American Apparel Sells Out; Cashes In

American Apparel, the cotton t-shirt, underwear, and socks company made famous by risqué ads and forward-thinking labor practices, will be sold to Endeavor Acquisition Corp, reportedly for $382.5 million. After the transition to new ownership, American Apparel founder and president Dov Charney, who freely admits to sleeping with employees and hiring girls on the spot in nightclubs, will continue to manage the company’s 145 stores.

American Apparel is a rare business success story among a field of still-born garment firms sporting decent labor practices. Other high-minded startups, such as worker-owned cooperative Sweat-X, which drew venture capital from Ben Cohen of Ben and Jerry’s Ice Cream, have tried to upset the sweatshop model in recent years, to no avail. Sweat-X, for example, had to close their doors in 2004 after some bad luck and poor marketing, despite rules limiting compensation for managers at eight times the wages of those working the sewing machines. (See an interesting documentary called No Sweat for a comparison of the inner-workings of Sweat-X and American Apparel.)

If you have not been keeping tabs, American Apparel has a mixed social record at best. On the one hand, seamstresses are known to receive massages, low-cost health care plans, and free classes in English, but flamboyant owner Dov Charney has been criticized for hindering employee efforts to unionize and several employees have charged him with sexual harassment.

Indeed, sleazy owner-operator Charney seems to run the company as if it his own Bacchinalian bachelor pad: he personally photographs many of the company’s young models in amateur-porn-like settings. He has given a vibrator to at least one female employee, has posted covers from Penthouse magazine on store walls, and famously masturbated while being interviewed by a reporter from Jane magazine. In photo shoots, Charney, not surprisingly, favors a fair share of crotch-shots. The recent sell-out is just the last of many signs that American Apparel is far more about satisfying the whims of its founder than making the garment industry more humane.

Whether one believes that Dov Charney has simply traded one form of the exploitation for another — substituting his sexual reign for the tyranny of sweatshops — American Apparel’s legacy will be determined by Endeavor Acquisitions, which saw its stock shoot up 22 percent after announcing the buyout.

— Jen Phillips and Koshlan Mayer-Blackwell