The company will shed hundreds of jobs as it revamps a critical step in its business process.
According to the company’s chief executive Paula Schneider, who wrote a letter that was obtained by the LA Times describing the details of the company’s restructuring, “If we do decide to produce some pieces out-of-house, they will still be American-made.”
Despite one of the main selling points of the company’s merchandise being that it was designed and made in-house, the manufacturer hopes to address the mismatch between workers and manufacturing goals was creating growing inefficiencies. As the firm tries to turn business around, executives reached the conclusion that a restructuring period was necessary.
The layoffs began last week, and so far as many as 500 employees have found themselves without a job. The company is hoping to cut down the total number of garments produced this year to reduce inventory stockpiles.
A spokeswoman from American Apparel declined to comment on the news. The company filed for bankruptcy last October on the back of years of losses. The company says it hopes to be profitable by 2018.
Aside from shifting manufacturing locations around, the company hopes to begin selling more complicated articles of clothing including jeans. While these will not be produced by American Apparel employees, the leadership of the company stresses that the products will still be made in the United States.
Many of the layoffs are occurring in the company’s hometown of Los Angeles. Founder Dov Charney was ousted from leadership this years the company struggles to recover from bankruptcy. The leadership change and decrease in real-time production promises to steer the company in an entirely different direction. Instead of provocative billboards with outspoken messages and a commitment to local workers producing high-quality garments, the new leadership is beginning to rethink the wisdom of such a setup.
Though the company claims that only a fraction of its garments will be outsourced, it could spell disaster for all of the firm’s employees in the Los Angeles area. According to chief executive of LA investment banking firm Grief and Company, Lloyd Grief, “They’re headed out of Dodge. They are going to outsource all garments. It’s only a matter of time. They might be kind of testing the waters to see what the market reaction is.”
So will American Apparel’s decision to rework its manufacturing process alienate its hard-core fans and hipster following? With the vast majority of its products being simple garments like T-shirts, a shift to more elaborate and complicated garments could scare away some of the company’s loyal no-frills customers in search of something with a greater air of American ‘authenticity.”
But the decision to become more of a one-stop shop for high-quality outfits could prove to be a good move for the company. Instead of spending precious resources on manufacturing T-shirts, the company can focus on becoming a more complete clothing retailer and appeal to more customers. For the workers in American Apparel manufacturing plants, however, it may already be too late.