Levi Strauss & Co.: The South Zarzamora Street Plant (a)

13 Pages Posted: 30 May 2017

See all articles by Jeffrey R. Edwards

Jeffrey R. Edwards

University of Virginia - Darden School of Business

Jason L. Lunday

University of Virginia - Darden School of Business

Abstract

Peter Thigpen, senior vice president of operations at Levi Strauss & Co., must decide whether to close a large plant in Texas and transfer production to the Caribbean. The case describes the company and industry background and the factors involved in the decision. Subsequent cases (B, C, and D) describe the decision Thigpen made and the results it had.

Excerpt

UVA-OB-0427

Rev. Dec. 18, 2012

LEVI STRAUSS & CO.: THE SOUTH ZARZAMORA STREET PLANT (A)

In December 1989, Peter Thigpen, senior vice president of operations for Levi Strauss & Co., (Levi's) faced a major decision as he sat in his office at Levi's headquarters, a low-rise complex located near San Francisco Bay. Thigpen had received a memo dated November 30 from Bruce Stallworth—Levi's operations controller—that recommended closing a Levi's plant on South Zarzamora Street in San Antonio, Texas, and transferring production to the Caribbean. Although closing the plant would cost $ 13.5 million, Stallworth believed it would ultimately yield significant cost reductions in terms of production, labor, and workers' compensation. But the prospect of closing the Zarzamora plant raised some very troublesome issues for Thigpen. For example, closing the plant would mean laying off more than 1,000 workers, many of whom could not leave the area due to family concerns or who were semiskilled and therefore would find it difficult to find jobs elsewhere. In addition, Levi's operated two other plants in San Antonio, and closing the Zarzamora plant could threaten the sense of job security among workers at those plants, thereby dampening their motivation, enthusiasm, and commitment. Perhaps the most salient concern resulted from a recent visit by Max Cohen, vice president of field operations, to the Zarzamora plant. During his visit, Cohen had told the workers that their jobs were secure, and that rumors of a plant closing were untrue. Closing the plant after this announcement would almost certainly be viewed as a major breach of trust, which directly contradicted the culture Levi's had carefully nurtured for over a century.

The Apparel Industry

The U.S. apparel industry consisted of manufacturing operations that cut and assembled fabrics for clothing and other garments. Raw materials were purchased from textile mills, and finished garments were sold to retailers, wholesalers, and other customer outlets. In 1988, the industry produced $ 63 billion of shipped goods and employed over one million workers, 85% of whom were engaged in direct production. While the dollar value of apparel production accounted for only 2% of all goods manufactured in the United States, the industry employed 7% of all manufacturing employees, making the apparel industry one of the most labor intensive in the country.

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Keywords: international human resources, discrimination, diversity in the workplace, organizational change, restructuring, international case, diversity case, worker satisfaction

Suggested Citation

Edwards, Jeffrey R. and Lunday, Jason L., Levi Strauss & Co.: The South Zarzamora Street Plant (a). Darden Case No. UVA-OB-0427. Available at SSRN: https://ssrn.com/abstract=2974778

Jeffrey R. Edwards (Contact Author)

University of Virginia - Darden School of Business

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

Jason L. Lunday

University of Virginia - Darden School of Business

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

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