American Apparel faces yet another year under public scrutiny after their decision to file for Chapter 11 Bankruptcy in early October, following the ousting of founder and former CEO Dov Charney in December 2014. This move, also known as “reorganization bankruptcy,” will see “the elimination of over $200 million of its bonds in exchange for equity interests in the reorganized company,” according to a statement made by the company. This move effectively cut American Apparel’s debt from $300 million USD to $135 million. This is not so much of a shock, however, after the company’s previous dance with bankruptcy in 2011 and lack of profit since 2009.
Financial troubles are not the only thing keeping American Apparel under the scrutiny of the public eye, however. Years of controversy, ranging from sexual harassment, assault, employment of unauthorized workers, exploitation, and death surround this company.
Founded in 1989, American Apparel’s cornerstone is the concept of “Made in the USA.” Their website boasts that “American Apparel garments are created by motivated and fairly paid employees who don’t just have jobs—they have careers.” Every piece of clothing is manufactured in the United States, and employees can expect wages well above the minimum, health benefits, and stock options.
However, in July 2009, after an initiative by President Obama to reduce the amount of illegal immigrants in the country by firing unauthorized workers, the auditing of American Apparel found 1,800 illegal immigrant employees in the company’s Los Angeles garment factory. The company chose to terminate all 1,800 of the aforementioned illegal employees, but founder Charney stated in an email to the New York Times that the firings “will not help the economy, will not make us safer,” and that “no matter how we choose to define or label them, [illegal immigrants] are hard-working, tax-paying workers.”
Later, in 2011, American Apparel faced scrutiny again after being forced to agree to pay $1 million USD to settle a civil suit over a worker’s death at their Garden Grove facility. Forty-nine-year-old garment worker Tuan Phan was killed in an accident involving a knitting machine after the company failed to disconnect and lock the equipment. American Apparel stated that they did not believe lack of training or oversight on their part was the cause of the accident, but agreed to pay the settlement in order to avoid the costs of litigation later. Of this settlement, only $150,000 went to Phan’s family, while $566,000 went to civil penalties and $283,000 to administrative and investigative costs.
Through all of this, Dov Charney stood as the face of the company, a figure representing the two sides of the wholly controversial American Apparel. In certain respects, he was a champion of ethical reform in the business world, advocating the responsible environmental and conscientious company standards he strove to uphold. His company stressed the use of “natural looking” and “real” women in their advertisements and company branding in efforts to engage with the girl-next-door whose body was more representative of the true American than any supermodel. At the same time, he led the brigade as ad after ad was pulled down for being considered too racy or provocative. In 2012, a total of eight American Apparel advertisements were banned in the UK for “gratuitous nudity,” some of the more famous ones giving the impression of someone peeking up a young girl’s skirt, and others showing very young looking models in very mature looking poses.
Charney was let go from the company in December 2014, his position as CEO having been suspended the previous June for, as stated in a press release, “alleged misconduct and violations of company policy.” Charney was made an advisor to the company for a time before his firing, but American Apparel ultimately chose to close the doors to their founder as “it would not be appropriate” for Charney to be reinstated. These actions followed years of misconduct and inappropriate behaviour, including the discovering of a nude video, allowing nude photos of a former staffer to be posted online, and the misuse of company funds for personal gain.
Charney was replaced with Paula Schneider, one of the first women to ever reach the top tiers of American Apparel’s management. Schneider has previously overseen turnaround at a swimsuit manufacturer, Warnaco, boosting profit by 25% in only two years.
It seems that only through watching the company carefully over the next few months and years can the public gain any insight into what successes or failures American Apparel might achieve, but Schneider is hopeful. She says in an interview with Forbes, “I think American Apparel is a cutting edge brand…we’re continuing to evaluate who our consumer is and aligning our product with their beliefs and their fashion taste.”
