THE 1963 SERIES: MMUEACTORING Ht PUERTO RICO
THE LEATHER XNDÜSTRY lE PUERTO RICO
Small Leather Goods
Economic Developnent Administratlon Office of Economic Research San Juan, Puerto Rico
FOKEÍTORD
This report makes a^/ailatle the most recent infor^tion concerning the manufacture of small leather goods in Puerto Rico. The developnent and growth of small leather goods manufacture is outlined and up-to-date cost feta, including comparisons vith U. S. mainland expe^Lence vherever possihle, are presented to demónstrate major savings could have in Puerto Rico. Data vhich fom the hasis of this report were ohtained from government and industiy sources.
Additional information may he ohtained upon request from the Economic Development Administration or any of its hranch offices.
SAN JUAN, Puerto Rico
Banco Popular Building Stop 22 Phone:
NEW YORK 19, New York
666 Fifth Avenue'
Phone: Gírele 5"1200
CHICAGO 3, Illinois
79 West Monroe Street
Phone: ANdover 3-^887-8
LOS ANGELES 36, California
5^55 Wilshire Bouleyard
Phone: WEbster 1-1225
MIAMI 32, Florida
Dupont Plaza Center
Suite 709-72
Phone: FRanklin 7-2618
BOSTON 16, Massachusetts
607 Boylston Street
Phone: COngress 2-I31O
PHILADELPHIA 3í Pennsylvania
6 Penn Center
Phone: LOcust 8-2665
PARIS VlIIe, France
17, Avenue Matignon
Phone: AIMA 13-78
ST. LOUIS 1, Missouri
Paúl Brovm Building
818 Olive Street
Phone: CHestnut I-5358
SMALL LEATHER GCODS MMUFACTUEE
The próduction of small leather goods in Puerto Rica includes: men's and ladies' wallets key cases ,leather kits hillfolds school hags Ixght-meter cases , visor wallets ring hinders eyeglass cases coin purses utility hags auto visors French purses flight hags helts
Manufacturing facilitiés comprise 21 plants, employing over 1,600 persons, predominantly women. Over half of the plants have "been estahlished since 1956. The largest plant employs more than 350 workers, while the average per plant is 8o employees. Manufacturing operations generally performed are cutting, stamping, cementing, skiving, stitching and seving, although the nature of the product may require additional steps. Rav materials are ohtained hoth locally and from the U. S. mainland. Almost all production is sent to the mainland, Shipments of small leather goods, wallets and similar articles have quadrupled during the past five years, reaching a level of $9.3 million in 196I.
The growth of small leather goods manufacture in Puerto Rico is attrihutahle to the prevailing lower cost of production, complete freedom from U. S. federal corporate income taxes, and exemption from Commonwealth of Puerto Rico taxes (up to I3 years). The 196I earnings to sales ratio of Puerto Rico's email leather goods firms is nearly three times that of the mainland leather industry hefore taxes. Most EDA prometed firms enjoy tax exemption and their profitahility (profits to average equity) is over three times as great as the mainland leather industry after taxes.
Comparative Profitahility
Source:' EDA and Federal Trade Commission - Securities and Exchange Commission.
Puerto Rlcan Small Leather Goods Manufacturers vs U. S. Mainland Leather Industry
The greater profit opportvinities for small leather goods manufacturers in Puerto Rico have attracted a number of U. S. firms, among others Aristocrat Leather Products, Inc., Baronet Leather Goods Corporation, Prince Gardner Co.^ Inc., Smallman and Sons Company, and líash, Inc. All but fo\ir of the 21 small leather goods firms are owned and operated by U. S. mainland companies.
LOCATIOH FACTORS
Labor
Availabilíty, Quality and Training
Puerto Rico's labor forcé is Its most valuable and plentlful resource. Small leather' goods manufacturers can draw upon a labor surplus of 85,000 persons, including 16,000 women. The ratio of job appllcants per employment opportunity is T to 1, and the Puerto Rico Einployment Service assists new firms by testing and screening applicants on file. Puerto Ricans are naturally skillful, have a high regard for factory vork and achieve very satisfactory levels in both quality and quantity of output per man hoxir. The Commonwealth's 12 industrial vocational schools give instruction in skills such as leather stitching and lacing,and new firms may also arrange on-the-;iob training.
Hage Rates
Going -wage rates in small leather goods plants engaged in interstate commerce are governed to a large extent by minimum hourly wage rates established by the U. S. Department of Labor. The minimum hoxirly rate is $0.69/hour. Approximately of the workers are paid exactly the minimum and 87^ receive not more than $0.10 above the minimum,according to a recent Department of Labor study. Incentive pay systems are utilized by a few firms, with piece rates set to yield wages 15fo above the minimum. Bnployment of learners at wage rates up to 25^0 lower than the minimum is authorized under special certificates, subject to limitations as to time, number, and length of service.
Average ho-urly earnings of small leather goods workers in September I962 were $0.75 as compared to $1.60 on the mainland. Although hourJy wage rates have been rising faster in Puerto Rico than on the mainland, the differential has declined only 3^ over the past five years. Production wages as a percent of sales for small leather goods manufacturers in Puerto Rico in 1961 were only 1^ higher than in 1957.
PLAPT
Difference Betveen Average Hoirrlj'' Earnings* of U. S. Mainland and Puerto Rican Small Leather Goods Uorkers
Small Leather Goods Firms in Puerto Rico
* Includes paid hblidays, sick leave, vacations and incentive and overtime pay.
Sotirce: EDA and U. S. Department oí Labor.
Fringe Eenefits
Non--wage payments by small leather goods manufacturers average about 11O.
Bnployer contributions to government sponsored insurance plans are:
1) U. S. Social Security: 3 5/8^ of individual workers' earnings up to $i|-,800 a year.
2) Unemployment Insurance: 3.5?& of individual workers' earnings up to $3íOGO a year.
3) Workmen's Accident Compensation: $1.35 per $100 of payroll.
In addition, employers are required by law to grant two months matemity leave at half-pay to all female employees.
Othér fringe benefits may include paid annual vacations of 1 or 2 weeks depending on length of service, 3 to paid holidays, and Christmas bonuses. A few firms also contribute to group life and medical insurance plans.
Collective Bargaining
The International Leather Goods, Plástic and Kovelty Workers' Unión, an affiliate of the AFL-CIO, represents U05 workers at 3 plants out of a total of over 1,600 workers eraployed in 21 plants. Collective bargaining agreeraents generally provide for:
1) 3~5 paid holidays a year..
2) 1-2 unpaid holidays a year.
' 3) 1 or 2 weeks paid vacation a year, depending on length of service.
U) company contri'bu'tions to group Ufe insurance and medical service plans.
5) hourly wage and piece rates at least equal to the Federal hourly minimnm during prolationary periods, to "be adjusted afterwards to reflect a five cent or lO^o lacrease.
PLAKT FACILITIES
Modem factory tuildings suitatle for the manufacture of sman leather goods are readily available for Immediate occupancy throughout Puerto Rico, They can be leased or purchased through prívate realtors or from the Puerto Rico Industrial Development Company (PRIDCO), a corporate agency of the Commonwealth. PRIDCO erects general-purpose buildings in sizes of 6,000, 11,500 and 23,000 square feet, which can be leased at annual rates from $0.50 to $0.95 per square foot, depending on the type of building and its location.. PRIDCO also contracts for and supervises any minpr alterations that may be necessary.
In the event you require a plant built to your oun specifications, PRIDCO will construct a building to meet your o-wn specific needs, assisting with site selection and architectural planning. Sale or lease terms for such buildings are estábilshed on a negotiated basis.
A n-umber of small leather goods firms operating in Puerto Rico have takpn advantage of the decentralized facllities available. The 21 plants are located in 10 different municipalities (see Table l) and I6 of them occunv PRIDCO buildings.
PERSPECTIVE
TRAITSPORTATIOW
Ocean Frelght Service
Both U. S. mainland and foreign markets, as weii as off-shore soiarces of rav mataríais, are readily accessible via low-cost ocean freight. A numter of U. S. and foreign steamship iines provide frequent and regularly scheduled service, connecting Puerto Rico with United States, European, Central and South American, and other ports. In Pebruary 1963í for example, there were scheduled sailings batveen Puerto Rico and U, s, Atiantic and Guif ports alone. Average sailing time to New York is 3"^ days.
Trailership service, linking the high\ra,y systems of Puerto Rico and the U. S. mainland, provides efficient and economical door-to-door pick-up and delivery of truckload shipments. Formarly availahle only hetveen U. S, Atlantic ports and Puerto Rico, this service vas extended to the Pacific Coast in October I962. Trailer trucks, loaded and sealed at the shipper's ware-^ house, travel via higiway to dockslde, where the trailer is detached and lifted aboard specially designed shipa for shipment as seif-contained units. The process is reversed upon arrival at the port of destination. Since goods are completely protected against pilferage and handiing ia reduced to a minimum, insurance and packaging costs are lower.
Air Cargo
Daily service het^reen Puerto Rico and virtually every important u. S. mainland market area is avallable via five major airlinesi Eastern, Pan AmericUí Trans Caribbean Airways, Delta and Riddie. There is also regularly scheduled direct or connecting service to other parts of the world, Modern equipment and facilities aSBure fast and dependable service. Flying time betveen San Juan and New York is only 3 l/2 hours.
Express Freight Service
" Manvifacturers utilize express freight service for door-to-door delivery of less-than-truckload shipments from plants in Puerto Rico to firms in the mainland. The four leadlng companies providing this service are Acmé Fast Freight, Inc., Valencia Baxt Express Co., Malahe Shipping Co,, and Marítima Trucking Co., Inc.
RA¥ MATERIALS
Eaw materials used in the manufactxire of small leather goods, while ottained from the U. S. mainlajid to a considerable extent, are becoming increasingly available locally. Seven mainland-affiliated tanneries and finishing planta produce a variety of leathers, including hand-grained English style morocco. Eyelets, buttons, zippers, thread, plástic inserts, metal findings and packa.ging materials are also available locally.
Ocean freight ratea from U. S. Atlantic and Gulf Coast ports via conference carriers for natural or artificial leather are $0.55/cu. ft. or ^l.M-S/cwt., whichever yields the greater revenue.
M.AKKETS
^ Nearly the entire production of small leather goóds produced in Puerto locally market. A small percentage is also sold
Ocean frei^t rates to U. S. Atlantic and Gulf Coast ports are $0.U8/ S í finished small leather goods. Air cargo rates to /^^l®'^®l-Pliia/¥aBhington/Ealtimore, for exanple, are $0,l4/lb. for shipments of more than 100 Ibs. -p ror
FROFITS
leather goods firms promoted by EDA have been consi-? O Lfíío' 11 in 1961 vere $1^90,OoHn 210^0? $7.0 miiiion. Assets of these firms amoiinted to $3.3 million and thel-r no+ vorth was $2.0 mllllon. The I96I earnings to salee ra?io ™s »ní tS
Case
History of Baronet of Puerto Rico, Inc.
Baronet of Puerto Bico, Inc., a wholly-OTmed subsidiary of the Baronet Leather Gaods Corporation of New York, was established in 1956 in Vega Baja. The firm manvifactiires men's and ladies' leather wallets (about 70^ of total production) and key casesi mpney clips and other small leather goods from genulne and Imltation leather.
Leather is cut, colorad, scored, skived and stamped. Component seetions are then folded, stitched, cemented and assembled to form the finished product. Approxlmately 60^ of the genulne leather used by the firm and zippers are obtained from local suppliers. The balance of the genulne leather, artificial leather, metal parts and mica are obtained from the U. S. mainland. Total production is sold to the parent firm, vhich is billed $5«30 per dozen for Items of $2.00 each at retail, and $15.00 per dozen for Items retailing at $5.00 each.
The firm employs I83 persons. Fringe benefits are 1 week paid vacation after one year service, 3 paid holidays per year, and a Christmas bonus.
Sales increased steadily xmtil 1959> when a peak of $1.6 milla on was attained. Although volume has been slightly lower during the last t-wo years, lower raw material prices have offset other increased costs sufficiently to maintain previous eaming/ sales ratios. During the same period, assets of the firm have increased from $361,000 to $883,189 and net worth from $319*^1^ to $656,067. Ihe firm is tax exempt.
Baronet of Puerto Rico, Inc. Statement of Profit and Loss (Thousands of Dollars)
Sojaroe: U. S. Department of Mor and Oonnonwealth Bepartment of State.
Note: Number of plants In each municipall-ty Is indicated. There are 21 plants located In 10 dlfferent munlclpalltles.
Sotirce: EDA
ftwaii Teather GoQds Plants O
UOiZA
Size of Small Leather Goods Plants
By Floor ST?ace OccuT>ied and Nxxníber of Ehiployees
Floor S-pace - Sq. Ft. No. of Plants
5.000 or less
5.001 - 10,000 10,001 - 15,000 15,001 - 20,000 20,001 - 30,000
* Informática on 5 plants not availatle.
Source: EDA
Source: EDA TABLE IV
Source: EDA Survey, June I96I.
TABLE V Average Hovirly Earninas of Leatherworkers
Occu-patlonal Group
August 1961
It is
Source: Bureau
TABLE VII
ShiTments of Leatlier, Leather Goods g.nd Related Products from Puerto Rico to U. S. Mainland
1955-1961
Product
Toys, athletic and sporting goods, n.e.c.
Leather card cases, change purses, wallets and similar articles
Leather and leather manu factures, n.e.c.
Total
TABLE VIII
Shípments of Leather, Leather Goods and Belated Froducts from U. S. Mainland to Puerto Pico
1955-1961
Source; U. S. Denartment of Coiranercf»,
DIRECTORY OF SMALL LEATHER GOODS MAMJFACTURERS
Plant, Parent Company and Location
American Bag Co., Inc. (Nene) Caguas 1/
Alpco of Puerto Rico, Inc. (Amity Leather Products Co.)
San Lorenzo
Baronet of Puerto Rico, Inc. (Baronet Leather Goods, Inc.)
Vega Baja
Billfolds Corp. of América (Aristocrat Leather Products, Inc.) G'ura'bo
Billfolds Corp. of América ^ (Aristocrat Leather Products, Inc.) Guraho
Black Horse Inc. of Puerto í^ico (R. G. Leather Co. and Ahedo Hhos., S. A.)
Craftsman Billfolds of P. R., Inc. (l. Smallman & Sons Corp.) Caguas
Donrichal Corporation (Hickok Mfg. Co., Inc.)
Toa Baja
Edel Plástic Co. (None) Bayamón
Esco Corporation ^1. (Baronet Leather Goods, Inc.)
Vega Baja
Esco Corporation =¡¡2. (Baronet Leather Goods, Inc.)
Moro\'ls
Product(s) Manufacturad
Flight hags, utility. hags, and light meter cases of leather, plástic and other materials
Leather wallets, key cases, coin purses
Men's and ladies' leather wallets, key cases, money clips
Billfolds
Billfolds
Wallets and helts
Men's and ladies' leather wallets
Leather wallets and auto visors
Plástic wallets, helts and handhags
Leather billfolds, handhags
Leather wallets, billfolds
1/ American Bag Co. and Ferree of P. R., are affiliates.
Octoher 195T
Plant, Parent Company and Locatión
Esco Corporation ^3 (Baronet Leather Goods, Inc.)
Morovis
Esquire Belt Corporation (None)
Guaynabo
Ferree of Puerto Rico, Inc. l/ (None)
Caguas
Fleetwood Novelties, Inc. (a. and L. Seaman)
Loíza
House of Nash, Inc. (Nash Incorporated)
Cabo Rojo
Hickok cf Puerto Rico, Inc. (Hickok Mfg. Co., Inc.)
Toa Baja
Kay Vee Products, Inc. (American Kleer Vu Plástic, Inc.)
Caguas
Nashtone, Inc. (Nash Incorporated)
Cabo Rojo
Red Cape Leather Products Corp. (Nash Incorporated)
Cabo Rojo
Steer Leather Goods Corporation (Artistic Leather Goods Mfg. Co.)
Caguas
Wilshire Leathercrafters, Inc. (Prince Gardner Co., Inc.)
Gurabo
Product(s) Manufactured
Purses and eyeglass cases
Leather, plástic and stretch belts, wallets and handbags
Wallets, key cases, coin purses, and other small leather goods
Men's and ladies' vallets
Men's and ladies' wallets, key cases, coin pursés
Men's and boys' leather belts
Acétate wallet inserts
Manufacturing of leather (inner surface) plástic (outer surface fabrics)
Men's and ladies' wallets, key cases and coin purses
V/allets, French purses, key cases and iiíiscellaneous leather goods
Men's and ladies' wallets and French and clutch piirses
1/ American Bag Co. and Ferree of P. R., are affiliates.
T.*\I®ÍING PM) PINISHING PLAIOTS
Plant, Parent Company and Locatión
Caritbean Tanning Co., Inc. (H. Remis & Co.)
Ponce
Central American Split Co., Inc. (H. Remis & Co.)
Ponce
Dorado Leather Corporation (a. Loewengart & Co.)
Caguas
Palé Tanning Corporation (Appalachian Tanning Co.)
Dorado
Nashtone, Inc. (Nash, Inc.) Cabo Rojo)
Puerto Rico Tanning Corporation (a. Loewengart & Co.)
Caguas
Puerto Rico Tanning Corporation (a. loewengart & Co.)
Juncos
Product(s) Manufactiired
Tanning of leather
Manufacture and finishing of leather splits
Laminated, cut and erabroidered leather
Sheepskin tanning
Leather and synthetic leather fabrics
Tanning of leather
Tanning and finishing of fancy leather, including English morocco luggage and wallet leather