Wednesday, April 6

Mixing Messages: Dov Charney, American Apparel

Dov Charney
Some say American Apparel CEO and majority stockholder Dov Charney rarely grants interviews (it's really just the opposite). But still, in reading the latest interviews he granted to Counselor magazine, one of six B-to-B magazines published by the Advertising Specialty Institute, it's easy to understand why some people wish he wouldn't grant interviews.

"First of all, the announcement about us possibly seeking bankruptcy protection is something we did as an obligation to shareholders to explain that it's a possibility, however remote," said Charney, who founded American Apparel. "In reality, to say that the company is unstable is not accurate."

The company, which was recently embroiled in alleged sexual abuse, announced it may pursue bankruptcy after 2010 left it with a loss of $86 million. But then, in an amazing reversal, Charney told the trade publication the exact opposite.

“There’s no chance this industry has to worry about me, or American Apparel, leaving,” Charney told Counselor. “I’ve been producing and selling T-shirts in this industry for more than 20 years and I’m not going anywhere."

The article goes on to reveal a very real and unadulterated glimpse of what some people would call extreme egotism and others would call superior customer dedication. Primarily, Charney used the interview to excuse his purchase of inflated cotton prices in order to meet manufacturing demands. The company owes $121.5 million in debt to Lion Capital and Bank of America.

The company's rise to become a clothing manufacturing brand occurred in less than eight years. But for the last three years, the company has walked from one crisis into another and then another.

In 2008, there was the accusation that Charney instructed an employee to pad inventory numbers. In 2009, there was the lawsuit with Woody Allen. Also in 2009, Charney was forced to lay off 1,600 undocumented workers (about one-fifth of his L.A. employees). In 2010, he received a letter from the NYSE for failing to comply with the rules amidst other investigations. And, during much of this time, he continually turned up the heat in his advertising, making American Apparel the most pornographic in the business. (The ad shown is painfully tame compared to the hand-drawn nude girls removing underwear, bottomless models, and nip slips.)

In some cases, Charney documents his own controversies. He even shared his letter to the undocumented workers that he was forced to lay off. In much the same way, he is working to use all the controversy as an opportunity to launch a new line of denim.

But that is the way it is with Charney. Even New York Fashion, which did better than most, struggles to get ahead of all the spin associated with the CEO of American Apparel. It seems to be all spin with him, 24-7, 365.

A little bit charismatic and a whole lot controversial?

Any other company would have sacked months ago, but American Apparel keeps forging ahead. Ever wonder why? In creating a brand, he chooses horns over halos but denies the existence of horns much like he says sl*t is not a derogatory term as much as a badge of honor.

Translated, he says "I choose to win in ways that offend you, but refuse to accept it's offensive. Change your beliefs." Or, in other words, "This duck you see on my head really isn't a duck. And by the way, you ought to get one." Or in yet other words, "Just because we said we might file bankruptcy doesn't mean we seriously considered it. We say all sorts of things and you choose to listen to the wrong ones."

And there you have it. On the charismatic side, Charney is seen as one of the few manufacturers able to keep his footing as an American clothing manufacturer not afraid to embrace controversy. On the controversial side (aside from the issues he confronts), Charney represents someone who will exploit anyone, including himself, and anything to achieve his mission.

But sooner or later, exponentially raising the ante on controversial publicity reaches a carrying capacity. And when that happens, the whole thing explodes or, perhaps worse, people begin to tune it out. Publicity whore, who?

So while Charney says that bankruptcy isn't an option because the company makes $10 million per week, the company would still need 15 weeks with no expenses to meets its debt obligations. It seems unlikely even Charney can spin the four weeks that some banks have given him into 15 weeks let alone the 52 weeks of sunshine that he really needs.

In sum, the story reads like a modern day Heart of Darkness. Case study ahead. What do you think?
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