Gildan Activewear is closing its operations in Mexico and laying off 1,700 employees at two plants in Sonora, the state across the U.S.-Mexico border from Arizona.
“As we looked at our cost structure in the future, we feel that we can achieve a much lower cost by limiting the facilities,” CEO Glenn Chamandy told analysts on the company’s earnings call Oct. 31.
The closure of Gildan Activewear’s two textile plants — Cactex and Alstyle — in the cities of Hermosillo and Agua Prieta is related to declining sales and higher operating costs during the third quarter, company officials said.
Montreal-based Gildan owns the Cactex and Alstyle factories. The company manufactures clothing, including T-shirts, sport shirts and fleeces.
Mexico accounted for 8-9% of Gildan’s global production. Chamandy said the factory transfer will take result in higher overall capacity.
Agua Prieta stands on the Mexico-U.S. border, adjacent to Douglas, Arizona. It was a major part of Gildan’s supply chain for North America.
Worker salaries at Cactex and Alstyle in Mexico ranged from $175 to $218 a month, according to job postings on Indeed.com.
Gildan will be moving its textile factories to possibly Honduras and the Caribbean, where operational costs are lower, Chamandy said.
Gildan is also building a textile and sewing factory complex in Bangladesh which will serve Europe and China.
Gildan’s two factories in Mexico opened around 24 years ago, according to Gerardo Vázquez Falcón, president of Index Sonora of the National Council of the Maquiladora and Export Manufacturing Industry.