American Apparel Sale Update: No Change in Worker Standards
American Apparel still has no information or press release available on its website regarding its sale to the Endeavor Acquisition Corporation. News in other outlets sheds a bit more light on some financial details:
The combined company will operate as American Apparel and is expected to trade publicly on the American Stock Exchange or another national stock exchange and will remain headquartered in downtown Los Angeles. Founder and Chief Executive Officer of American Apparel Dov Charney will remain CEO, while core members of the management team responsible for American Apparelâ€™s strong growth will also remain with the company….
â€œThis is an exciting time for American Apparel â€“ acquiring the necessary financial foundation will give us the opportunity to realize our bigger dreams,” said Dov Charney, American Apparel Founder and CEO. “By leveraging art, technology and design, we will continue to bring people clothes they love to wear. This transaction and the infusion of substantial capital from Endeavor will allow American Apparel to capitalize on the many opportunities in front of us ranging from improving our manufacturing processes to implementing our global growth plans,â€ said Charney.
â€œAmerican Apparel is a unique company in the apparel manufacturing and retailing industry with a visionary leader, passionate employees and loyal customers. Its cutting-edge brand building efforts and vertically-integrated â€˜made in downtown Los Angelesâ€™ operation have created significant brand awareness and a â€˜cultâ€™ status worldwide,â€ said Eric Watson, Chairman of Endeavor Acquisition Corporation.
â€œAmerican Apparel has a solid top-line strategy with good operating margins and significant expansion potential of its domestic and international store count,” said Jonathan Ledecky, President of Endeavor Acquisition Corporation.
â€œWe have a special culture and ethos at American Apparel including a commitment to excellence. I am very excited about sharing my potential good fortune with my fellow employees as well as providing our millions of loyal customers the opportunity to become shareholders through this potential merger,â€ said Charney.
Here’s a smidgeon on American Apparel’s worker standards after the sale, which will happen this summer:
From American Apparel’s inception Mr Charney has put great emphasis on making his workers happy. Pay is performance-related, and amounts to $12 an hour on average, far above California’s minimum wage of $6.75. American Apparel staff can buy subsidised health insurance for $8 a week. They are entitled to free English lessons, subsidised meals and free parking. Their workspace is properly lit and ventilated. When the company goes public employees will receive an average of 500 shares, expected to be worth about $4,500.
Anti-sweatshop activists praise Mr Charney as a pioneer of the fair treatment of garment workers. The benefits he provides are expensive: subsidising health insurance costs his firm $4m-5m a year; subsidising meals costs another $500,000. Even so, Mr Charney says he has no plans to scale back these benefits. He considers his contented workers the reason for his success. Treating them well means they are less likely to leave, for one thing, which saves money. â€œAmerican Apparel is not an altruistic company,â€ says Mr Charney. â€œI believe in capitalism and self-interest. Self-interest can involve being generous with others.â€
Anti-globalisation activists like Mr Charney, too. Whereas Gap, another American fashion chain, outsources 83% of its production to factories in Asia, all of the 4,000 or so workers involved in American Apparel’s manufacturing process work in the same factory in downtown Los Angeles. But this is not because Mr Charney is opposed to outsourcing or globalisation. His motive, once again, is self-interest: it gives him control over every stage of production, and enables him to monitor the fickle fashion market and respond quickly to new trends. In any case, he cannot outsource anything, he says, because he lacks the necessary infrastructureâ€”and he has no plans to set it up.
I don’t care what Charney’s motivations are. As long as he keeps treating his workers well, we’ll keep offering our progressive political designs printed on American Apparel’s organic cotton shirts and other clothing, including fitted t-shirts, long sleeve raglans, and tank tops.
I’m relieved to hear Charney say he won’t change worker standards as CEO of bought-out American Apparel. But I’ll keep watching, too, because the company will be publicly traded, which leads to those classic pressures to push profit ever higher, higher, higher.