Levi Strauss Capitalizes on Hungarian Reforms : Jeans Maker Operates New Plant in Partnership With State-Owned Firms

KISKUNHALAS, Hungary — Levis, the jeans that epitomized capitalistic decadence here in the 1960s, stand for socialist success in the late 1980s.

Just a half hour’s drive from the Yugoslavian border, about 200 Hungarian factory workers--most of them women--assemble, wash and iron 3,000 pairs of jeans each day as the rock beat of Madonna blasts over the radio in the plant. This is Levi Strauss Budapest Co., a $1-million business venture with Skala-Tex Clothing & Trade, Centrum Dept. Stores Co., Meteor Clothing Trading Co. and Tritex Trading Co.--all Hungarian state-owned firms.

Levis retains 51% of the company and enjoys a five-year tax holiday under the new law designed to encourage foreign investment, said Andras Pinter, the Hungarian textile engineer who serves as general manager. In 1987, when a previous licensing agreement expired, San Francisco-based Levi Strauss & Co. and its partners built a factory of more than 50,000 square feet in southern Hungary.

Today, about half of its annual production of 700,000 pairs of jeans is sold in Hungary--some at a recently opened Levis retail store in downtown Budapest--and the rest are sold throughout Western Europe.

Work Incentives

Levi Strauss Budapest says it is already turning a profit. It posted a loss in 1988 but realized a profit in the first half of 1989, Pinter said. Between 1977 and 1987, Levis licensed a Hungarian firm to manufacture its jeans but grew increasingly dissatisfied as aging machinery went unreplaced and low factory wages caused quality to plummet.

When the contract expired in 1987, Levi Strauss decided to build its own plant. It installed all new equipment, including washing machines filled with stones that pummel the jeans to create the popular stone-washed look.

At the factory, some of the workers look enervated by the summer heat but everyone works furiously, and little wonder: The firm has doubled pay to about 10,000 forints (about $160) or more a month, based on production. Employees have more incentive to work because they get bonuses for making extra jeans.

Under the new capitalist system, employees also have more incentive to show up for work--those who are repeatedly absent are fired. Levi Strauss, which retains control of production and marketing, says that reorganizing the work flow has boosted production.

“At the old factory, we sometimes had to sit idle for days while we waited for material to come in,” the plant manager said, as she led visitors through the modern plant, which is equipped with IBM personal computers for the office staff. “Here, every day we work through the day.”