AMERICAN APPAREL: growing pains
Christina Eaves, Sandy Johnson, Lisa Tousant, Sheridan Mascarenhas, William Drescher
Faculty supervisors: Ellen A. Drost and Stephen J. J. McGuire
In 2007, American Apparel, Inc.[i] was about to change from a private firm to a publicly traded company. It had become the largest vertically-integrated garment manufacturer in the United States in less than ten years, bucking a trend in the garment industry to outsource manufacturing to low cost countries. Its founder and Chief Executive Officer, Dov Charney, was a self-proclaimed hustler whose lifestyle and management techniques generated controversy that most publicly traded companies eschewed. Charney’s open and frank attitude about progressive social issues and sexuality stirred up media feeding frenzies, from rag trades to nationally syndicated television. The provocative photos he selected for American Apparel’s ad campaigns grabbed people’s attention – not always in a positive way. The very way the company had chosen to go public indicated much about the CEO’s refusal to conform to tradition; in the summer 2007 American Apparel would merge with the special purpose acquisition company, Endeavor Acquisition Corp. In addition, the company’s commitment to paying high wages and generous benefits to it’s mostly immigrant workforce, and its “Made in USA” stance, might not appeal to Wall Street investors who believed that an adequate return on investment took priority over political correctness.
Should Dov Charney allow these Wall Street financiers to step into the American Apparel sandbox to play? What changes would American Apparel need to make once it became a publicly traded company? Could it maintain its expensive manufacturing base in Los Angeles? Would outsider scrutiny of its CEO, its provocative marketing, and progressive personnel policies and social agenda force the company to make changes in strategy and culture?