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.
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.
Warning: The piñata beating is graphic.
View this video on YouTube
Full letter from American Apparel CEO to staff:
August 20, 2015
Dear American Apparel Employees:
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. I'm sorry this happened and I thank you for your support and kindness.
The behavior of a small group that support these intimidation tactics, including the attack last week on our headquarters at 747, and now, the beating of the piñata is truly appalling.
Let me be clear: I believe in the right to free speech, but not violence in any form. During last week's attack, some of our employees were pushed and shoved and treated very disrespectfully. There were also instances of rioters forcing their way into our colleagues' offices to yell and scream at them while they were working hard to collectively try and turn American Apparel around. This behavior is not helping to move our company forward in any way. In fact, it is tearing it down. I have to question the motivation of these individuals and so should you. I also will not tolerate any type of physical or threatening behavior.
Some of you wonder why Esmerelda Morales was terminated. The fact is that Esmerelda sent me a very threatening and disturbing email showing a war zone of people getting blown up. This is intimidation and not acceptable workplace behavior from anyone as is clearly outlined in our business code of conduct. In addition, a group showed up at one of our stores last Saturday to picket a retail store event (to increase sales) and harassed our employees at the store. We have heard that the plan is to now focus on picketing our retail stores. In fact the picketers left here yesterday afternoon and picketed our Little Tokyo location. This resulted in customers leaving our store. If this continues we will lose sales and lost sales mean lost jobs. I would encourage all of our employees to support our company, and not tear it down.
When I came into American Apparel 8 months ago, the company had lost over $340 million dollars in the last 5 years (and had not been profitable since 2009), was in severe debt (over $30 million in past due payments), had built a massive inventory of slow moving products, had loans that require us to pay over $34 million a year in interest and very little money in the bank to buy the new product we needed for both retail and wholesale. This was a very challenging situation.
In addition there have been over 30 lawsuits filed against the company by its former CEO, several former employees and a small amount of our current employees. The damages that they are seeking are well over $200 million dollars. 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.
We were also told by a spokesperson for the National Immigration Forum that they were contacted by terminated management and instructed "not to work with us". They then cancelled the citizenship classes being held onsite at 747. We are trying to find other options. This directly affects some of our hard working employees who are seeking U.S. citizenship.
Business has been tough this year. It is a particularly tough environment for retail in general. 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.
My only goal is to work together to bring American Apparel back, first to stability and then to profitability. To that end, we have been able to get the additional funding that I told you about earlier this week. This allows us to buy the yarns and fabric we need to create the right product and maintain the inventories needed to increase sales. This also allows us to pay out the last of the bonuses owed to the production staff. That will be done in the next week. I sincerely appreciate all of your patience.
Each day I come to work with a positive attitude and work very hard. I know the vast majority of you do as well. I appreciate the outpouring of support and I will continue to move the company forward to get new styles in our stores to improve our sales, to create the right amount of good wholesale inventory and to drive out ecommerce sales. That is my commitment to each of you.
I'm aware that there are some people in the work force that aren't happy working at American Apparel anymore. If that is the case, you always have the right to find a job where you will be happier. What I ask is that you allow the rest of us who are here to work hard and to rebuild American Apparel to be able to do our jobs without threats and violence.
Let's work together to build a great future for American Apparel.
Paula Schneider
Chief Executive Officer (CEO)
American Apparel