American Apparel has commenced its layoff of around 180 employees.
Most of the layoffs are in its manufacturing section.
All affected employees will be informed by Friday, according to the company. The group has not confirmed if more layoffs were imminent after this batch, but stated that assessment of its work force would continue.
Wages have not been reduced and the company will continue production in its downtown Los Angeles factory. The company stated that its wage for an average sewer is around $25000 or $12 per hour, which is much higher than other lower paid jobs in retail.
The company is taking this route in a bid to survive and thrive in the industry.
The company’s board voted in June to oust the founder, Dov Charney. This came about after allegations of abuse of company funds and has resulted in an inquiry by the Securities and Exchange Commission.
Dov Charney has denied these allegations and stated that this was the result of a plot to get rid of him. He has vowed to return to his previous position by teaming up with Standard General, a hedge fund, which will allow him to purchase a large share in the company. However, Standard General has agreed to back him only once he has been cleared of any wrongdoing, but the fund eventually supported his termination.
Charney has garnered support from workers, who called for his return at a recent outdoor rally.
CEO, Paula Schneider, said the company needs to gain cash, but the cutbacks were not done for this reason. It was done in a bid to ‘declutter’ its stores.
A recent earnings report indicated that the company had lost a further $28m during the fourth quarter, with only $8.3m in cash at the close of the year. To obtain liquidity, the company has arranged a Standard General loan to the tune of $15m.
There are no plans to lay off retail store workers as the company hopes to grow this section of its business. The overhaul of the design department has resulted in many employees appointed by Charney losing their jobs.