American Apparel Confronts New Debt

13

Author: Iris Edwards

American Apparel, the clothing company geared toward the young alternative scene, is facing financial problems. Between August 2009 and August 2010, American Apparel stocks plummeted 66 percent, according to Bloomberg.com. In 2009, American Apparel saw about a million dollars in profits. In 2010, business for American Apparel fell precipitously and they accumulated an 86 million dollar deficit.

There have been whispers of impending bankruptcy before, but on March 30, the company released official information that unless sales pick up dramatically and their general financial standing improves, bankruptcy could be a very realistic possibility. On April 21, they were approved for a loan of 15 million dollars, but their deficit will still be substantial. Unfortunately for the retailer, the financial outlook for 2011 does not look much better than the outcome of the 2010 business year.

American Apparel’s financial peril is only one of the reasons for their recent media attention. In March of this year, a former American Apparel employee filed a sexual harassment suit against American Apparel’s CEO Dov Charney. This lawsuit is the second charge to be levied against Charney this month. Previous to these March lawsuits, Charney had been sued at least four times for sexual harassment since the mid-2000s, according to the New York Times.

Although American Apparel staunchly denies that any of these claims are true and stands behind its CEO, Charney has openly admitted to having sexual relations with many of his employees. According to the New York Times, Charney defends himself against the allegations of sexual assault by explaining that he often holds meetings in his bedroom.

Despite these shady allegations, many people applaud American Apparel for its dedication to American-made products and its rejection of sweatshop labor practices. Supporters say that even though Charney has had some legal problems, he should be appreciated for his business practices. Globally, American Apparel employs about 10,000. Its Los Angeles factory accounts for about 5,400 of those jobs.

In 2009, the company was forced to fire a quarter of their workforce in their garment factory located in Los Angeles because they were illegal immigrants. Considering the proximity to the border, a company in Los Angeles is probably more likely to hire illegal labor due to the larger population of undocumented immigrants.

That being said, American Apparel was not guilty of hiring one or two undocumented aliens — they were forced to fire 1,800 illegal members of their labor force. For a company that boasts such high standards of patriotism and morality, this substantial amount of what could arguably be called illegal exploitation is paradoxical.

Times are hard for everyone, so it is easy to feel sympathetic toward American Apparel’s situation. Still, some of the other controversy around the business should not be overlooked.  Sexual assault, exploitation and harassment are serious crimes. In addition to employing illegal workers as a huge proportion of a labor force, Charney’s track record doesn’t merit confidence.

Despite this, American Apparel still has staunch supporters that admire its business practices and anti-sweatshop policies. In addition, investors are still willing to fund the controversial company to the tune of a 15 million dollar bailout. This company is a source of a lot of positive and negative attention, but regardless of whether it is an ethical company, the depth of its financial woes may prove insurmountable for American Apparel.

 

This article has been archived, for more requests please contact us via the support system.

Loading

LEAVE A REPLY

Please enter your comment!
Please enter your name here