Concorde factory to shut down

Two months after it confirmed that it is bowing out of the poker industry, Tan Holdings Corp. yesterday dropped another bombshell—the closure of its garment factory, Concorde Garment Manufacturing Inc., effective Feb. 6, 2007. The move will affect about 1,400 employees, mostly nonresident workers.

The company cited substantial losses arising from the 2005 worldwide lifting of trade quotas, which dramatically diminished the local manufacturers’ ability to compete globally.

“After approximately 23 years of business operations in the CNMI, Concorde…regretfully announces that it will be closing its apparel facility on or about Feb. 6, 2007. The decision to close this pioneering operation is an extremely painful but necessary decision that the management has to take,” said Concorde in a statement issued yesterday.

Concorde, which began operations on Saipan in 1983, is one of the two biggest garment manufacturers on the island; the other leading company, UIC, is owned by businessman James Lin.

Concorde attorney Steve Pixley said that since the World Trade Organization lifted quotas last year, the factory has taken numerous steps to remain competitive but it continued to sustain losses.

He said Concorde has instituted an aggressive cost-cutting plan, which included a substantial reduction in workforce and a re-engineering of its facility in Lower Base, Saipan.

“These steps were calculated to allow Concorde to continue business operations in the CNMI. Sadly, despite these aggressive measures, Concorde continues to sustain significant losses. Unfortunately, Concorde can no longer continue to absorb these losses,” said the company.

Pixley said affected employees may choose to transfer within the CNMI or be repatriated to their countries.

“They have that option. We are committed to assist the employees during this challenging time,” said Pixley.

Pixley said the company is also working closely with both the CNMI and U.S. government agencies “to ensure that this closure is conducted as smoothly as possible and in full compliance with applicable law.”

He said all affected personnel, including managers, have been issued a 60-day notice of the closure.

Concorde currently employs 1,400 workers, mostly nonresident workers from China. During its peak in the mid- to late-’90s, Concorde employed some 3,000 employees.

Acting Gov. Timothy P. Villagomez described the factory’s closure as another blow to the sputtering economy.

“This represents another big blow to the CNMI’s economy,” said Villagomez, citing several adverse economic effects, including unemployment, diminished fee and tax collections, and a reduced multiplier effect throughout the local economy.

He expressed concern for the employment prospects of Concorde’s employees next year. “This closure will hurt families and cause a contraction in our local economy, resulting in less consumer spending on goods and services.”

Villagomez also noted the reduction in fee and revenue collections the factory closure would cause. “When Concorde shuts down, we will no longer receive user fees from the factory, and our Labor Department would lose about $300,000 from the annual Labor application fees,” he said.

According to Villagomez, businesses providing goods and services to the Concorde factory would also suffer income losses and local banks might experience reduced deposits as a result of the factory closure.

The government estimates that Concorde’s closure may compute to losses of $17.6 million in gross sales by other CNMI businesses, a loss of 700 jobs in the private and public sector, and a loss of $11.8 million in wages paid to other employees in other CNMI businesses and government. The total loss to the CNMI could be $12.73 million in lost taxes and fees, including business gross revenue taxes from other businesses and local sales.

Saipan Chamber of Commerce president Charles V. Cepeda said he had thought that Concorde would be able to survive the hard economic times.

“I was shocked. I thought, being one of the bigger factories, it would stay on. But it’s the reality. If the factories are making money, they would remain. Obviously, that’s not the case,” said Cepeda in an interview yesterday.

He said the factory’s closure sends a clear message about Saipan’s depressed economic situation.

“This also emphasizes the need to concentrate on other strong industries like tourism. We can’t neglect tourism like we neglected the garment industry,” said Cepeda.

He said the government’s neglect of the garment industry was evidenced by the lack of assistance to the local manufacturers since 10 years ago.

He said the government knew since 1995 that the garment industry would fold up but it did practically nothing to avoid its total demise.

“It [government] didn’t help. It could have reduced the tariff rates. It could have minimized the requirements such as provision of housing for its employees and the like. It’s not just this administration. Even the previous administrations could have done something. They knew about it years back,” said the Chamber official.

Chamber president-elect Juan “Pan” Guerrero warned about the negative impact of Concorde’s closure on government revenues. He said the government would lose between $11 million to $12 million in taxes from the factory a year.

Aside from this, the loss of salaries of over a thousand employees would adversely impact local businesses.

Guerrero called on the government to amend the fiscal year 2007 annual budget to avoid deficits.

“You’re taking millions of funds from government coffers. The result is a budget shortfall for this current fiscal year. The government, the Legislature better do something about it now and not wait for February,” said Guerrero.

“We need to brace ourselves. Concorde’s closure will have a great impact across the board,” he added.

The closure of Concorde brings the remaining number factories on Saipan down to nine from about 25 a decade ago.