbundling” or separating big-business contracts into separate contracts.

A number of agencies that received low grades say many of their prime contracts are better handled by larger companies, and that the SBA’s grading system should take subcontracts – which often go to small companies – into greater account.

One boost for small businesses has been the stimulus contracts that began rolling out in early 2009 as part of the $787 billion Recovery Act. Although stimulus jobs amount to only a small portion of overall government work, they are often modest in size and well-suited for small firms. Through early last month, small businesses have landed 32% of stimulus contracts, according to preliminary data.

The SBA’s scorecard indicates that the government, while showing improvement over 2008, is still not meetings its targets for women-owned or service-disabled veteran-owned companies, or for small businesses located in historically underutilized business zones or HUBZones. Federal agencies did meet their goals in awarding contracts to small “disadvantaged” businesses, a category that is based on the owner’s socioeconomic background.

For stimulus contracts, however, the government is meeting or exceeding its goals in all subcategories, Mr. Jordan said.

Write to Emily Maltby at emily.maltby@wsj.com

Private Sector Cuts Jobs

September 1, 2010 | Author: admin

Wall Street Journal

By KATHLEEN MADIGAN

Private businesses laid off workers in August as only large companies hired last month, according to data released Wednesday.

Private-sector jobs in the U.S. fell by 10,000 last month, according to a national employment report published by payroll giant Automatic Data Processing Inc. and consultancy Macroeconomic Advisers.

Economists had expected ADP to report a jobs gain of 17,000 in August. The estimated change in employment for July was revised to a gain of 37,000 from an increase of 42,000 first reported.

The ADP survey tallies only private-sector jobs, while the Bureau of Labor Statistics’ nonfarm payroll data, to be released Friday, include government workers.

Economists surveyed by Dow Jones Newswires expect that continued layoffs of government workers hired temporarily for the Census will mean a drop of 110,000 jobs from total August nonfarm payrolls. Among those economists forecasting private-sector jobs within the BLS data, the median projection is for a gain of just 28,000.

The ADP number may cause some forecasters to change their Friday expectations.

The August unemployment rate is projected to edge up to 9.6% from 9.5% in July.

Over time, the U.S. economy has to create between 125,000 and 150,000 jobs a month just to keep the unemployment rate steady. Hiring accelerated to a solid pace in the spring, but has since petered out as market volatility, regulatory uncertainty and weak demand has curtailed economic growth.

The Federal Reserve has focused on the lack of strong job growth. According to minutes of the August 10 Open Market Committee meeting released Tuesday, Fed officials discussed why job growth had been weaker than expected. Reasons included business concerns on regulations, taxes and future health-care costs, plus job mismatch.

But the primary deterrent seemed to be the lack of demand, according to the minutes. Real gross domestic product has slowed significantly this summer.

The latest ADP report showed large businesses with 500 employees or more added 1,000 new employees. But medium-size businesses cut 5,000 workers in August and small businesses that employ fewer than 50 workers dropped payrolls by 6,000.

Service-sector jobs added 30,000 last month, while factory jobs fell by 6,000.

ADP, of Roseland, N.J., says it processes payments of one in six U.S. workers, while Macroeconomic Advisers, based in St. Louis, is an economic-consulting firm.

Other job reports released Wednesday were mixed.

Employers announced job cuts totalling 34,768 in August, according to global outplacement firm Challenger, Gray & Christmas. That was down 17% from the July number and the lowest monthly total since June 2000.

Also on Wednesday, TrimTabs Investment Research said that because of layoffs within the Census Bureau, the economy lost about 65,000 jobs in August with private-sector hiring adding 70,000.

“A sustainable economic recovery requires strong job growth and a healthy housing market, and the U.S. has neither,” said Charles Biderman, CEO of TrimTabs.

TrimTabs bases its employment estimates on an analysis of daily income tax deposits to the U.S. Treasury from all salaried employees.

Imports drag second-quarter growth lower

August 27, 2010 | Author: admin

WASHINGTON (Reuters) – Economic growth was revised down to a sluggish 1.6 percent annual rate in the second quarter, dampened by the largest increase in imports in 26 years, the government said on Friday.

Gross domestic product growth previously was estimated at 2.4 percent and analysts had feared it would be pushed down even more sharply, but business investment was robust enough to partially cushion the blow from imports.

Analysts polled by Reuters had forecast GDP, which measures total goods and services output within U.S. borders, would be revised to a 1.4 percent growth rate. The economy grew at a 3.7 percent pace in the first three months of the year.

“The instant reaction is that it isn’t good but we thought it might be worse, so there might be a bit of relief,” said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts.

U.S. stock index futures added to gains after the report, while Treasury debt prices extended losses. The U.S. dollar rose against the yen.

The soft GDP report came shortly before Federal Reserve Chairman Ben Bernanke addresses monetary policymakers at their annual retreat in Wyoming. Financial markets will be closely watching the 10 a.m speech for any hints the U.S. central bank may be mulling new measures to try to stimulate economic activity.

BAD POLITICAL OMEN

A slackening recovery poses a major political challenge for the Obama administration and the Democratic Party two months away from crucial mid-term elections that could shift the balance of power in Congress in favor of Republicans.

A Reuters/Ipsos poll this week found Obama’s approval rating at 45 percent, overtaken for the first time by a 52 percent disapproval rating.

Despite concerns the economy may be at risk of slipping back into recession, analysts said the most likely prospect was for continued soft expansion rather than a double dip downturn.

“There is no doubt we are losing momentum in the economic recovery,” said Robert Dye, senior economist at PNC Financial Services in Pittsburgh. “But if we define recession as two or more consecutive declining quarters of GDP, I think we are not going to go there.

“We are going to see a pattern where we may have declining GDP in one quarter followed by smaller gains in the next quarter, bouncing along the bottom as it were,” Dye said.

The recovery from the worst economic downturn since the Great Depression had been largely fueled by a $862 billion government stimulus package and businesses rebuilding inventories from record low levels.

IMPORTS CHOKING GROWTH

Growth in the last quarter was stifled by a 32.4 percent surge in imports, the largest since the first quarter of 1984, dwarfing a 9.1 percent rise in exports. That created a trade deficit, which sliced off 3.37 percentage points from GDP, the largest subtraction since the fourth quarter of 1947.

A smaller contribution from business inventories than initially estimated also restrained output. Business inventories increased only $63.2 billion, rather than $75.7 billion, adding a slim 0.63 percentage point to GDP.

Inventories, which had been a major driver of the recovery that started in the second half of 2009, increased $44.1 billion in the first three months of the year.

Excluding inventories, the economy expanded at a 1 percent rate, instead of the 1.3 percent pace reported last month.

There were some bright spots in the report, with growth in consumer spending revised up to a 2 percent rate from 1.6 percent. Consumer spending grew at a 1.9 percent rate in the first quarter.

Stubbornly high unemployment has dampened consumer spending, which normally accounts for 70 percent of U.S. economic activity. Spending added 1.38 percentage points to GDP last quarter.

Although businesses have been reluctant to hire new workers, they have been splurging on equipment and software, which also contributed to the surge in imports. Business investment was revised up to a 17.6 growth percent rate, the largest increase since the first quarter of 2006, from the previously estimated 17 percent pace.

Investment in equipment and software was the strongest since the fourth quarter of 1983. Spending on structures was revised to show a far smaller increase than previously estimated but still posted the first rise in spending on structures since the second quarter of 2008.

Growth in new home construction was revised down slightly to 27.2 percent from 27.9 percent. The sector, which was a drag on growth in the first quarter, was lifted by a spurt in building activity spurred by a popular home-buyer tax credit, which has since expired. The rate of increase was still the biggest since the third quarter of 1983.

Residential investment had contracted at a 12.3 percent rate in the first quarter.

The report also showed corporate profits rose 2.9 percent in the second quarter after increasing 5.8 percent in the first three months of the year.

(Reporting by Lucia Mutikani; Editing by Neil Stempleman)

Article: Is It Possible? Outsourcing to the United States?

August 27, 2010 | Author: admin

Bhasin, CEO of Indian outsourcing giant Genpact said he will move jobs to America because high US unemployment is pushing wage rates below that of what he’s having to pay in India.

To unemployed Americans, the announcement may be welcome news. But Ron Shah of Geena Ventures, an India-centric private equity firm, is concerned. The jobs being sent back to America, he said, are low skill and pay around minimum wage. Meanwhile, the US continues to outsource high margin, high intellectual property work to places like India, where a technology-friendly base has been built.

These jobs are being sent back to America for cost advantage, so there will be no sustainable boost to US employment, Shah argued. Historically, high margin work has been the strength of the US economy, he said. High margin work has been America’s “bread and butter” and Shah has “issues” with those jobs being exported.

Steve Cortes of Veracruz said the announcement is a “testimony to the efficacy of free markets that the rising tide lifts all boats.” This first helped American shareholders, he said, because companies were able to outsource jobs to more cost efficient places, like India. As a result, India’s middle class grows and that increases demand for the amount of American products that can be exported there, he said.

Watch the video<http://www.cnbc.com/id/15840232/?video=1569389046&play=1> to see the full segment.

http://www.peoplepoweronline.com/journal/2010/8/26/article-is-it-possible-outsourcing-to-the-united-states.html

Frozen fruit bars recalled after typhoid outbreak

August 27, 2010 | Author: admin

SANTA FE SPRINGS, Calif. – Fruiti Pops, Inc. of Santa Fe Springs has recalled its mamey (mah-MAY’) frozen fruit bars because of a possible link to a rare U.S. outbreak of typhoid fever.

The company said Thursday that the fruit bars were distributed in California, Arizona and Texas since May 2009.

Fruiti Pops says retail stores, ice cream trucks and vending machines sold the frozen fruit bars, which have the UPC number 763734000097.

The company says the frozen fruit bars were made from contaminated mamey pulp that Goya Foods, Inc. voluntarily recalled on Aug. 12, after it was linked to a typhoid fever outbreak in California and Nevada. So far no illnesses have been reported from the mamey fruit bars.

Mamey or zapote (zah-POH’-teh), is a fruit popular in Latin America and the Carribean.

Lack of skilled workers threatens recovery: Manpower

August 26, 2010 | Author: admin

By Nick Zieminski

NEW YORK (Reuters) – Workers with specialized skills like electricians, carpenters and welders are in critically short supply in many large economies, a shortfall that marks another obstacle to the global economic recovery, a research paper by Manpower Inc (NYSE:MAN – News) concludes.

“It becomes a real choke-point in future economic growth,” Manpower Chief Executive Jeff Joerres said. “We believe strongly this is really an issue in the labor market.”

The global staffing and employment services company says employers, governments and trade groups need to collaborate on strategic migration policies that can alleviate such worker shortages. Skilled work is usually specific to a given location: the work cannot move, so the workers have to.

The shortage of skilled workers is the No. 1 or No. 2 hiring challenge in six of the 10 biggest economies, Manpower found in a recent survey of 35,000 employers. Skilled trades were the top area of shortage in 10 of 17 European countries, according to the survey.

While the short-term way to address to shortages is to embrace migration, the long-term solution is to change attitudes toward skilled trades, Manpower argues.

Since the 1970s, parents have been told that a university degree — and the entry it affords into the so-called knowledge economy — was the only track to a financially secure profession. But all of the skilled trades offer a career path with an almost assured income, Joerres said, and make it possible to open one’s own business.

In the United States, recession and persistent high unemployment may lead parents and young people entering the workforce to reconsider their options.

WELDERS NEEDED

The skilled trades category also includes jobs like bricklayers, cabinet makers, plumbers and butchers, jobs that typically require a specialist’s certification.

Older, experienced workers are retiring and their younger replacements often do not have the right training because their schools are out of touch with modern business needs. Also contributing to the shortage is social stigma attached to such work, Manpower argues in its paper published on Wednesday.

A poll of 15-year-olds by the Organization for Economic Cooperation and Development found only one in 10 American teenagers see themselves in a blue-collar job at age 30. The proportion was even lower in Japan.

Education could address that stigma. Students should be reminded that blue-collar work can be lucrative: skilled plumbers can make upwards of $75,000 a year, Manpower argues.

Overall, Manpower’s fifth annual talent shortage survey found 31 percent of employers worldwide are having difficulty filling positions due to the lack of suitable workers available in their markets, up one percentage point over last year.

for a link to Manpower’s research papers, click on: http://www.manpower.com/research/research.cfm

AN EMOTIVE ISSUE

Although the proportion of employers seeing shortages is still below pre-recession levels, shortages in some countries are more critical than the global average.

Majorities of those surveyed in Poland, Singapore, Argentina and Brazil reported shortages. In Japan, 76 percent had trouble finding the right workers, the highest reading among the 36 countries and territories.

Examples of successful, targeted migration include an Ohio shipbuilder that brought in experienced workers from Mexico and Croatia, and a French metal-parts maker that hired Manpower to find welders in Poland.

Obstacles to such migration include differing standards for certification in skilled trades, as well as political barriers to immigration, which remains an “emotive” subject in many countries, Manpower’s CEO said. Japanese employers, for example, have difficulty attracting skilled workers.

Sweden, on the other hand, is innovative and aggressive about strategic migration, for example by removing obstacles to workers being recertified in their specialty, Joerres said.

(Reporting by Nick Zieminski, editing by Dave Zimmerman

AvaLAN Wireless Is First Manufacturer of Long Range Industrial Wireless Radio/Ethernet Technology To Earn Made in USA Certification

August 25, 2010 | Author: admin

MADISON, Ala., Aug. 25 /PRNewswire/ — AvaLAN Wireless (www.avalanwireless.com) has successfully completed the Made in USA Certified proprietary audit process making it the first U.S. manufacturer of long range industrial wireless radio/Ethernet technology to be granted license to use the Made in USA Certified Seal.

Founded in 2004, AvaLAN Wireless (“AvaLAN“) is a leading developer and manufacturer of long range industrial wireless radio technology. AvaLAN’s products are designed to enable affordable wireless connections in perimeter or remote locations. AvaLAN has grown each year since inception, shipping over 30,000 radios to networking, surveillance, digital signage, robotics, industrial automation, access control and smart grid markets. AvaLAN’s innovation concentrates on delivering robust and reliable wireless connections to devices at the network’s edge.

AvaLAN’s products have been implemented in such demanding environments as high interference indoor applications and long distance outdoor applications with range up to 30 miles. Specializing in the unlicensed 900MHz, 2.4GHz and 5.8GHz radio spectrum, AvaLAN offers a number of Ethernet bridge products and point-to-multi- point wireless networking products. AvaLAN’s products offer the ideal combination of price, data rate, security, interference avoidance, quality-of-service, and ease-of use that professional installers demand.

AvaLAN in 2010 will continue to expand their line of robust and reliable wireless products with new modules for easy integration and further expansion of solutions for machine-to-machine networking.

Made in USA Certified’s Co-founder and President, Julie Reiser stated, “In an industry that has been largely outsourced, AvaLAN’s commitment to R & D and manufacturing in the U.S.A. is a breath of much needed fresh air.”

“U.S. manufacturers perform half of all the R & D in the nation, driving more innovation than any other sector.  AvaLAN is proof that high technology R & D and manufacturing goes hand in hand and is crucial for a strong national economic strategy for jobs and a globally competitive America.”

About Made in USA Certified, Inc. (www.usa-c.com)

Made in USA Certified, Inc. is the leader in independent third party assurance verification for genuine Made in USA products and services. Seal of Certification assures consumer Made in USA or Product of USA claim is true – keeping you and your family safe, giving consumers peace of mind and helping to support and promote products and services Made in USA, one factory, one business at a time. Trust but Certify!™

CONTACT: Jessica Robinson
561-750-9800 x210
jessica@transmediagroup.com

Home sales plunge 27 pct. to lowest in 15 years

August 24, 2010 | Author: admin

WASHINGTON – Sales of previously occupied homes plunged last month to the lowest level in 15 years, despite the lowest mortgage rates in decades and bargain prices in many areas.

July’s sales fell by more than 27 percent to a seasonally adjusted annual rate of 3.83 million, the National Association of Realtors said Tuesday. It was the largest monthly drop on records dating back to 1968, and sharp declines were recorded in all regions of the country.

The plunge in home sales also magnified fears about the broader economy.

“The housing market is undermining the already faltering wider economic recovery,” said Paul Dales, U.S. economist with Capital Economics. “With the increasingly inevitable double-dip in prices yet to come, things could yet get a lot worse.”

Sales were particularly weak among homes in the lower- to mid-priced ranges. For example, in the Midwest, homes priced between $100,000 and $250,000 tumbled nearly 47 percent.

The weakness follows a strong spring, when now-expired government tax credits sparked sales, especially among first-time buyers of lower-priced homes.

The tax credits caused many of those buyers to speed up their home purchases. Sales have weakened since the credits expired on April 30.

As sales have slowed, the inventory of unsold homes on the market grew to nearly 4 million in July. That’s a 12.5 month supply at the current sales pace, the highest level in more than a decade. It compares with a healthy level of about six months.

One reason the market is hurting is that buyers and sellers are in a standoff over prices. Many sellers are reluctant to lower their prices. And buyers are hesitating because they think home prices haven’t bottomed out.

Laurie Salaman has been trying to sell her home in New York City for a year so she can move to the suburbs. She’s had no offers, even after cutting her listing price on the three-bedroom Bronx home from $475,000 to $449,900.

She notes that she has upgraded the kitchen and bathrooms, refinished the basement and put in new decks and patios. Her goal is to take about $100,000 from the sale and put it toward the purchase of the new house. She said she won’t lower her price any further.

“That’s my bottom price,” said Salaman, 55. “If I don’t get that price, then I will hold off until the market gets a little better,” she said.

The housing market is also being hampered by the weakening economic recovery. Unemployment remains stuck at 9.5 percent and many potential buyers worry they might not have a job to pay the mortgage.

Prices have fallen in part because foreclosures are running about 10 times higher than before the housing bust. Though the average rate for a 30-year fixed mortgage has sunk to 4.42 percent, many people can’t qualify because banks have tightened their lending standards.

Home sales picked up in the spring when the government was offering tax credits. But sales have sputtered since the tax credits expired.

The drop in July’s sales was led by 35 percent plunge in the Midwest. Sales were down 30 percent in the Northeast, 25 percent in the West and 23 percent in the South.

The median sale price was $182,600, up 0.7 percent from a year ago, but down 0.2 percent from June.

American Apparel Is Close to Defaulting on Loans

August 23, 2010 | Author: admin

By SARAH WEINMAN

Just a few years ago, American Apparel (APP) was held up as a model for American clothing retailers, thanks to hip marketing campaigns, profitable earnings, a high-flying CEO in Dov Charney and products entirely made in the USA.

But now a series of financial troubles coupled with allegations of shoddy labor practices leaves the company’s future in serious doubt, with signs American Apparel may go away sooner rather than later.

On Tuesday, according to CNNMoney, American Apparel said it may default on loan agreements with its lenders, citing ongoing weakness in its business. This news comes just months after negotiating a $94 million loan from British private equity firm Lion Capital and is a far cry from more profitable times as recent as February 2009. While American Apparel is in talks with creditors to avoid a default, if it does come to pass, the company warns that it may not have sufficient liquidity to stay in business for the next 12 months.

Falling Profits, Ballooning Debt

The news of a potential loan default also comes the same day that American Apparel reported provisional second-quarter earnings for the period ended June 30. As was the case for the first quarter, the stats are especially grim. The company expects same-store sales to drop 16% compared to same period last year and will report an operations loss of between $5 million and $7 million for the quarter, compared with a $7.3 million in profit earned 12 months ago.

Debt is expected to balloon by almost $30 million to total $120.3 million. So far the stock market has responded accordingly, with shares currently trading just over $1.

American Apparel’s financial problems have persisted for quite a while. Though the company filed a provisional first-quarter report in May, it released the official numbers only today — and they included an additional impairment charge of $4.2 million on top of the already pretty dismal previously reported results.

American Apparel had to release its 10-Q filing for the first quarter by yesterday in accordance with an agreement it struck with the New York Stock Exchange, which had threatened to delist the company. (Delisting from a stock exchange is often considered to be a prelude to bankruptcy.)

The retailer’s longtime accounting firm, Deloitte & Touche, also quit at the end of July, but it’s still tasked with investigating the clothing firm’s consolidated financial statements for all of 2009 and current and projected earnings for 2010. And the once-hefty advertising budget for its racy campaigns has been chopped by more than 40%.

Settling With Woody Allen

American Apparel has also faced criticism for its hiring practices — specifically targeting attractive young women and freezing out anyone who doesn’t fit that bill — and for Charney’s personal behavior, which has seen him slapped with a number of sexual harassment suits. The company also recently settled with Woody Allen for $5 million in the wake of Allen’s lawsuit for using his image on billboards without his permission.

All these factors add up to the likelihood of American Apparel’s bankruptcy, a fate that Jezebel attributes to the company expanding “beyond the point of rationality or even sanity.” All of the marketing and brand awareness can only go so far to compensate for mismanagement and endless legal battles. For American Apparel, they may not be enough to save it from doom.

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