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American Apparel fights the 'made in America' fight. For how long?

Thousands have factory jobs in American Apparel's downtown Los Angeles plant. CEO Dov Charney preaches 'made in America.' But it's not easy.

June 03, 2012|By Shan Li, Los Angeles Times
  • Gary Friedman, Los Angeles Times
Gary Friedman, Los Angeles Times (m2n1gqpd20120531141039/600 )

Ofelia Lopez scrutinizes the hem on a hot-pink shirt fresh off the assembly line, making sure the stitching is just right. All around her, rows of workers rapidly attach sleeves, adhere labels and churn out piles of garments.


FOR THE RECORD:

The headline in an earlier online version of this article said American Apparel CEO Dov Charney recently talked of importing products. As the article indicated, the company currently has no plans to move operations offshore. What he said was: "At this time our business concept is to make everything here. But I wouldn't rule anything out."


Lopez, a Guatemala native, has worked in the apparel industry for 22 years. Now a team supervisor, she keeps a watchful eye on her group toiling on a vast factory floor, where the whir of sewing machines and the hiss of industrial steam irons drown out most other sounds.

This could be a clothing factory in Guatemala, China or Vietnam. But it's in an industrial area of downtown Los Angeles, where American Apparel Inc. is engaged in an epic — and, so far, money-losing — struggle to prove that clothes can still be made for a profit in America.

Photos: American Apparel

The company's seven-story factory, a former Southern Pacific Railway freight depot, is the biggest garment-making facility in the U.S., according to an industry trade group. Here, 4,500 workers staggered over two shifts cut, sew, fold, box and ship clothes to the company's 253 stores and other clothiers worldwide.

American Apparel may be best known for its hip stores, racy ads and controversial chief executive, Dov Charney. But this factory and the thousands it employs are what truly make the company stand out, said Sarah Y. Friedman, executive director of the National Assn. for the Sewn Products Industry. Few other U.S. clothing manufacturers employ more than a few hundred workers, she noted.

"American Apparel is very, very remarkable," she said. "Anytime you have a retailer with thousands of employees still in the U.S. — that is pretty remarkable."

At the helm is Charney, 43, an outspoken advocate for local manufacturing who founded the company 14 years ago. In a recent interview he acknowledged pressure from other company executives, board members and consultants to move manufacturing abroad.

"I want to prove myself," he said, "and I want to prove 'made in America' is a smart business."

Charney conceded that the company's finances could eventually push it to start making some products overseas.

"To say that I'm never going to import from overseas would be unreasonable," he said during an interview at his colorful factory office strewn with new designs being tested for fit. "At this time our business concept is to make everything here. But I wouldn't rule anything out."

Made in the U.S.

A native Canadian who attended Tufts University in Boston, Charney started selling T-shirts under the label American Apparel in 1987 with seed money cobbled together from his father, family friends, former classmates and parents of friends. Charney began his manufacturing operations in South Carolina before settling in downtown Los Angeles in 1997.

In recent years, Charney has battled multiple wrongful-termination and sexual harassment lawsuits brought by at least eight employees. The latest two suits, filed by five retail employees last spring, are now in arbitration, according to company lawyer Peter Schey. The company denies wrongdoing, but it acknowledged in response to a previous lawsuit that it operates "a sexually charged workplace" where employees deal with "sexual conduct, speech and images as part of their jobs."

It was an unusual admission for a publicly traded company, but investors are more likely focused on the firm's finances. American Apparel has suffered nine straight quarterly losses. The company booked sales of $547.3 million in 2011 but posted a net loss of $39.3 million. Shares closed Friday at 86 cents, down from their 52-week high of $1.13 last July 15.

"There's been a lot of discussion about the importance of American companies employing American workers. But when it comes to fashion items, that doesn't necessarily resonate with shoppers," said Anthony Dukes, a business professor at USC who has studied the retail industry. "There's not a lot of evidence to suggest that 'made in America' is a great model."

Marty Bailey, 52, is out to prove him wrong. The burly Kentucky native, who is the company's chief manufacturing officer, has seen both sides of the problem. His 28-year career includes 15 years at underwear giant Fruit of the Loom, where he oversaw factories in Kentucky, North Carolina and Mississippi. When many of those factories closed, he supervised the company's transition to manufacturing in lower-wage countries such as Honduras and Mexico.

Skilled workers

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