American Apparel Workers Defect as Layoffs Hit the Hipster-Clothing Firm
UPDATE at 1:56 p.m. Friday, April 3, 2015: Dov Charney speaks. See what he has to say at the bottom of the story.
About 180 workers were laid off from L.A.-based American Apparel this week, the company said. Today the last of the workers who are being cut will be notified.
The layoffs have emboldened a fledgling movement to organize a manufacturing workforce that has made the hipster-clothing maker famous for its embrace of Latino immigrants.
Under former chief Dov Charney, the company promoted the slogans "Legalize L.A.," "Sweatshop-Free" and "Made in USA."
Nativo Lopez, whose organization Hermandad Mexicana has been rallying workers, said that one-third of the employees have signed authorization cards to have the group represent them in collective bargaining.
By the end of April, he said, Hermandad should have about 60 to 70 percent of the workers signed up; at that time, the organization will take its organizing effort to the National Labor Relations Board for an election that could sanction a bargaining unit.
*The company that once boasted of 1,500 [manufacturing] workers [at the main downtown warehouse] or more now has closer to 600 according to what Lopez told us. He said most the layoffs appear to be affecting the company's core, downtown operations, though it has a few other plants in Greater L.A.
American Apparel has been squeezed under the weight of hundreds of millions of dollars in debt used to expand retail operations around the world under Charney's reign.
Paula Schneider, CEO of American Apparel, said this in a statement sent to the Weekly:
While we were disappointed that we had to make this very difficult decision, it is important that everyone understand that American Apparel is managing a turnaround.
This change is meant to help restore the financial health of the company, which under previous management saw losses of more than $300 million over the past five years.
Layoffs are not new to American Apparel. Under Dov Charney's leadership, in 2013, 160 employees were laid off, and in 2014, prior to his departure in June, 238 employees were laid off.
Of these groups, only 10 percent of employees were given severance pay. This week, our new management team is offering severance to every employee affected by the layoff.
This has been a difficult week, but we have to conduct business differently in order to thrive.
Charney, who founded the company, was ousted recently following allegations of sexual improprieties. He has denied the allegations and hinted in a U.S. Securities and Exchange Commission filing that he would fight his termination.
The controversial Charney won over workers during his tenure by paying them more than minimum wage. In a downtown L.A. that is America's fashion-manufacturing capital, some workers don't even make the minimum.
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Lately Charney has been hitching his trailer to Hermandad's organizing effort. He spoke at one of the group's weekend meetings for workers, criticizing the firm for allegedly dismantling the goodwill he established with the workforce, Lopez said.
Lopez said the company recently vowed not to institute layoffs. He called the firings "really sleazy stuff."
The workers also have endured the lack of their annual holiday bonus, reduced hours and furloughs, Lopez alleged. Employees, he said, are "righteously pissed off."
UPDATE at 1:56 p.m. Friday, April 3, 2015: We spoke to Charney on the phone. He offered up this response to the situation:
The company is not managing a turnaround. It is managing a severe decline in sales that has taken place under the stewardship of a hedge fund, Standard General. In the fourth quarter the sales decline was almost 10 percent. Sales at the company have declined for the first time in almost half a decade, and they’ve rarely declined in the last 20 years.
Right now the company is laying off qualified workers, some of whom have worked for the company for over 12 years. The bottom line is the company is facing a sales crisis that began after my ousting and the ousting or departure of dozens of my colleagues.
In the spring and summer of 2014, we were hiring garment workers— not laying them off. I was personally involved in that effort.
Whereas the company chooses to emphasize previous net losses, they fail to emphasize that that the company has had positive EBITDA [earnings before interest, taxes, depreciation and amortization] every year for the last 10 years, except one. In fact, during the last 10 years, the company has earned over $300 million of EBITDA, on a sales base of slightly less then $5 billion. The net earnings do not reflect the true operational earnings history of the company or reflect the opportunity of the future earnings power of the company. The American Apparel business model has proven itself to be operationally profitable.To generate net profits after capital costs and non cash, sales need to be scaled to the $800 million level.
*The company disputes the figures above but wouldn't provide exact numbers of downtown manufacturing workers. It says there are 10,000 employees worldwide, including at retail stores. The firm says it has 4,800 manufacturing and office workers in Greater L.A.
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