Converse is shifting production to Asia

E-mail E-mail this article
Print Print this article

BOSTON - Sneaker maker Converse, best known for its basketball and "Chuck Taylor" brand shoes, is closing three North American production plants and shifting production to Asia as part of a Chapter 11 bankruptcy reorganization.

The 93-year-old company said yesterday it plans to close its plants in Lumberton, N.C.; Mission, Texas; and Reynosa, Mexico, by March 31. The three plants employ about 1,000 people.

Converse said it plans to become exclusively a licensor of Converse-brand products - a model it has already adopted for overseas sales.

"One could perhaps criticize us for holding on longer than most," chairman and chief executive Glenn Rupp said yesterday. "If you look at our major competitors, with rare exceptions, all of their products are manufactured in the Far East."

The North Reading-based company said it has enough financing to continue operations during the restructuring. Converse has filed a motion with the bankruptcy court in Delaware seeking approval of an agreement to make Santa Barbara, Calif.-based Global Brand Marketing the licensee for Converse-brand footwear in the U.S.

A Charlotte, N.C., distribution facility may also be affected by the company's previously announced restructuring plan, depending on how Converse's new licensing arrangements develop.

The company, which faced a Jan. 31 deadline to satisfy its creditors, missed a $25 million interest payment in June. On Sept. 30, it listed assets of $202.1 million and debts of $226.2 million.

Converse reported a net loss of $6.3 million, or 36 cents per share, for the third quarter ending Sept. 30, 2000.

Rupp insisted the Converse brand and sales are strong, but the company is simply too overwhelmed by debt dating back to its 1995 acquisition of apparel-maker ApexOne. Converse sued ApexOne for fraud and deception after the acquisition, and received a $13.7 million jury award, which Rupp said was far less than the actual damages.

It also suffered through a dramatic slump in the athletic-footwear market worldwide in 1998 and 1999.

"We certainly didn't have the wind at our back," Rupp said.

The company, founded as the Converse Rubber Company in 1908 in Malden, got a big boost in 1921 when basketball star Chuck Taylor joined its sales force and traveled the country, hosting basketball clinics and selling shoes. The old-style Chuck Taylor shoes came back into fashion again in the 1980s.

Converse has tried to diversify beyond basketball shoes, which Rupp says now account for less than 20 percent of sales, shifting its focus to leisure-wear lines like Chuck Taylor All-Stars and skateboarding shoes.

In recent years, Converse has scaled back its fierce competition with Nike and other shoemakers for celebrity endorsers. Current endorsers include NBA players Karl Malone of the Utah Jazz, Ron Artest of the Chicago Bulls and Brevin Knight of the Atlanta Hawks.

Shares of Converse were up 3 cents to 20 cents in over-the-counter trading yesterday.