American Apparel Laying Off Hundreds Of Workers, May Outsource Some Manufacturing

Image courtesy of Michael Kalus

As part of its continuing efforts to streamline costs and transform into a newer, leaner company after emerging from bankruptcy, a new report says American Apparel has slashed hundreds of jobs in its Southern California home recently, and may make some clothing outside of Los Angeles as part of an overall redesign of the production process.

According to the Los Angeles Times, American Apparel started laying off workers last week, and has cut about 500 local jobs so far. The company has about 4,600 employees in Southern California.

In a letter to employees obtained by the LAT, Chief Executive Paula Schneider blamed the layoffs on a “redesign of our production process” that will also include making fewer garments in a year so the company can cut down on inventory that eventually has to be discounted anyway.

She also floated the idea that manufacturing some trickier pieces like jeans and other denim clothing might be outsourced to a third-party company, although those items “will still be American-made.”

The company says only a fraction of garments would be outsourced, the ones that are more complicated and take more labor, but aren’t the big moneymakers. For example, 80% of the garments made by American Apparel in 2015 were things like T-shirts, while 20% were complicated items like denim. That being said, the workforce is still split 50-50 between the two categories, Schneider’s letter said. That uneven split is something that needs to be addressed as the company moves onward and upward, Schneider said.

That being said, some experts see it as the beginning of the end of American Apparel’s manufacturing relationship with LA.

“They’re headed out of Dodge,” the chief executive of one Los Angeles investment banking firm told the LAT. “They are going to outsource all garments. It’s only a matter of time.”

Founder and former CEO Dov Charney — whose bid to buy back his company was spurned this year — sees this latest move as a betrayal of what the company used to stand for.

“They are doing exactly what American Apparel fought against,” Charney said, adding that he’d always resisted “outsourcing and searching for ways to pay people less money.”

American Apparel lays off hundreds of workers and considers outsourcing some manufacturing [Los Angeles Times]