Finance

Los Angeles-based American Apparel lays off 500 workers, will outsource production

HK_Admiralty_Queensway_Plaza_金鐘廊_mall_shop_American_Apparel_clothing_Nov-2013

“The exodus has begun,”

Sung Won Sohn, Cal State Channel Islands economist and former Forever 21 director, ominously stated about Californian businesses, following the massive minimum wage hike. He went on: “The garment industry is gradually shrinking and that trend will likely continue.”

The predictions of economists and conservatives are already coming true: American Apparel, the classic American clothing company based in Los Angeles, has already laid off 500 local employees since last week.

Chief Executive of American Apparel Paula Schneider wrote in a letter to employees that the layoffs are due to a “redesign of [the company’s] production process.” She also mentioned that many of the more-complicated pieces of clothing may be outsourced to a third-party American company.

However, Lloyd Greif, chief executive of the LA-based investment banking firm Greif & Co., is not convinced that this is the end of the changes to the company.

“They’re headed out of Dodge. They are going to outsource all garments. It’s only a matter of time.”

Greif believes that American Apparel is simply dropping the bad news in steps in order to prevent a worker revolt or a public relations disaster. He is convinced that the company intends to eventually leave Los Angeles completely.

American Apparel filed for bankruptcy protection in October of last year, and then exited bankruptcy by January.

Founder Dov Charney, removed from the company multiple times since 2014, characterized these new moves by American Apparel as a betrayal of the company’s foundation. Charney plans to open a new apparel company in South-Central Los Angeles, mentioning that downtown Los Angeles has become too expensive to start a business.

What do you think? Did these new moves by American Apparel have something to do with the minimum wage hike in California? Let us know in the comments!

 

(H/T Los Angeles Times)

Follow the author on Twitter: @rsaydlowski.

Tell HYPELINE what you think:

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

To Top