American Apparel Bankruptcy


American Apparel Layoffs Employees in Bankruptcy Proceedings

By Jessica DiNapoli and Lisa Richwine

Canadian apparel maker, Gildan Activewear Inc (GIL.TO), has withdrawn its plan to acquire the manufacturing operations of American Apparel LLC.  This has forced the company to layoff workers. 

Gildan placed an $88 million bid in a bankruptcy auction last week, which has given the company rights to the American Apparel brand.  Gildan was interested in acquiring US manufacturing operations to produce retail that said "Made in the U.S.A."

Arielle Patrick, American Apparel spokeswoman, said the company was laying off about 2,400 workers in Southern California.  The company had 2,166 employees at its headquarters in Los Angeles, and 959 employees at the nearby South Gate manufacturing facility.

On Monday, Francisco Morales, 56, clothing maker of seven years at the Los Angeles plant, was one of the American Apparel workers to be handed his employment termination notice and his last paycheck.

"It's really bad what happened here, really bad," Morales said in Spanish, according to a co-worker who translated into English. The worker has three children and was worried about finding another job with the same benefits, because of his age.

"The company issued a WARN Act notice several months ago, letting employees know that depending on the buyer of the business, a sale could result in eventual shrinkage of some business areas," American Apparel said in an email.

Last week, American Apparel reached a preliminary deal to sell its Garden Grove manufacturing site to textile manufacturer Broncs Inc, re-launching it as a knitting and dyeing facility.

"The company is pleased that it was able to secure a second agreement with Broncs, which plans to save over 300 jobs when they take over the Garden Grove facility," the statement added.

Gildan had already indicated it would not take on any of American Apparel's 110 stores.  Without another buyer for these stores, American Apparel has started to shut them down.

In a Chapter 11 filing, American Apparel's second bankruptcy filing in November with about $177 million in debt after the failure of a turnaround plan. It had filed for its first Chapter 11 in October 2015 and emerged from bankruptcy early last year.

Gildan has Latin manufacturing facilities with over 42,000 employees in Caribbean and Central American countries and the company does not manufacture clothes other than socks in the United States.

Being conscious of transportation costs and energy costs, Gildan plans to acquire American Apparel's manufacturing facilities to develop a "go-forward" plan for the brand and its "go-to-market" strategies. American Apparel New Jersey locations include Cherry Hill NJ, Hoboken NJ and Secaucus NJ.

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