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American Apparel Notifies Factory Workers of 3,500 Potential Layoffs

American Apparel may be axing jobs at its three Southern California facilities.

According to the California Employment Development Department (EDD), American Apparel warned 3,457 employees on Nov. 7 of potential layoffs in January, due to the possible sale of the company to Canadian clothing tycoon Gildan Activewear, The Los Angeles Times reported.

EDD’s Warn Report was sent to 332 employees in Garden Grove, California, 959 in South Gate and 2,166 employees at American Apparel’s Los Angeles headquarters. Analysts said the potential layoffs would be detrimental to Southern California’s apparel manufacturing sector, which has already been on a downward spiral in recent years.

Although the EDD released “Closure Permanent” messages to employees, American Apparel on Monday said that “layoffs are not certain” and that the message was “purely a legal precaution.”

On Nov. 14, Gildan Activewear signed an asset purchase agreement (APA) to acquire American Apparel for an estimated $66 million, the same day American Apparel filed for Chapter 11 again within a little more than a year. Gildan Activewear will incorporate the bankrupt brand into its print business, allowing American Apparel merchandise to reach a new consumer demographic.

With the acquisition, Gildan Activewear expressed interest in keeping most manufacturing in the U.S., to support domestic production initiatives.

“We felt like ‘made in America’ is an inherent part of that brand,” Gildan Activewear VP of corporate communications Garry Bell said in November. “It is our intent to continue that focus.”

Despite American Apparel’s sales agreement with Gildan Activewear, employees are still uncertain about how the new ownership would impact their jobs.

According to a November letter sent to employees by American Apparel chief human resources officer Craig Simmons, the bankruptcy filing still allows other buyers to submit offers for American Apparel’s retail business. Analysts said if another buyer were to express interest in American Apparel, layoffs are likely even though a small portion of manufacturing would remain domestic.

Customer Growth Partners president and retail expert Craig Johnson said, with another buyer, a majority of production could likely be moved to manufacturing facilities in the Caribbean and Central America where it’s a “much lower cost than anywhere in the U.S.,” he told the LA Times.