Business & Economy

The fate of American Apparel's 3,500 LA workers will likely be decided this week

An American Apparel store.
An American Apparel store.
William Murphy (aka infomatique)/Flickr Creative Commons

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The fate of American Apparel and its thousands of Los Angeles workers could be decided Monday, as the company goes up on the auction block in New York City.

Several companies have signaled an interest in bidding for American Apparel, which is one of the biggest clothing manufacturers in the country. Reuters reported last week that Amazon and teen apparel store chain Forever 21 were among the companies considering bids. Both would have to beat out a $66 million "stalking horse bid" from the Canadian apparel maker Gildan Activewear, which American Apparel agreed to when it filed for bankruptcy.

A Gildan spokesman told KPCC preserving the company's L.A.-made brand was important, but also said any layoffs would be the fault of American Apparel. 

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

Though Gildan makes yarn in the U.S., the vast majority of its workers are employed in low-wage Caribbean and Central American countries where clothing is sewn.

American Apparel filed for Chapter 11 bankruptcy protection in November, just eight months after exiting its previous bankruptcy. 

The company notified 3500 workers in Los Angeles in December that they could be laid off this month. The company called the notices “purely a legal precaution” and said “layoffs are not certain.” But the workers' status will now be out of American Apparel's hands, and the next buyer could find it harder to keep the L.A. factory running while still turning a profit, as L.A.'s minimum wage rises to $15 an hour in 2020.

"The value of American Apparel lies in its brand," said Lloyd Greif, president & CEO and of the Los Angeles-based investment banking firm Greif & Co, who has closely followed the company.

Greif said any suitor would likely be buying American Apparel for its intellectual property to be able to put the brand on clothing, shoes, perfume, accessories, and other goods. 

“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," said Greif. "They probably don’t even need the back office personnel. What they would do is license the brand to different manufacturers in different categories."

But Greif also considered the possibility that a big company, like Amazon, might take a loss on the L.A. factory in exchange for currying favor with President-elect Donald Trump, who has shown a willingness to publicly call out companies that move jobs overseas.

"That would give them a little PR boost with the face of the incoming administration,” said Greif.