Business & Economy

Canadian company buys American Apparel. What's next for workers?

The exterior of the American Apparel factory in downtown Los Angeles on August 18, 2010.
The exterior of the American Apparel factory in downtown Los Angeles on August 18, 2010.
MARK RALSTON/AFP/Getty Images

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The label most associated with American clothing manufacturing has been bought by a Canadian company.

Gildan Activewear Inc. announced Tuesday it has won the bankruptcy auction to buy Los-Angeles based American Apparel with a $88 million bid.

So what will happen to American Apparel's 3500 L.A. workers who were notified last month they could be laid off as soon as last week? Gildan has not revealed specific plans, and it has sent mixed signals about its intentions. 

On the one hand, the company's spokesman told KPCC Friday that American Apparel's L.A. roots are important. 

“We realize that there’s a heritage to this brand that is based on its L.A. style as well as its 'Made in the USA' moniker, and those all are things we would intend on continuing,” said Garry Bell, Gildan's vice president of corporate communications and marketing.

But Bell stopped short of making any specific guarantees to workers and offered this hardly-reassuring statement blaming American Apparel for its inability to stay solvent: “The layoffs of the workers is a direct consequence of American Apparel going bankrupt for the second time in 13 months."

There's also the fact that the vast majority of Gildan's clothes are made in low-wage Caribbean and Central American countries and that Gildan is mostly buying American Apparel for its intellectual property, not for its factory or stores (though some manufacturing equipment is included in the deal.)

"The value of American Apparel lies in its brand," said Lloyd Greif, president & CEO of the Los Angeles-based investment banking firm Greif & Co, which has closely followed the company. “If you’re really interested in buying a brand, and that’s what you’re looking for, then you don’t have a need for the manufacturing facility or the retail stores, and that’s where all the employees are."

Gildan's transaction still needs to be approved by a bankruptcy judge Thursday. Gildan says it expects to complete the deal by early next month.

"The American Apparel brand will be a strong complementary addition to our growing brand portfolio," Glenn Chamandy, president and CEO of Gildan said in a statement Tuesday. "We see strong potential to grow American Apparel sales by leveraging our extensive printwear distribution networks in North America and internationally to drive further market share penetration in the fashion basics segment of these markets."