American Apparel’s bankruptcy filing this week provided new fuel to a workers union that has long-called for the reinstatement of founder Dov Charney.
The General Brotherhood of Workers of American Apparel rallied Wednesday afternoon, marching steps away from the entrance to the company’s headquarters in downtown Los Angeles.
American Apparel’s bankruptcy filing early Monday and subsequent delisting was new fodder for the rallying workers, whose top concern remains the company’s manufacturing jobs. The union said it represents some 3,000 workers.
“Everybody’s disappointed,” said union president Stephanie Padilha.”[Workers] are really afraid of losing their jobs. Anything can happen at this time. In the next two to six months things will change completely and now the company’s not public anymore, which means the bondholders will own the company. Anyone can decide what’s going to happen. Either they’re going to sell the company or they’re going to [license it].”
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The company countered the concerns voiced during Wednesday’s protest with its own statement saying most of its workers have rallied around its more recent decisions.
“The majority of our workforce has expressed support for the company’s turnaround plan,” a spokesperson said. “This restructuring will enable American Apparel to become a stronger, more financially stable company. Through the restructuring process, we will be able to refocus our efforts on the execution of our strategy to restore the company to financial health. This protest, attended by a very small percentage of our workforce, represents the exception, not the rule. The behavior of this group is not representative of our loyal and deeply valued employees.”
Chief executive officer Paula Schneider told WWD earlier this year, in discussing the challenges she faced in turning around the business, that the company has had to churn through mounds of unsold inventory left by previous management.
Schneider added in an interview with WWD Monday that the lack of newness in product has also been a hurdle.
“There was tremendous inventory from five years or more,” she said during this week’s interview. “At the end of every season, it would do a seasonal flip, bring back the inventory to the warehouse and then bring it back to the floor the following year. If [consumers] liked what they saw [the first time], they bought it, but they’re not going to buy it again. They became fatigued.”
Padilha, a former American Apparel merchandising executive, said the company’s lack of focus on classics, such as the disco pant and other items along with inadequate size offerings at the store level, only exacerbated its issues in the months leading up to the bankruptcy. She also alleged the company had more recently begun outsourcing some of the production process to area contractors.
A person close to the matter refuted the claim.
Meantime, sources said meetings have been taking place between Charney and prospective investors in more recent days.
With the bankruptcy, which the company said in its filing it expects to emerge from in the next three months, a new uncertainty looms over American Apparel’s fate should a buyer—that does not include Charney—step into the picture.
Bankruptcy judge Brendan L. Shannon approved some $90 million in debtor-in-possession financing in a swift decision that came a day after the Chapter 11 filing.
Shannon also presided over the RadioShack case in which New York hedge fund Standard General—which has control of Charney’s 42 percent equity stake in the company—bought the electronics retailer out of bankruptcy.