Made in the USA Foundation purchasing C.F. Hathaway makes ambitious plans in a difficult market

WATERVILLE – The Made in the USA Foundation spent years urging Americans to buy domestic goods, even as thousands of manufacturing jobs were exported overseas. Today it’s trying a new tactic.

The nonprofit group is leading an investment group to buy C.F. Hathaway, the nation’s last major shirt manufacturer.

“We’ve done everything we can for the past 13 years to promote American goods,” said Joel Joseph, chairman of the Made in the USA Foundation. “But if you can’t find American goods, you can’t buy them.”

Hathaway, recognized for its man with an eye patch logo, set the standard for men’s dress shirts back in the 1950s and ’60s.

Back then, button-down shirts were sewn in factories like the 19th century brick building Hathaway occupies along the Kennebec River. Times changed, though, and most shirts sold in the United States now are imported from countries where labor is cheaper and there are fewer regulations.

U.S. shirt makers such as Arrow and Van Heusen, once strong competitors, have moved their operations overseas.

“Offshore pressure is a huge competitive problem for us,” said Donald Sappington, chief executive officer of the 165-year-old shirt maker, the nation’s oldest. “There is no domestic competition.”

Hathaway has survived, but just barely.

The company’s pending sale, its third in six years, was negotiated after its current owner, Connecticut-based Windsong Allegiance Group, announced plans to close the factory this summer.

Joseph read a newspaper article about Hathaway’s imminent shutdown and saw a chance to save 300 U.S. manufacturing jobs.

“I was shocked by it,” he said from his office in Bethesda, Md. “I knew it was an efficient plant, and it was a plant with a good reputation that should be saved. And so I called immediately.”

Joseph previously has orchestrated deals to save other U.S. manufacturers, but the Hathaway deal, expected to close by month’s end, will be the foundation’s first direct purchase of a company.

More deals to preserve American manufacturing jobs will follow if Hathaway proves to be a good investment, Joseph said. He insists U.S. shirt manufacturing still is viable if owners are willing to accept reduced profit margins.

Howard Davidowitz, chairman of the Davidowitz & Associates Inc. retail consulting firm in New York, predicted it will be a struggle.

“Ninety percent of the people who have tried this have collapsed,” he said. “There are bodies littered everywhere.”

The key will be whether Hathaway can design distinctive shirts and then market and brand them for a premium market, the same way a handful of U.S. shoemakers have managed to survive, Davidowitz said.

Sappington, who will remain CEO, believes the company can be competitive despite the higher cost of running a U.S. plant.

His unionized work force is paid an average of more than $10 an hour, far more than apparel workers in developing countries, and receives paid holidays, health care benefits and retirement accounts.

Hathaway also pays more for raw materials because it buys roughly half of its fabrics from U.S. producers.

Despite those handicaps, the new ownership has ambitious plans. In the short term, officials hope to win a five-year Air Force contract that would supply steady work. A decision is expected in August.

Eventually Joseph hopes to expand from Hathaway’s traditional dress shirts into sportier men’s designs as well as shirts for boys and women. In the 1970s, Hathaway sold plaids, paisleys and wide-collared golf shirts, but today its products are limited to button-down pinpoint Oxfords and shirts for private labels and the government.

Hathaway also plans to open 10 retail stores in the Northeast, where it hopes to target customers who want to buy American.

Joseph said retail and wholesale shirts will be marketed to union members, consumers concerned about sweatshop labor, and government agencies that must give preference to U.S. manufacturers.

Hathaway’s current annual sales are about $15 million, but Joseph believes they will jump to $100 million within eight years.

A local investment group that bought the company in 1996 had similar hopes for a revival but was forced to sell last year.

Former Maine Gov. John McKernan, who led the local ownership group, said his greatest frustration was not having the bankroll to expand the firm’s product line. Hathaway’s new owners are raising a total of $6 million, so they may not have the deep pockets, either.

“I think it’s just a godsend that the Made in the USA Foundation was available,” McKernan said, but he added: “I think it’s still going to be very difficult.”