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. Last Updated: 07/27/2016

End of American Dream Looms for Levi Strauss

Levi Strauss & Co., the 149-year-old manufacturer of blue jeans, has virtually abandoned its decades-long effort to keep an American icon from becoming just one more foreign import.

The descendants of Levi Strauss, the man who invented the world's first jeans, announced it would lay off 20 percent of its workforce and shut down six of its U.S. plants, leaving only one factory in the United States that sews jeans and another that puts on the finishing design touches.

The family-owned firm, based in San Francisco, resisted sending its work overseas for many years, but little by little succumbed to the same financial pressures that have driven many other clothing makers into cheaper foreign labor markets.

In a statement Monday, company executives said they would lay off about 3,300 workers worldwide and close plants in Georgia, Texas, Tennessee and California starting in June. The operations to be closed include the oldest remaining Levi Strauss factory, on San Francisco's Valencia Street.

That leaves Levi Strauss with two U.S. plants, both in San Antonio. Since 1997, the company has closed 29 plants in North America and Europe and relied more on contract workers in more than 50 countries.

"There is no question that we must move away from owned-and-operated plants in the U.S. to remain competitive," Philip Marineau, the company's chief executive, said in a statement.

The brand has been in trouble for about five years. The maker of Levi's jeans has amassed $1.96 billion in debt. Sales reached a high of $7.1 billion in 1996 but dwindled thereafter, to $4.3 billion last year. Knockoffs have been eating into the company's market share, but the jeans maker failed to add to its classic lines or mount ad campaigns, believing in name recognition alone, several retail consultants said.

Before the 1970s, Levi's products had little in the way of competition, said Burt Flickinger III, managing director of Reach Marketing in Connecticut. The Lee and Wrangler brands faded under poor management. And the first wave of designer jeans eventually subsided. But today Levi's are challenged on almost every front, he said.

The decline of department stores, one of the main venues for Levi's jeans, didn't help matters, Flickinger said.

Yet the company continued to cling to its U.S. owned-and-operated plants, showing an extreme loyalty to communities and workers even when other retailers had defected to second- and third-world markets, where labor was cheaper, said Harry Bernard, a fashion industry consultant in San Francisco.

The higher the labor cost, the higher the cost of the company's garments, and the less it had left to spend on advertising, research and development.

That made the plant closings and firings inevitable, Bernard said.

"The real misfortune is that much of this was done as late as it was done," Bernard said. "But it's like ripping a bandage off a wound: If you do it quickly, it hurts severely but only for a moment."

Levi Strauss is negotiating separation packages for the workers to be laid off, and the Levi Strauss Foundation has created a $2.8 million fund to provide grants for affected communities.