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Editorial: New Era Cap's painful pivot

An outbreak of conclusion jumping took place after New Era Cap announced on Tuesday it would shut down its Derby manufacturing plant.

Was the company moving its manufacturing of caps for Major League Baseball to Florida in order to use cheaper, nonunion labor? Did Trump administration tariffs put too much financial strain on the Derby operation? Was the company using its announcement as leverage to negotiate with local government for new tax incentives?

The answer appears to be none of the above. The employees who will lose their jobs when the Derby plant shuts down – almost the entire 219-member workforce – are victims of changing circumstances and evolving strategies for the company.

New Era produces most of its headwear through third-party manufacturers in various countries. It is contractually bound to make its caps for Major League Baseball in the United States, and will do that at a facility in Miami. The company’s focus now is on social marketing, design and branding.

New Era management calls it a “pivot,” which will sound like a euphemism to the Western New Yorkers thrown out of work, but big companies have to be agile to stay competitive in 2018 and beyond.

Capitalism involves “creative destruction,” in which businesses that don’t adapt have to get out of the way. The demise of Sears this year is a glaring example. The workers in Derby bear the brunt of it now, though we expect New Era to follow through on its vow to provide them with ample severance packages. In the most optimistic scenario, most of them will be able to find other jobs at a time when there is a labor shortage in Western New York.

Senate Minority Leader Charles E. Schumer and Erie County Executive Mark C. Poloncarz said they would speak with officials from the company about trying to keep the plant open. Anything they can do to keep hope alive is welcome, but it seems the company’s mind is made up.

New Era Cap released a statement on Tuesday that said: “The company’s contemplated decision to discontinue operations at its Derby facility is about better aligning the company’s business model with its competitors in the global sports, lifestyle and apparel industries by moving away from owning and operating manufacturing plants. It is not about economic or tax incentives to keep the plant open.”

Management also told The News this week that U.S. tariffs on goods made in China did not drive their decision.

The made-in-America clause in the company’s contract with Major League Baseball was well-intentioned protectionism, but ultimately it couldn’t protect the jobs in Derby. Instead, market economics had the last word. New Era Cap produces up to 4 million caps a year for major league teams, a small fraction of the 65 million pieces of headwear it makes.

Most of the company’s caps are made in China, Vietnam, Bangladesh and Haiti. And at least one-third of New Era’s approximately $750 million in annual revenues come from international sales.

Disruption of the manufacturing field will only continue to escalate in the coming months and years. Automation, artificial intelligence and machine learning will drive the changes. More people will see their jobs drastically changed or eliminated by technology than by companies chasing profits in other countries. Workers who seek out training and update their skills will be the most employable.

Change can be painful. Any Derby plant employee who has to sell his or her house, worry about how to pay medical bills or how to make car payments will feel the pain. It won’t be easy. But companies that don’t grow and change, that stay wedded to old-economy ways, eventually will die out. It’s not easy for those employees, either.

New Era Cap’s headquarters will remain downtown. It employs 337 people there and is a notable contributor to Buffalo’s economy. Our region can’t afford to lose it.

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