American Apparel, the Los Angeles company that made all of its clothes in the USA, filed for Chapter 11 bankruptcy protection on Oct. 5, 2015. Chief executive Paula Schneider said the company had no plans to move manufacturing out of Los Angeles and that the restructuring would let it keep production in the USA.
The restructuring
- The company said 95% of its secured lenders had agreed to a deal. Lenders would trade about $200 million in bonds for equity, cutting debt to no more than $135 million and annual interest by $20 million.
- American Apparel reported a $19.4 million loss in the second quarter of 2015, its 10th straight quarterly loss, as sales fell 17%.
- Its filing listed assets and liabilities of $100 million to $500 million each.
The USA-made model under pressure
The company employed about 4,600 sewing and manufacturing workers in Southern California, the Los Angeles Times reported. It cited garment worker pay of $1,440 a month at California’s $9 minimum wage, against monthly apparel minimums of $68 in Bangladesh, $90 in Vietnam, $127 in Mexico and $156 in China, according to International Labor Organization figures.
Some analysts told the Times the company should move production abroad to survive. Others said its brand was too tied to USA manufacturing to change, or suggested moving to a lower-cost part of the USA. Net losses had totaled nearly $384 million over 5½ years.
Gildan Activewear later bought the brand, and the relaunched American Apparel limited USA-made production to a small capsule collection (our coverage).
Source & credit
Sources: The Guardian: “American Apparel files for bankruptcy”, Oct. 5, 2015; Los Angeles Times: “American Apparel hangs on to its made-in-America model — by a thread”, by Shan Li, Oct. 7, 2015.