American Apparel CEO a Good Fit

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The calls intensified last week for Dov Charney to step aside as chief executive of American Apparel.

That’s nothing new. (Even I opined in late 2008 that Charney should become chief creative officer or some such, and turn over the CEO duties to an experienced hand.) What’s new is that virtually every analyst and stockholder now is screaming it.

On the face of it, such calls make sense. Charney’s stewardship of the clothing company in recent years could be characterized as dismal. American Apparel has been criticized for its provocative ads and Charney is forever branded as a one-man generator of sexual harassment lawsuits. The company’s financials have long been shaky. It suffered after a crackdown from immigration officials last year and its accounting firm resigned last month in such a manner as to make that red flag a bright one. But last week’s announcements were maybe the grimmest yet: Sales are slumping, losses are expected, a looming debt may not get paid and the company’s status as a going concern is officially up in the air. Shares last week crashed into penny stock territory as equity owners fear a haircut in a bankruptcy court.

Since all that happened on Charney’s watch, the opinion among many professionals is that it’s time – maybe past time – to let a turnaround expert take command.

But before Charney gets poked aside by all those folks with torches and pitchforks, let’s take a moment and think about that.

Look at what he has done for the company. For one, starting from zero, he created a sizable enterprise – 10,000 employees and 280 stores (albeit shrinking) in 20 countries. He took his vision and relentlessly pushed his concept through his ADD-like workaholic devotion. Charney has the rare talent to design clothes that are fashionable yet classic; they don’t quickly go out of style. And the clothing is durable and reasonably priced.

What’s more, he may be one of American’s sharpest marketers. Admit it. Those provocative ads – many of which were created and photographed by Charney – you may love or hate but you must pay attention to them.

The result of all this: Most everyone knows about American Apparel. The company has an image of being sexy, hip and reliably outrageous.

He’s also made some noteworthy decisions. He famously put health clinics in his plant for his mostly immigrant employees, and he has not offshored his production (his big factory remains near downtown Los Angeles). As a result, he can say American Apparel is the largest apparel company still manufacturing in America.

Those are aspects that customers like and admire about American Apparel. It makes the company different and even special. And people closely associate Charney with all those things, as well as with the company itself.

So the question is: If an expert manager comes in, takes over and saves the company through highly efficient management, what might be lost? Will the durable clothes become lower grade? Prices no longer quite so reasonable? Will production be offshored to save money? Ads turned over to Madison Avenue to make them safer but blander? Clinics closed to save money?

In short, if an expert takes over, will American Apparel be “saved” financially but ultimately doomed because it will shed what people like? Will it be a formerly interesting company that has become just like All The Rest?

I can’t help but think of how another terrific company, whose products were fun, interesting and even sexy in the 1950s and ’60s, was taken over by pod people with M.B.A.s in the 1970s. That was General Motors. (Remember Chevy engines in Oldsmobiles? Now that was some smart cost-cutting for you!)

To be sure, American Apparel needs to be saved financially (and bankruptcy reorganization is a possibility). Expert managers are needed.

But on reflection, I think it would be shortsighted and perhaps ruinous for Charney to surrender the reins. I hope he remains as CEO and drafts a competent outsider to be chief operating officer. Charney shouldn’t let his company lose what makes it special. And that’s Charney.

Charles Crumpley is editor of the Business Journal. He can be reached at [email protected].

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