American Apparel Workers Get Pink Slips
Scores of American Apparel workers are being laid off as the Los Angeles clothing company is revamping its production process shortly after emerging from bankruptcy protection in February.
In a letter sent by Chief Executive Paula Schneider, American Apparel employees were advised that the manufacturing process is being consolidated into a single floor of the large downtown factory. The idea is to cut costs, reduce the amount of time spent delivering production material between groups, and “to ensure consistency and quality,” Schneider said in the letter.
According to the American Apparel website, the company employs 2,600 garment workers in its downtown Los Angeles facility, which makes it the largest apparel manufacturing factory in the United States.
Nativo Lopez of Hermandad Mexicana, which has been trying to unionize the workers there, said he heard that at least 100 workers had been given lay-off notices. “Right now it is up to 100, and more calls keep coming in,” he said.
An American Apparel spokesperson declined to comment on the layoffs or specify any numbers.
In addition to the layoffs, sources said the company has started outsourcing some of its production as the company goes beyond the basics collections it has been known for and starts manufacturing more work-intensive items.
The layoffs and outsourcing come after the company’s head of manufacturing, Martin Bailey, resigned from American Apparel in mid-February. He had been with the company for nearly 15 years and at one time had served as American Apparel’s president of manufacturing.
Also in February, American Apparel notified workers it was shuttering its Hawthorne, Calif., dye house and laying off 75 workers, with 20 of those being allowed to transfer to the company’s other dye house in Garden Grove, Calif.
“We predicted this,” Lopez said. “Everything that we predicted is coming to pass.”
American Apparel was founded in Los Angeles by Dov Charney in 1997 when he started selling T-shirts to the wholesale market.
Charney left American Apparel in December 2014 after the board of directors ousted him the previous June as the chairman and suspended him as the chief executive and president, pending an investigation into alleged misconduct. He was later fired.
The company’s reorganization plan filed in Bankruptcy Court converted approximately $230 million of bonds into equity into American Apparel and provided for the infusion of $40 million of exit capital and a commitment for a $40 million, asset-backed loan.
American Apparel’s debt was reduced from $300 million to no more than $135 million, and annual interest expenses were decreased by $20 million.
Charney, who tried to buy American Apparel out of bankruptcy with the help of two private-equity firms, is now thinking about starting a new apparel company. Last November, he got a California business license for a company called Schmatta LA.
In an interview earlier this month with Tavis Smiley, which was broadcast on PBS, Charney said he was thinking of locating his new company to South Central Los Angeles.