Can American Apparel’s ‘Made in U.S.A.’ model survive bankruptcy?
Through a special arrangement, presented here for discussion is a summary of a current article from Supply Chain Digest.
American Apparel has maintained a "Made in U.S.A." focus for all of its 15-year history, but its step into bankruptcy proceedings in early October poses risks to its 4,600 factory workers in Los Angeles.
After the filing, CEO Paula Schneider said management had no plans to move manufacturing operations to offshore locations.
"That’s what makes us a really important company and a company that needs to thrive and be saved," Ms. Schneider said.
Despite some small signs of apparel manufacturing returning to the U.S., the American-made model is under threat from several directions.
"There is too much emphasis being placed in having things made in America," Lloyd Greif, CEO of investment banking firm Greif & Co., told the Los Angeles Times.
"It costs way too much money," added Josh Arnold, an equities analyst and contributor to financial site Seeking Alpha.
Source photo: American Apparel Facebook page
But it’s not as though American Apparel factory workers in California are highly paid.
The workers, primarily sewers, averaged about $12 an hour in recent years. After production slowed down this year, several workers said they are earning closer to $9 an hour — California’s ‘s current minimum wage. That would translate into pay of about $1,440 per month for a full-time employee.
But those lowly hourly wages compare to perhaps the equivalent of $68 per month in Bangladesh or $90 per month in Vietnam, both major apparel producers. And unfortunately for American Apparel, the minimum wage in Los Angeles is scheduled to go much higher, rising in increments to $15 per hour by 2020.
One possible path out for American Apparel, industry experts say, is to move production from Los Angeles, but keep it in the U.S., perhaps in the Southeast, where in many states the minimum wage is still just $7.25 per hour.
Evan Clark, deputy editor of Women’s Wear Daily, thinks there is still some hope for American Apparel manufacturing in the U.S., but it will have to thread the market needle to do so.
"I think Millennials are very conscious of social issues and being environmentally friendly and all of that," Mr. Clark told NPR. "So I think made in the U.S.A. ethos resonates very much with that population. But the consumers seem to mostly make their decisions based on style and cost. So if you’re making it in the United States, the path would seem to be kind of get the styling right or get the timeliness. You need to somehow compensate for the cost factor in there."
- American Apparel’s Made in USA Model May Not Survive Bankruptcy Process – Supply Chain Digest
- American Apparel hangs on to its made-in-America model — by a thread – Los Angeles Times (tiered sub.)
- What American Apparel Bankruptcy Means For The ‘Made In America’ Market – NPR
How important is it for American Apparel to retain its “Made in U.S.A.” model? Do you see a way for American Apparel to preserve its American-made status as part of its reorganization?