American Apparel, Inc. is a relatively young but growing clothing manufacturer and retailer. The company's website boasts of it's "sweatshop-free" manufacturing facilities located in the United States.
The About Us section goes on to deliver self back pats with regard to compensation:
A garment worker in Bangladesh earns an average of $600 a year. An experienced American Apparel garment worker can earn $30,000+ and receive beneļ¬ts such as comprehensive health care.
From the company's description, its compensation package is sound, including free parking, free massage, and subsidized health care. Yet strangely no commentary on the relative purchase power of a US Dollar in Bangladesh. True, $600 is a small amount of money, but don't get too high and mighty, $30,000/yr in LA isn't exactly "swimming in it." Let the record reflect that it's below the Federal Poverty level for a family of 6.
But before any potential customers get too sappy on the Made In America clothing company, consider this statement from American Apparel, Inc.'s 10-K Annual SEC Filing where the company discusses its risk factors:
We rely heavily on immigrant labor. Adverse changes to existing laws and regulations applicable to employment of immigrants, enforcement requirements or practices under those laws and regulations, and inspections or investigations by immigration authorities or the prospects or rumors of any of the foregoing, even if no violations exist, could negatively impact the availability and cost of personnel and labor to us. As a result, we could experience very substantial turnover of employees on short or no notice, which could result in manufacturing and other delays. We may also have difficulty attracting or hiring new employees in a timely manner, resulting in further delays. These delays could materially adversely affect our revenues and ability to complete. If we are not able to continue to attract and retain sufficient employees, our manufacturing capabilities, operations and financial results would be adversely affected.
What is the company saying? "We're extremely proud of our American workers. At least we don't have any reason to believe they're not in America legally. Just please don't ask anyone if they're legal, lest they sprint for the hills and shut down our plant." If the wages are so spectacular, why such difficulty in attracting and retaining employees. Just fly in a bunch of Bangladeshians... #solved. Doesn't exactly sound like a company that's extremely confident about the high quality jobs it's providing to Americans.
Let's review some more evidence of the company's American pride and its do whatever it takes to compete against evil outsourcing corporations mind set. The Annual Report's Risk Factors also discusses the decision to locate in the United States. Get ready to feel a mixture of pride/sorrow/guilt that will make you want to buy yourself a brand new pair of Rainbow Print Nylon Leggings (yay America!):
Despite the general industry-wide migration of manufacturing operations to lower-cost locations, such as Central America, the Caribbean Basin and Asia, our textile manufacturing operations are still located in the United States, which is a higher-cost location relative to these offshore locations. In addition, our competitors generally source or produce a greater portion of their textiles from regions with lower costs than we, which also places us at a cost disadvantage. Our competitor's lower costs of production may allow them to offer their products at a lower price than our selling prices for similar products. This could force us to lower our margins or to compete more vigorously with non-price competitive strategies to preserve our margins and sales volume.
Hey American Apparel, pardon the American Midwest if it doesn't feel sorry for your cost structure. You surely realize that you chose to locate your primary operations in Downtown Los Angeles. The owner of the company, Dov Charney in an interview, is delighted to be able to pay good wages and be a company that appeals to the "sensibilities of young adults."
How relatively sensible is the choice to house your business in Downtown LA? Given the rate at which the state of Iowa has been handing out subsidies on name-brand business investments (read: Facebook), AA could probably open up shop in Iowa free of charge for several years. Sure, a company can choose to call one of the richest parts of the country home, but goodness sakes, don't expect cost of living sympathy. If you really want to stick it to the third world manufacturing contingent, set up shop in South Dakota and pay no state income tax. Take that Bangladesh!
Another fun risk factor from the 10-K:
If we fail to maintain the value and image of our brand, our sales are likely to decline.
No arguments here, the value of a brand is well understood. But what exactly is the messaging of this company?
- Buy from us because we pay our probably-legal-but-threats-of-searches-would-send-them-fleeing workers more than our competitors pay their likely-extremely-grateful-to-have-any-job-at-all workers!
- Buy from us, all of those models on our home page's semi-pornographic slide show are wearing Made In America!
- Buy from us, our rent is too damn high!
Frankly, it seems there might be more integrity in a t-shirt from Bangladesh than from LA.
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