American Apparel Memo Alludes to Outsourcing, Layoffs

Paula Schneider, CEO of Los Angeles-based American Apparel, reportedly sent an email to employees detailing numerous changes going on within the company. One such change being the possibility of outsourcing complicated items, such as denim, to a third-party company. However, the Los Angeles Times reported that Schneider stressed that the products still will be made in the U.S.

The Los Angeles Times, which received a copy of the internal memo, reported that only a few items would be manufactured outside of Los Angeles.

Complex pieces, such as jeans, only accounted for 20 percent of American Apparel's total garment output in the last few years. About 80 percent was basics, such as T-shirts. The memo reportedly detailed that the company's workforce was divided equally between basics and denim.

So where exactly would the company move its production? The Los Angeles Times reported that analysts are setting their eyes on the South, which would let American Apparel manufacture items at a lower cost.

This wasn't the only major news in the memo. The Los Angeles Times reported that—according to Nativo Lopez, an advisor helping American Apparel employees' unionizing efforts—the company is laying off approximately 500 employees in Los Angeles.

Schneider reportedly said in the memo that this announcement came after "months of careful and rigorous review."

"We have streamlined the number of items we display in each of our stores," she wrote, according to the Los Angeles Times. "Earlier this year, we closed a number of stores to focus on our best-selling locations."

Lopez told the Los Angeles Times that laid-off employees received a severance package of two months' pay, with the option for an additional $800 if they waived their rights to file claims against American Apparel.

This comes after a few other noteworthy events in American Apparel's recent history. After filing for Chapter 11 bankruptcy in October, the company won its court case against founder and former CEO Dov Charney regarding its restructuring plan.

We will continue to follow this story as it develops.

For more information on American Apparel, visit www.americanapparel.net/wholesale.