Last week, American Apparel CEO Paula Schneider announced a round of layoffs as a part of a manufacturing “redesign” for the struggling company, which recently emerged from bankruptcy; she also hinted that the company may begin outsourcing the manufacturing of some garments to other parts of the country. This week, it’s been reported that about 500 local employees have been laid off so far, over 10% of their Southern California workforce.
On Monday, WWD reported that the General Brotherhood of Workers of American Apparel called for a boycott of the company’s products in light of the job cuts. In Schneider’s letter to the company, she said that as demand is mostly focused on basics, “more complicated garments may be outsourced,” but “If we do decide to produce some pieces out-of-house they will still be American-made.” In the letter, Schneider said that there were too many employees working on complex garments when they only made up 20% of the company’s inventory; she also shared plans to cut down on the number of garments made per year.
According to WWD, the Brotherhood, which has been thus far unsuccessful in achieving union certification (American Apparel claims former CEO Dov Charney is involved with the group, creating a conflict of interest), alleges that the company has already been outsourcing manufacturing for both complicated and basic garments. American Apparel responded to WWD that they are only considering outsourcing. Over the past year, AA workers have protested rounds of layoffs and reported reduced hours; according to the LA Times, laid off workers were given two months severance with an additional $800 if they agreed not to file claims against the company.
One analyst told the LA Times that Schneider’s outsourcing hint might be a calculated move (the company declined to comment to the Times):
“They’re headed out of Dodge,” said Lloyd Greif, chief executive of Los Angeles investment banking firm Greif & Co. “They are going to outsource all garments. It’s only a matter of time.”
American Apparel appears to be dropping the bad news a little at a time, he said, to gauge public opinion and also to prevent a worker revolt.
“They might be kind of testing the waters to see what the market reaction is,” Greif said.
For now, American Apparel will probably outsource manufacturing to a cheaper part of the country, such as the South, analysts said. Eventually, the company may well move much of its manufacturing overseas.
Charney told the Times that “they are doing exactly what American Apparel fought against,” aka “outsourcing and searching for ways to pay people less money.”
While this may prove true, American Apparel has not been profitable since 2009 and the past few years have been financially dire; the rise of fast fashion behemoths like H&M and other competitors that outsource cheap labor haven’t made it easy for American Apparel to continue manufacturing in the U.S. But it does beg the question: what exactly is good about American Apparel if the apparel is made using cheap labor—or further, as the LA Times suggests, if it’s not made in America at all?
When asked about American Apparel’s outsourcing plans, a company spokesperson declined to comment to Jezebel on the record.