Last month, American Apparel once again filed for bankruptcy and said that it would be selling off $66 million in assets and intellectual property to Canadian company Gildan Activewear. It was the latest in a long line of hardships that the company had faced, including diminishing sales returns and a scandal involving former CEO and founder Dov Charney.
Now, the retailer has told nearly 3,500 of its workers in Southern California that they could be getting a pink slip. According to a report from the Los Angeles Times, the company notified workers at three of its production facilities that they could be laid off on January 6.
An official report of the potential mass lay-off was sent to the California Employment Development Department. It divvies up the worker cuts to 332 in Garden Grove, 959 in South Gate, and 2,166 in downtown Los Angeles where the company is headquartered.
Craig Johnson, president of Customer Growth Partners, points out that the layoffs could have a huge impact on the apparel manufacturing industry. “It’s a big number,” he said of the layoffs, adding that “there are not a ton of U.S. large-scale apparel manufacturers left.”
Unfortunately, it isn’t likely that the lion’s share of these jobs will be protected by any incoming buyer. Gildan Activewear has stated that it will keep a portion of the operations in the U.S, saying that the “made in America” claim was central to the brand.
However, it may choose to move most production to its hubs in Central America and the Caribbean, where costs are “much lower,” according to Johnson. Company officials have already stated that they have no interest in the 110 U.S. store locations or the other 83 found in other parts of the world.
There is a slim chance that another interested buyer could make a bid for American Apparel, since the terms of the bankruptcy dictate that an auction take place for company assets. Analysts don’t think it’s a likely move, though; and even if it was, there’s no guarantee that the new company would want to continue manufacturing activities. Johnson says that any potential buyer would only keep a fraction of the U.S. production, so it seems layoffs are an inevitability.