With Donald Trump pressurizing companies to subscribe to his agenda, American companies such as Amazon.com and Forever 21, could succumb to cost conscious competitor such as Canada’s Gildan Activewear Inc.
According to sources familiar with the discussion at hand, online retail giant Amazon.com and teen apparel store chain, Forever 21 Inc, are the companies who are eyeballing bankrupt American Apparel LLC for a potential acquisition.
The auction of Los Angeles-based American Apparel in bankruptcy court, whose branding theme “Made in the U.S.A” is streamlined with the upcoming U.S. administration, will now determine the future of the clothing manufacturer.
Significantly, California is one of the most expensive U.S. states in terms of labour costs.
President –elect Donald Trump has made the keeping jobs in the U.S. a steaming hot issue. On Tuesday, Ford Motor Co announced the reversal of its plan for a $1.6 billion factory in Mexico after it received stinging criticism from Trump. Ford Motor has now said it would add 700 jobs in Michigan.
As per sources familiar with the matter at hand, Amazon and Forever 21 are the lead contenders for American Apparel ahead of today’s deadline for submitting offers of acquisition.
A successful offer needs to be more than the $66 million stalking horse bid made by Canada based Gildan Activewear Inc, to which American Apparel agreed to when it filed for bankruptcy, in November.
Among other conditions, Gildan’s offer includes an option to retain American Apparel’s manufacturing plants in southern California, which has an employee strength of approximately 3,500 workers, making it one of the largest apparel makers in the U.S.
However, sources reveal that Gildan plans to only retain some American Apparel’s production in California, if it wins the bid. Gildan’s production facilities are mostly located in low-cost countries.
The outcome of the auction is expected to be revealed sometime next week, said the sources, who requested the cover of anonymity since the deliberations are ongoing and are thus confidential.
When asked to respond to requests for comments, American Apparel declined to comment.
Amazon and Forever 21 also did not respond to requests for comments.
In an e-mail, a spokesman for Gildan stated that the company is consolidating all of the necessary information required for its due diligence to best position itself in the auction.
On its part, American Apparel has notified its workers that they could be potentially losing their jobs as early as this month.
Gildan manufactures most of its apparels and garments offshore. Nearly 90% of its workforce is located in Central American countries and in the Caribbean.
For companies who employ 26 or more workers in California, the minimum wage is set to rise to $15 per hour in 2022.
Canada-based Gildan has yarn-spinning and distribution centers in parts of the United States which are less expensive than the state of California, which includes Georgia and North Carolina.
Gildan’s bid for American Apparel does not include American Apparel’s nearly 110 retail stores.