High Ideals Didn't Save Anti-Sweatshop Garment Factory

Los Angeles Times

Eric Slater
Times Staff Writer

July 4, 2004

The small company, launched to disprove the maxim that to turn a profit in the garment industry you had to have nonunion workers toiling for low wages in a bare-bones factory, had the glamorous begimiings of a bubble-era dot-com.

Ben Cohen of Ben & Jerry's ice crearn fame poured in $1.5 million and beamed for the cameras at the opening of TeamX in 2002. Los Angeles Mayor James K. Hahn was on hand for the celebration. So was singer Michelle Shocked.

The initial managers were a collection of well-heeled, left-leaning businessmen. The sparkling factory building in the heart of the Los Angeles garment district looked as if it might have been airlifted in from Century City.

Today the building sits vacant, its state-of-the-art machinery sold at fire-sale prices. The Internal Revenue Service is poking around, according to some former workers. Once a symbol of hope for anti-sweatshop, crusaders across the country and an apparent evidence of their progress, the company has become an embarrassing example of defeat.

"I'm discouraged that so much goodwill was squandered," said Rick Roth, who almost but not quite - rescued TeamX as the last in a string of company presidents in the company's two years of existence.

Poor management, virtually everyone agrees, was the most obvious contributor to the demise of TeamX, better known by its brand name, SweatX But the company's downfall also illustrates the difficulties of cutting against the grain of outsourcing and cheap labor, even at a time when the topic gets considerable attention in the media and on the presidential campaign trail.

"It was a wonderful idea, and I still believe if s feasible," said one former company official, who asked not to be named. "But it makes me sad and it makes me sick that the principles and the culture we tried to create were thrown out the window. This whole thing almost caused me to change my politics."

The company was launched by Cohen through his Hot Fudge Social Venture Capital Fund, and its ambitions included nearly every item on the wish list of the anti-sweatshop movement.

The shop would be opened in the center of the garment district - where 61% of apparel contractors violated wage and hour laws, according to a 2001 study by the U.S. Department of Labor.

TeamX workers would earn nearly $11 an hour, well above California's $6.75 minimum wage. They would be represented by UNITE, the Union of Needletrades, Industrial and Textile Employees. They would enjoy a benefits package, pension plan and the opportunity to one day own the company themselves as a cooperative - something that never happened.

The company, however, foundered almost from the start.

TeamX typically employed about 30 workers. It was headed by a large management team that included a chairman and chief executive, a president and chief financial officer, a director of operations, a director of sales and marketing, a director of retail and private label sales, and a director of consumer organizing and community affairs, among others.

Its early leaders had resumes long on business success but short on experience in the apparel industry.

The company's chairman at the beginning, Chris Mackin, founded a Cambridge, Mass., firm that advises companies on employee-ownership issues. The first president and CFO, Doug Waterman, is a longtime Los Angeles banker. The initial CEO, Pierre Ferrari, head of the Hot Fudge fund, is a former Coca-Cola executive.

For a start-up, TeamX compensated its employees too well, some former company officials say. It also presented a somewhat holier-than-thou image that turned out to be costly in terms of dollars and making friends in the industry. The company produced expensive, glossy color brochures detailing products but also emphasizing what the company wasn't - a nonunion sweatshop like so many other apparel manufacturers - infuriating other companies.

TeamX paid $200,000 for a computerized cutting machine that went unused, former employees said. It counted about $1 million in sales during its first year, yet spent 12% of that on its lease, according to workers. The upscale building cost about $10,000 a month.

"They went out to prove a point, not to make a business work," said Ilse Metchek, executive director of the California Fashion Assn. "If you're running a business in order to prove a philosophical point of view, you better be sure you know what you're doing."

The company's problems unfolded even as a growing body of evidence suggested that some consumers were willing to pay more for "sweat-free" goods. Several national surveys have found that consurners - up to 86% in some polls - say they would pay higher prices for goods made in "sweat-free" conditions.

A recent University of Michigan study went fin-ther, looking at consumers' actual purchases rather than their pledges. Using identical pairs of white socks, researchers found that as many as 30% of shoppers at a suburban Detroit department store were willing to pay as much as 401/6 more for a pair labeled "GWC," which, a tag said, stood for "good working conditions" and defined as "no child labor/no sweatshops/safe workplaces."

In 2000, Starbucks Coffee began selling slightly more expensive "fair trade" coffees. Last year, the Seattle-based company bought 2. 1 million pounds of certified fair trade coffee, a 9 1% increase over the previous year.

Also last year, Dunkin'Donuts, which sells 3 million cups of coffee a day, began making its espresso drinks with fair-trade coffee.

After its initial struggles, TeamX began to focus on that potential market of supportive consum , aiming to sell to unions, universities, socially progressive rock bands and others who were actively seeking apparel made by union laborers making fair wages in the United States.

"That concept was valid," Metchek said, "but they didn!t even do that well.

Occidental College, a hub of activity for the influential United Students Against Sweatshops, was among the first TeamX customers. But the shirts, shorts and hats the group ordered arrived three months late and were poorly made, said professor Peter Dreier, a proponent of the sweat-free movement.

A fire department in Oregon that was searching for union-made T-shirts last year sought out SweatX, but eventually gave up after numerous problems and delays with its order.

"We thought every union in the United States was going to buy from us. That didn!t happen," said one of the former

TeamX presidents, Marlon Vaezi, who now works for American Apparel.

"They bought a little bit just to pat us on the shoulder. And even then, they would look to get a better price."

A botched order for Red Bull, the maker of energy drinks, brought TeanLX to the brink of early disaster. Thaf s when Roth, its final president, came aboard.

Some of the company's employees and much of its machinery have gone to American Apparel, which offers wages similar to those paid by TeanLX.

American Apparel has about 2,000 employees and three retail outlets. Despite its relatively high wages, some in the anti-sweatshop movement criticize American Apparel for being a nonunion shop. But unlike TeamY., it remains in business and is growing.

Some former TeamX officials have not given up on the possibility of a well-paying, employee-owned apparel shop. They plan to study TeamYs failure and perhaps try again.

"Nobody thought that SweatX was going to replace Nike," said Occidental's Dreier. "The idea was to set a standard, [to] lift the veil from Nike and the Gap and all the other industries that say they have to move to India and China and pay slave wages.

"It was more of an experiment to show that it would work. I think it can work. Unfortunately, SweatX didn't."