American Apparel to cut 180 jobs amid a turnaround bid and worker ire
American Apparel Inc. is laying off about 180 employees as the company tries to engineer a comeback in the midst of worker discontent with new management.
Most of the job losses are coming from American Apparel’s sprawling manufacturing operations in Southern California. Some office positions also are being eliminated, said Paula Schneider, who took over as chief executive in January, nearly a month after the board fired Dov Charney, alleging misconduct.
The layoffs will involve 3.8% of the company’s approximately 4,800 manufacturing and office workers in Southern California. Employees at the nearly 250 American Apparel stores won’t be affected. In all, the company employs nearly 10,000 people.
“It’s a tough day,” Schneider said in an interview Wednesday. “We’re in a turnaround. This is a company that hasn’t made money in years.”
American Apparel has racked up about $340 million in net losses in the last five years and has more than $200 million in debt.
Schneider said the layoffs would help realign the workforce to meet the company’s changing production needs. American Apparel plans to produce 30% fewer styles this year compared with 2014, she said, which means the company needs fewer manufacturing workers.
The Los Angeles company had already been furloughing factory workers and slashing hours.
Schneider said her goal “is to get as many employees as possible back to work full time.” But she said she couldn’t rule out additional layoffs.
“There are a lot of things that impact our business — how many styles we are making and what sells in retail stores,” she said. “We will have to continuously assess our business.”
The recent moves have angered many employees who have become accustomed to a company that, under founder Charney, had fashioned a name for itself by treating its factory workers well — with good wages, benefits and even free massages.
“We used to have the feeling, even with supervisors, that everyone was treated equally,” said Ana Amador, who sews clothing in American Apparel’s downtown factory. “Now I don’t know what’s going on from one day to the next, whether I’m going to work tomorrow or not work.”
Amador and two other employees have filed complaints with the National Labor Relations Board, accusing the company’s security guards of intimidating and harassing them during efforts to organize workers. Some say they want the return of Charney, whose personal peccadilloes often overshadowed his passionate support of immigrant workers.
Schneider said the company has made efforts to keep employees satisfied.
Factory workers started receiving their 2014 bonuses in mid-March; the company usually doles them out in January. American Apparel plans to improve healthcare benefits and offer a 401(k) plan in the second half of the year, Schneider said.
The company has also hired someone outside the firm to investigate allegations of security guard harassment.
Still, some factory workers are voicing their opposition to new management and its actions.
On a recent Saturday, more than 200 employees and their families gathered in the parking lot of an abandoned Echo Park church to vent their anger over the furloughs and cut hours.
Latin pop music filled the air while attendees mingled. Strung between two basketball hoops were 11 life-size photographs of employees with their faces obscured by T-shirts, their fists raised in defiance.
When Charney made an appearance, clad in a blue plaid jacket and white polo shirt, his former employees stood up and cheered.
“I won’t give up until the company is safe,” he told the crowd. “I’m committed to you for life.”
Charney made appearances at several meetings organized by Hermandad Mexicana, a Santa Ana group that advocates for immigrant worker rights.
Nativo Lopez, an activist with the group, said about 1,000 American Apparel employees have signed cards giving consent for Hermandad to represent them in negotiating better wages.
“It’s the first stage of them establishing their own organization,” Lopez said. “They will need to determine if they want to keep it at the level of an organization at the plant or establish a union.”
In response, American Apparel has circulated a letter to employees accusing Hermandad Mexicana of spreading “false accusations” about working conditions, Charney’s return and the company’s financial health.
Labor experts said American Apparel workers may have public sentiment on their side.
“Their brand has been as a sweatshop-free employer,” said Victor Narro, project director at UCLA Labor Center. “That could be a point of pressure because American Apparel has outlets” vulnerable to picketing or other efforts that could gain shopper sympathy.
But efforts to unionize could be arduous for the factory workers, who currently lack backing from any existing unions, Narro said.
“It’s very difficult to work toward a very independent union model,” he said. But “it can be done. You need a visible, high-profile campaign.”
Many employees say their priority is simply getting their hours restored.
Domingo Marcos, who has sewn clothing at American Apparel for seven years, said he needs his old schedule to support three kids.
The 43-year-old said he typically earned $1,600 to $2,000 a month but in recent months his paycheck has slipped to around $1,100. That’s barely enough to pay rent and buy necessities, Marcos said.
“Previously, I would have an income that permitted me to take my children to eat out and do other activities,” the Pico-Union resident said. “Now I don’t have that.”
Worker unhappiness is only one of American Apparel’s problems.
Charney, who has denied the allegations that led to his dismissal as chairman and chief executive, has been doggedly fighting to get back his company.
He increased his ownership stake to 43% from 27% with the help of investment firm Standard General. But the New York hedge fund’s loan gave it voting control of the stock, and Standard General failed to back Charney in his push to get his job back.
Charney’s attorney said last month that the ousted executive plans to seek up to $35 million in damages from the company.
American Apparel said it has gotten a takeover offer from New York private equity firm Irving Place Capital.
In addition, the company has disclosed that the Securities and Exchange Commission is looking into issues that had come to light during the internal investigation into allegations of misconduct by Charney.
Charney said the new management has “created an environment of fear, intimidation and desperation” among employees.
“What we have seen thus far is indicative of a leadership that lacks respect for its workforce,” he said in an email. “A company that treated its manufacturing workforce with dignity is now one where workers are viewed as expendable and not as highly skilled workers that constitute the financial and spiritual backbone of the company.
“I support my workers 100%,” he said, “and will continue to do so.”