MADE IN THE U.S.A.

2004-07-04 04:00:00 PDT Los Angeles -- In a business better known for dull uniformity than bold personality, Dov Charney is a dynamo who has found success selling an unlikely mix of T- shirts, sex and social responsibility.

On the factory floor at American Apparel -- the company he runs just outside of the Garment District here -- he's the loud, lanky boss with mutton chops, a rock-star demeanor and an often-discussed love life that seems outsize even by Los Angeles standards. But in an industry that has all but fled American soil for cheaper labor elsewhere, he's also the businessman who has pledged his loyalty to homegrown apparel, above-average wages and worker- friendly factory conditions.

On billboards and in magazines, Charney sells youth and sex appeal packaged in extra-soft, snug T-shirts. Through shrewd marketing, he has commandeered a significant slice of the market, infusing a high level of fashion into an everyday wardrobe item. The formula has brought American Apparel rising sales and national attention.

But the question remains: Can he continue to do well and do good? His marketing acumen could falter, his rivals could offer similar high-fashion T- shirts at lower prices, and fleeting styles and tastes could shift. Pressure could build to compromise the workplace ideals on which he has built the business.

"His goals are very, very laudable, but I think a lot of people in the industry are watching to see if he's going to be able to survive," says Jack Kyser, chief economist with the Los Angeles County Economic Development Corp., a private nonprofit that promotes jobs and industry.

With his edgy, out-front image, Charney doesn't seem like a man who is worried. He is a portrait in confidence, an unsubtle and sometimes off-color company spokesman prone to manic populist discourses. He's unapologetic about American Apparel's in-your-face marketing, his confrontations with unions, and his love affairs with employees and women who model his T-shirts.

Stories about Charney's personal life, which circulate in industry circles and have been featured in media coverage of American Apparel, sometimes overshadow more-serious portrayals of the business he's building, he says.

"There's a lot of love, and a lot of commitment, and a lot of passion and blood and tears that have gone into this company," Charney says. "And there are many hardworking people there that are extremely passionate that I've never had any romantic relationship with."

Four years ago, he pulled his then-little-known rag business into profitability after years of red ink. He didn't do it selling boxy, mass- market T-shirts. Instead, he weaves thin-fiber cotton yarn into styles favored by urban trend-seekers in cities such as San Francisco and New York. A basic women's T-shirt from American Apparel is priced at about $16 retail. Much of the company's business comes from small, independent designers who buy the shirts wholesale, embellish them with original touches and resell them in boutiques for $30 or more.

It's a niche market that distantly trails the multibillion-dollar reach of brands such as Hanes and Fruit of the Loom. But American Apparel reported $80 million in sales last year, and Charney says he expects to reach $140 million this year.

The company opened its first retail stores last year, in New York and Los Angeles, and Charney plans to have 25 locations by the end of the year, possibly including San Francisco.

Bucking the offshore trend

American Apparel weaves its fabric and cuts and stitches its T-shirts, fleece pants, pullovers and panties in an immense, adobe-pink former railroad warehouse in downtown Los Angeles. A huge banner that hangs outside proclaims the company "an industrial revolution."

Its sewing-machine operators commonly make more than $500 a week working fewer days and shorter hours, with more-generous benefits and generally better working conditions, than most other garment workers in the city, according to industry observers and independent worker advocates.

In recent years, much of the Los Angeles garment industry has moved away from manufacturing in favor of importing. At the same time, American Apparel has grown from 1,200 workers a year ago to nearly 2,000, most of them Latinos who live in low-income neighborhoods.

"I'm only 35. You name another 35-year-old who's changing this many lives, " Charney says during a factory walk-through, in the midst of a running commentary that ranges from free-market trade to cotton shrinkage and prisons in Iraq.

Yet questions remain whether Charney's business model can be broadly adopted to bring large-scale apparel manufacturing back to the United States. Charney argues that higher labor costs can be offset by happier and more- efficient workers, generating higher profit.

Two decades of industry trends refute the notion. Major apparel brands such as Gap and Ralph Lauren subcontract with factories in dozens of countries outside the United States in their search for the right balance of design, quality and labor costs.

"American Apparel is an anomaly. It's not the status of the industry, nor is it the future of where the industry is going, but it is functioning extremely well based on the model it has designed for itself," says Ilse Metchek, executive director of the industry-backed California Fashion Association, and LA By Design, a marketing program under the private Los Angeles County Economic Development Corp.

'Sweatshop Free' marketing

American Apparel keeps things simple, sticking with cotton tops and bottoms that require a narrow range of machinery and skills to produce.

The company stresses the made-at-home mantra. American Apparel clothing tags, catalogs and billboards declare the goods "Sweatshop Free." Yet, it's unclear how much that message registers with its wholesale customers and individual shoppers.

"Customers are more attuned to quality" than to anti-sweatshop marketing, says Roxy Buu, who owns the San Francisco boutique Buu, in San Francisco's Hayes Valley, which carries designers who use Charney's T-shirts. "When I see that a shirt is American Apparel, I know it's good."

Los Angeles County's roughly 67,000 apparel workers don't make many commodity clothing products, says Kyser, the economic-development economist. The region's garment shops more routinely churn out quick-turnaround, inexpensive fashions for specialty retailers such as Forever 21 and Wet Seal, or higher-end goods for upscale retailers such as St. John Knits. Basic apparel competes heavily on price, which generally means overseas production, Kyser says.

On the factory tour, Charney -- dressed in a pink cotton-jersey leisure shirt made by his company -- seems confident that he can thrive. The company is built on more than some do-gooder social mission, he insists.

"No one can stop this," Charney says over the hum of sewing machines, punching the air with his fist and whooping at his workers, inviting them to shout back in a kind of impromptu pep rally. "I'm paving a new method of distribution. ... I have to rebuild part of America!"

Some workers grin. They say that theatrics are typical for the boss.

A lifetime in T-shirts

Charney's mother is a painter and his father a Harvard-educated architect. He first sold T-shirts as a Montreal high-school student, buying them at U.S. Kmarts and trucking them back to Canada.

T-shirt brokering led to manufacturing, which led Charney to South Carolina in the early 1990s. The industry was highly competitive and increasingly moving offshore. Charney moved to Los Angeles in the summer of 1997 and partnered with Sam Lim and other garment-industry veterans to get American Apparel off the ground. The company turned a profit in 2000 after shifting its focus to fashion-conscious youth, Charney says.

A tireless promoter, he has worked the floors at major trade shows such as the Magic Marketplace in Las Vegas, often flanked by models handing out American Apparel ClassicGirl Ts and women's briefs.

According to Charney, the "Sweatshop Free" tag has built up the company's image but also caused headaches. The designation, combined with the company's success, makes him a prime target of what he calls "the liberal, PC-oppressed left."

"Is it a cooperative? Is it unionized? Are you objectifying women?" he says, listing the questions he says he gets from anti-sweatshop activists and union organizers. "Of course we're objectifying women. You want a smock? Go to the Middle East."

Life on the factory floor

The factory is not unionized. Last year, Charney and the Union of Needletrades, Industrial and Textile Employees, AFL-CIO, or UNITE, tangled over an organizing drive. The effort failed, and at one point hundreds of American Apparel workers staged a protest against the drive. The union says that the company management intimidated workers.

"By the third day of our campaign, people were not receptive. They were very afraid," says Cristina Vazquez, UNITE's regional manager in California and international vice president. She contends that American Apparel should set an example for other, smaller factories in the city by embracing the union.

UNITE, in a complaint to the National Labor Relations Board, contended that Charney had meddled in union talks with employees. In a non-monetary settlement, Charney, who denied wrongdoing, agreed to post flyers spelling out workers' collective-bargaining rights, have the list of rights read aloud to employees and stay out of future talks.

Kimi Lee, director of the independent, nonprofit Garment Worker Center in Los Angeles, says that the center typically supports UNITE's organizing efforts. But, in the case of American Apparel, the center did not believe that workers would benefit.

The Garment Worker Center hears few complaints from American Apparel workers, and those that come up are typically minor and resolved relatively easily, Lee says. They tend to stem from a lack of management experience among floor supervisors who have been promoted with little training, as a result of the company's fast growth, she says.

"Dov believes in a happy workforce," and that's reflected in the factory conditions and salaries, Lee says.

American Apparel workers can take free English-language classes and yoga classes on-site. They have free Internet access and massage therapy and subsidized lunches and bus passes. Employee health care has been privatized and subsidized by the company for about a year and a half, Charney says.

"This is the only factory where I've been content, where I have been happy," says Benigno Navarro, 36, of Los Angeles, who has worked there a year. He sews T-shirt hems.

During his decade in the city's garment factories, the husband and father of three rarely earned more than $30 or $40 a day at other factories, often working from 6 a.m. to 6 p.m., and had no health benefits, he says in Spanish.

At American Apparel, he says that he works 7:45 a.m. to 4 p.m. most days, with a lunch break, and makes anywhere from $80 to $120 per day. In Los Angeles, Navarro says, "This is the company people say is the best."

The average hourly pay is about $13, with some workers making more than $18, Charney says. He vows that if he ever expands production overseas, he'll pay those workers above-standard wages as well. Workers who can't afford hot water and an Internet connection aren't making a living wage, he says.

American Apparel isn't the only Los Angeles clothing-maker that has stressed social values. A company called TeamX marketed its "union-made, sweatshop-free clothes (produced) in the most socially responsible manner" under a label called SweatX. It was founded by UNITE in 2002 with a reported $1 million seed investment from the Hot Fudge Social Venture Capital Fund established by Ben & Jerry's co-founder Ben Cohen. The workers made at least $10 an hour and had medical coverage.

But the company wasn't profitable, and it folded in May, says Rick Roth, who was hired in October as chief executive. By then, TeamX was debt-ridden and beyond saving, he says.

"It was all about the social premise, and the only thing that works in this business is the product," says Metchek, of the California Fashion Association.

After SweatX folded, Charney bought some of its sewing machines. He says he'll use them to expand his operation.

Age: 35

From Montreal, lives in Los Angeles

Founder and lead partner,

American Apparel, Los Angeles

Business: Cotton T-shirts,

underwear, pullovers

Sales: $80 million (2003)

Source: American Apparel