The battle between American Apparel’s new regime and those still loyal to founder Dov Charney has gotten genuinely ugly.
Workers Together Save American Apparel / Via youtube.com
More than a year after founder Dov Charney was ousted from American Apparel, the conflict between workers who remain loyal to him and the company's new management keeps escalating. Last week, workers beat a piñata of the company's new CEO, Paula Schneider, in front of American Apparel's Los Angeles headquarters in "I Heart Dov" and "Save Our Company" t-shirts, carrying "Dov Wouldn't Let This Happen To Us" signs.
"Many of you have reached out to me to express your dismay over the demonstration held out in front of our corporate HQ yesterday that included violently beating a Piñata in my likeness," Schneider, who was installed eight months ago, said in an employee-wide memo on Aug. 20 that was obtained by BuzzFeed News. "I'm sorry this happened and I thank you for your support and kindness."
She told employees that the behavior of a small group that supports these "intimidation tactics," such as an "attack" at the company's headquarters the prior week and the piñata's beating is "truly appalling." The attack refers to a protest over the recent firings of employees seeking to organize, including the termination of Esmeralda Morales, a garment worker who was was a leader in such efforts.
"Let me be clear: I believe in the right to free speech but not violence in any form," she wrote. The full memo is included below.
A spokeswoman for the company declined to comment. Charney also declined to comment.
The piñata built to look like Schneider, which was made in downtown Los Angeles by local vendors, was an extremely unusual and shocking form of corporate protest in the U.S.
A video of the beating, posted to YouTube by the Workers Together Save American Apparel group, noted at the start: "In Mexico, the piñata has a long tradition of being used as a prop for political commentary of unpopular public figures." Many of the company's workers are Mexican immigrants. The piñata, like more uplifting incarnations, was filled with gold chocolate coins and play money. The video said these were meant to illustrate Schneider's "reckless" handling of the company's finances.
Some employees involved in the demonstration with the piñata were fired, according to two people familiar with the matter, who spoke on the condition of anonymity.
Workers Together Save American Apparel / Via youtube.com
Labor unrest has plagued the company this year while it also grapples with falling sales, a deteriorating balance sheet and a new brand ethos. As part of an attempted turnaround under hedge fund Standard General, the company has announced store closures and additional job cuts after laying off about 180 people earlier this year. Further, Schneider's memo noted that the company, which makes all of its clothing in the U.S., is now battling more than 30 lawsuits from Charney and current and former employees. Charney is also supporting unionization efforts.
"We have had to defend all of these lawsuits and pay very costly attorney's fees, instead of buying yarn and fabric to help the turnaround plan," Schneider wrote. She added later in the memo that the company was able to obtain additional funding last week that will help pay for yarn and fabric.
American Apparel listed the unionization of its workforce as a potential risk in its annual filing in March, and noted that non-union groups were making demands of the company and seeking recognition. The General Brotherhood of Workers of American Apparel has been seeking recognition from the company's management and formally registered with the U.S. Department of Labor last week, according to the Los Angeles Business Journal.
Concern has floated this summer about a potential American Apparel bankruptcy after the company said that it can't guarantee it will have enough financing to "meet funding requirements for the next twelve months" and that shareholders may lose everything.
But if American Apparel were to file for bankruptcy, that probably wouldn't mean the end of the brand — though it would certainly radically change the company that exists today. Standard General, the hedge fund overseeing American Apparel, is also involved with RadioShack, which filed for bankruptcy earlier this year and still exists, though in a smaller state. C. Wonder, Chris Burch's retail venture which also went out of business earlier this year, will relaunch on QVC in 2016. And Delia's, that once-beloved 90s retailer better known as dELiA*s, is back in an online form after going under late last year.
Schneider is hoping that she can build American Apparel to "stability and then to profitability," she wrote in the Aug. 20 memo.
"It is a particularly tough environment for retail in general," she wrote. "Many retailers are having a difficult time, including Gap, Urban outfitters and J Crew. American Apparel is also experiencing a decline in sales. We are taking steps to rebuild our business. Refreshing the store inventories with new products and building up the right wholesale inventories are all part of the turnaround and will require the continued commitment of our skilled sewers and production staff to accomplish our goals."
American Apparel's shares closed at 23 cents each yesterday, a 78% decline for the year.
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