American Apparel: A Made-In-U.S.A. Success

On seven floors of a one-time railroad warehouse in downtown Los Angeles, thousands of workers do what almost no one does in the United States anymore: they make clothing. It's the kind of job that long ago moved offshore to places known for sweatshops and low wages.

To make T-shirts in America these days, you have to be crazy, but that's just what Dov Charney, the boss of American Apparel, is doing.

At 38, Charney has built American Apparel into a phenomenon in the clothing business by being different.

"America doesn't need another faceless, institutional apparel company," he told Sunday Morning correspondent John Blackstone. "They need an apparel company that gets it, and does it right."

Charney is doing something right. In just three years, American Apparel stores have opened in 11 countries around the world, from Los Angeles to Tokyo, with sales of some $300 million last year.

"Three years, 143 stores we opened. It's the fastest retail rollout in American history."

It's casual clothing that has quickly developed a big following among the urban hip, from T-shirts and skirts, to bathing suits and underwear — there is even American Apparel for dogs — all made not in some foreign sweatshop, but by workers in America.

Charney, who is Canadian, born in Montreal, has long been an admirer of made-in-America quality.

"There was something about American products," he said. "They were just, like, rugged!"

As a high school student Charney started buying T-shirts in the United States and selling them back home to Montreal. Now he's the biggest manufacturer still making t-shirts in America. He pays his workers well over minimum wage, plus productivity bonuses.

"They make $25,000 a year — 300,000 bucks earned out of this little square here," he said.

Huge signs in the lunch room detail generous fringe benefits including subsidized meals, full family medical insurance, even English lessons for the mostly immigrant workers.

"It's not a marketing ploy necessarily. It's about taking care of the people that are taking care of the company," he said. "And it's also a capitalist ploy, 'cause they say, 'Well you know someone works at another factory they make $2 less or $5 less an hour and at American Apparel they got medical insurance.' So when we put an ad in the paper we're lookin' for people, we got a line-up."

Charney isn't against globalization, but in the fast-changing fashion business he says his business model makes sense. If something starts selling unexpectedly quickly in American Apparel stores this weekend, the word goes immediately to Los Angeles. By Monday morning the workers can start meeting the new demand so by next weekend store shelves are full again.

"The beautiful thing about free trade is it creates an environment of competition where there's a marketplace of ideas," he said. "And you know, one guy could go offshore and pull things in from China. Another guy could automate here in the United States. And may the best man win. Maybe both men will win."

Unlike most of his competitors, Charney doesn't invest in high fashion photography and big name models. His advertising is done in-house, sometimes in his own house, where he shoots many of the photos himself. The models are friends, employees, or maybe girls he sees on the street.

But the provocative style of American Apparel advertising has helped give Charney a reputation known to many who shop in his stores. In the past couple of years, he has faced three sexual harassment suits: One was settled out of court, one was dismissed, and the third is still pending. Charney says the suits are groundless, and claims some stories of his sexual adventures are tabloid exaggerations.

"Some people get a high off reading tabloid journalism. But they know for the most part it may not all be true," he said. "It's like watching wrestling, ya know? It's fun to watch, but we're not really sure if the back flip is truthful or not."

Still, Charney is far from politically correct on the issue of sex in the workplace. He's admitted having relationships with some of his employees, and on his office walls there are photos of topless women. An open attitude about sex is part of the atmosphere, and part of the business, at American Apparel.

"We are focused on the sexuality and we wanna make sure our panties are hot, ya know, that they fit right," he said. "That they make someone look the very best they can look, or a men's underwear, whatever it is. Ya know, so ... stuff happens. It happens to the best of us."

But Charney's freewheeling style is about to face a new environment. American Apparel is going public. With an infusion of millions of dollars from a big investment company, Charney plans to keep expanding.

"Anything we want to do, we can do," Charney said. "If we can dream it, it can be done."

And his workers are sharing in the dream.

"I'm giving about $25 to $30 million of stocks away, deferred stocks," he said. "I'm just distributing. The average employee will get 540 shares in the company."

Charney says his Los Angeles factory has lots of room to expand. So he intends to keep doing the impossible: Making clothes in America while making a profit for his investors.

"I want to be remembered as one of the great CEOs of our time and of my generation," he said. "And I think that I'm gonna make them proud. That's my plan."