American Apparel is attempting to overhaul its production process and streamline costs after emerging from bankruptcy in February. Its efforts have led to hundreds of worker layoffs and the possibility of outsourcing some of its clothing production to another manufacturer.
According to the Los Angeles Times, the downtown L.A.-based American Apparel has laid off roughly 500 of its Los Angeles employees since last week. The clothing company has about 4,600 workers in Southern California.
In a letter obtained by the newspaper, American Apparel CEO Paula Schneider wrote that the layoffs were the result of a “redesign of our production process.”
The revamped production process also involves slashing the number of garments the company makes throughout the year and potentially outsourcing the production of some of its more complicated clothing items – like jeans – to a different manufacturer outside of Los Angeles. But American Apparel maintains that its clothing will continue to be made in the United States.
“If we do decide to produce some pieces out-of-house, they will still be American-made,” Schneider wrote in a letter to employees.
Although Schneider insists that just a small number of garments face outsourcing, analysts told the Times that American Apparel appears to be making strides to get out of Los Angeles.
“They’re headed out of Dodge,” Lloyd Greif, chief executive of Los Angeles investment banking firm Greif & Co., told the Times. “They are going to outsource all garments. It’s only a matter of time.”
American Apparel filed for bankruptcy last year after several years of losses. Company founder Dov Charney was forced out as CEO and chairman in 2014 amid allegations of misuse of funds and inappropriate behavior with employees.
Charney told the Times that worker layoffs and outsourcing production flies in the face of American Apparel’s core values.
“They are doing exactly what American Apparel fought against,” Charney told the Times. He said that when he was at the helm, he always resisted “outsourcing and searching for ways to pay people less money.”
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