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Orders waning, garment companies suffering   2008-10-15 - VNE

Garment companies have been gearing up production to fulfill contracts signed with foreign partners, but the partners have been reducing the volumes they ordered. As a result, garment companies are suffering, with many facing bankruptcy.

 

Garment companies have been gearing up production to fulfill contracts signed with foreign partners, but the partners have been reducing the volumes they ordered

Tran Thanh Lam, the director of a garment export company in Binh Duong province, related that last month, his company signed FOB contracts with three partners from the US, UK and Canada on making 130,000 pairs of women’s trousers and 50,000 jackets. The orders were half-done when two of the three partners asked to reduce their ordered volumes by 30-40%.

 

“Our company has suffered heavy losses from the contract, as we spent money on importing materials before,” Lam said. Meanwhile, tens of workers of his company have been laid off due to the order cuts, while Lam still has to pay them 70% of their salaries.

 

Lam said that he dares not refuse the foreign partners as he fears he will lose partners. “The global financial crisis has prompted consumers to tighten their purse-strings, which has forced distributors to cut their imports,” Lam said, adding that other garment companies are facing the same problem.

 

La Kien Ban, Director of Dat Thanh Garment Trade and Production Company, which has headquarters in district 6 in HCM City, said that garment companies are all running perfunctorily, trying to retain clients rather than make profit.

 

“The profit gained in the last few months was just big enough to cover production costs and pay workers,” Ban said. Meanwhile, other companies complain that their incomes are not sufficient to maintain production, as orders are very small and the low output does not even cover production costs.

 

Unstable orders have been pushing a lot of garment companies against the wall. Their workers have been staying at home and garment workshops left idle.

 

Nahnoom Company in Dong Nai province, which specialises in jackets, has declared bankruptcy. Importers repeatedly cut orders.  The company’s workers, who earned money on the volume of their products, left the company to find other jobs. As a result, the company had to hire other garment workshops to do the orders at very high fees. Despite the high fees, the quality of the products was very low, which made the company lose partners. The repetition of this scenario led the company to the bankruptcy.

 

Le Ngoc Duc, Director of Van Thanh Garment Company in district 12, HCM City, said that the biggest sufferers now are the newly established companies which have a big scale of operation with a lot of workers. If orders continue dwindling, the companies may not survive the difficult period.

 

Several companies which previously specialised in making apparel for export have shifted to make products for domestic production. However, according to Duc, this will not help much as the domestic market is also gloomy.

 

Usually, November is the peak production time for garment companies with orders coming continuously. However, no garment company now thinks that they will earn a lot of profit this year.



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