American Apparel Almost Bankrupt; Supply and Demand Alive and Well

American Apparel has started dumping shares, so stock up on your leggings and Ts now.

Explanations are below, if you’ll try for a moment to ignore that arched seductress hawking thigh-highs perched atop your screen. Or the ad below, launched this week, that makes every website Not Safe For Work:

It’s just this kind of presumptive marketing that makes the company seem tawdry and cliched. American Apparel opened its doors in 2003 as an earnest appeal to progressives who believed themselves weary of sweatshop wares.

Those of us who embrace mass production shudder at the money-making alternatives left to women and children in developing nations when “sweatshops” close their doors.

Los Angeles-based, “100% sweatshop-free” atelier American Apparel has been flailing for awhile. Bankruptcy rumors circulated when the clothing company missed SEC and auditors’ deadlines. The company’s financials have been in sharp decline since early 2010:

Explanations for the company’s slide vary.

Many blame Canadian CEO Dov Charney, the hipster’s hipster. Here’s a photo of Charney:

Wouldn’t you like to be clothed by this man? I certainly wouldn’t want to be not clothed by him.

Charney famously fills the AA website and ads with half-naked young men and women in a text and position context that is…suggestive, at best. News stories ask whether the marketing is advertisement at all, or if it’s straight sexual harassment. Employees could ask the same question — isn’t this sexual harassment? — about Charney’s controversial employment practices. Charney rose to fame in part for his focus on brand consistency, hiring and firing employees based on full-length photos alone.

In response to an employee suit in 2005 for sexual harassment when Charney regularly walked around American Apparel offices in his underwear, Charney said at his deposition: “I frequently drop my pants to show people my new product.”

But enough about the controversial chocies a private company makes to garner attention in a competitive market. Mores and morals aside, and all of that. This all-American flagship has been losing upwards of $40 million per quarter for the past year.

American Apparel is marketed as the urban brand, angling for a new American mentality. Perhaps fittingly, the company has been taking hits as dramatic as the House’s turnover to the Republicans last election. This week billionaire major investor Ron Burkle dumped his AA shares, possibly in response to fast-fashion competitor H&M’s announcement that they will move into a major AA demographic, online ordering, by the end of this year. The dump puts Burkle’s interest below 5 percent, which means he no longer has to report his holdings at all.

You know things are bad when even the guy who owns a jet dubbed “Air F*** One” sells out.

What sank American Apparel wasn’t its racy ads or irresponsible employment practices. American Apparel misunderstood what American branding is all about.

Americans are not generous because it’s ironic or funny; we’re generous because we all understand the American Dream. Sure, the American Dream includes being elevated out of sweatshops. But putting in sweat and underpaid time is all part of this. Our nation’s capital runs on unpaid interns’ striving, dreaming, sweat, and time.

AA has been paying employees $20/hour plus vacation time and benefits. Clothing prices reflect that. If all of the economies of the world operated as isolated actors, perhaps those prices would fly.

Happily, we are living in international times and enjoy a global economy. Much of the world benefits enormously from Americans’ “greed” and urge to acquisition. Clothing commodities may trade hands numerous times during their long second life, but more importantly, the market for clothing produced en masse in developing nations is a job boon to their economies and a part of what fuels such an acquisitive market.

American Apparel has not declared bankruptcy, even after repeated quarterly failures to file number on time, and even after laying off $1,500 illegal workers (all paid well above minimum wage) under threat of a federal raid. Yet even as AA skirts the law in so many sex and harassment arenas, it’s clear that people simply won’t reward unclever ads and prices designed to force the square peg of fast garment making into the round hole of a living wage.

What is most certainly bankrupt is the idea that a company (much less a government!) can somehow negate the law of supply and demand.