American Apparel: inspiring, not hiring

This week American Apparel, fashion’s “cool kid” and recent financial dunce, started on the economic road to recovery to become the prospering beacon of trend they once were.

To those of you who aren’t familiar, American Apparel is a fashion manufacturer, distributor and retailer based in Los Angeles. They specialize in retro-hipster-chic clothing frequently seen around college campuses and cosmopolitan areas.

American Apparel provides all of its employees with fair pay, great benefits and safe working conditions.

The company delivers its products to 285 stores worldwide and manages to remain sweatshop free, following a more compassionate track than many other fashion retailers.

However, the company’s list of financial faux pas is troubling.

American Apparel missed numerous deadlines to file its 2010 first quarter sales numbers with the Securities and Exchange Commission. It reported huge losses of 5 to 20 percent in same-store sales of 2009 and almost faced default on an $80 million debt before its lending company agreed to re-negotiate the terms. And this July, it had their private auditors resign because of the company’s “material weaknesses in internal control over financial reporting.”

In short, American Apparel needs some schooling about how to run a financially ethical and prosperous company.

Until just now, the company has been refusing to deal with its monetary woes.

American Apparel made a bold hire in the form of Tom Casey, former Chief Financial Officer of Blockbuster. Casey left in the wake of Blockbuster’s bankruptcy filing and was named acting president of American Apparel this past weekend.  

Hopefully Casey’s experience in dealing with failing companies will aid him in making American Apparel more financially responsible.  

I remember first discovering American Apparel in a Newsweek piece when I was in high school. I thought their policies on suitable treatment of their workers were brilliant, and I wondered why all companies couldn’t do the same.

I would later observe that with ethical treatment, comes a price.

The main motive behind any company choosing to outsource its production needs to a sweatshop is cost. They are significantly cheaper but infringe on human rights.

It’s inspiring that American Apparel has placed such a high value on its employees, who at other factories would be earning below minimum wage for much more arduous work and less job security. And the company has not compromised its promise to its employees despite the recession.

Before this new change in management, when it looked as if American Apparel’s time had run out, I am not ashamed to say I kind of wanted the company to fail.

If they were going to fail because of bad business ethics and management, let them fail.

I would have preferred it if the company could have saved itself from bankruptcy rather than relying on the second chance presented by its lenders.

Don’t get me wrong; I would rally behind any apparel manufacturer that could deliver industry-sized quantities of clothing to stores worldwide without the use of sweatshops no matter what I thought about their product.

But as a customer, I feel a bit disenfranchised by American Apparel hiding behind its social responsibility while failing to comply with the authorities in financial matters.

American Apparel’s investment in workers should be an expectation, a norm for all companies, not a humanitarian extra that excuses the company’s inability to follow rules and report things on time.

It would be beneficial for other companies to have a model similar to American Apparel that achieves ethical production and remains to stay afloat in the economy.

I don’t think we should applaud a company for accomplishing this when they haven’t.

With the addition of Casey, the company is trying to turn over a new leaf and make financial responsibility its main goal, in addition to creating clothes that appease the tastes of its young, trendy base.

I am now hoping that in the future we see American Apparel stick to its principles as well as become a compliance machine, never missing a deadline for filing its numbers.

I think with the right management, the company can be a great model for maximizing profit and minimizing unethical treatment of workers.


E-mail: abeander@indiana.edu