The Rise and Fall of American Apparel: What Netflix's New Documentary Reveals About Leadership, Culture, and Manufacturing

Years ago, I found myself fascinated by American Apparel. Here was a company that seemed to be doing everything right from a manufacturing and operations perspective – producing trendy clothing domestically, paying workers above minimum wage, and somehow making it profitable. But as I noted in my earlier posts, there was always something troubling about Dov Charney's management style that made me wonder if this success was sustainable.

I wrote several posts about Dov and his company, once even being invited out to visit their factory in LA. It definitely wasn't manufacturing excellence, let alone six sigma or lean (aside from above average wages, "respect for people" was non-existent!), but I could consider it "manufacturing innovation" in comparison to the reflexive tendency of other clothing companies to simply outsource to supposed low cost countries.

Netflix's new documentary "Trainwreck: The Cult of American Apparel," which dropped this week, provides a sobering look at what happens when operational innovation collides with toxic leadership. And the years since Charney's 2014 departure have proven that my concerns about his "crass management style" were unfortunately just the tip of the iceberg.

The Documentary's Revelations

The documentary explores allegations of inappropriate behavior and oppressive conditions in the workplace, revealing that new hires at American Apparel received welcome gift bags that included a vibrator, along with a book called "The 48 Laws of Power," a Leica camera, and a Blackberry so they would always be on call. Former employees describe a toxic environment where it was not uncommon to see employees making out in the hallways, and footage even shows Charney walking around naked in front of female employees.

Perhaps most disturbing was the revelation of company traditions like "Fool of the Week," where during company-wide conference calls, Charney would publicly humiliate employees in front of hundreds of colleagues. As one former employee, Michelle, recalled: "There was always someone that he'd call, 'Fool of the Week.' You know 'Michelle, you're the fool of the week! Fool of the week, you f****** me.' I mean it was so mortifying that hundreds and hundreds of people heard that you personally are the Fool of the Week for a multi-million-dollar company."

This isn't just about poor management – it's about creating a culture of fear and humiliation that inevitably undermines any operational advantages a company might have. The inclusion of "The 48 Laws of Power" in those welcome bags is particularly telling – a book that explicitly advocates for manipulation and power over others as acceptable means to achieve ends.

The Unraveling I Predicted

Looking back at my 2010 post, I noted that despite American Apparel's innovative operations, "sometimes you just need some experience – financial, operational, sales, and otherwise." I worried then that the company's streamlined structure was "too streamlined for such a dynamic and growing company."

The numbers tell the story: American Apparel recorded sales topping $633 million in 2013, but by 2015, sales had declined to $497 million. The company filed for Chapter 11 bankruptcy protection in October 2015, emerged briefly in early 2016, then filed for bankruptcy again in November 2016.

What I didn't anticipate was how much damage toxic leadership could do to what was fundamentally a sound business model. Looking back, I realize I was admiring operational innovation rather than operational excellence – Charney had genuinely figured out how to make domestic manufacturing work in a way that few others had, but he built it on a foundation of workplace harassment and exploitation that made long-term success impossible.

The documentary reveals a classic case of confusing short-term results with sustainable success. Yes, American Apparel achieved remarkable growth and profitability for a time, but the means used to achieve those results contained the seeds of its destruction.

The End of an Era

In January 2017, Canadian company Gildan Activewear acquired American Apparel for $88 million – a fraction of its former value. Gildan bought the brand and certain manufacturing equipment but tellingly chose not to acquire any of the retail stores. As Gildan's CEO Glenn Chamandy explained during an earnings call, "Really, what we bought is a brand. At the end of the day, the way we approached American Apparel was almost like we licensed the product."

The new American Apparel under Gildan briefly attempted to maintain some US manufacturing, launching a "Made in USA" shop on its website in 2017. But this quietly began to disappear in 2019, and by October of that year, the site's Made in USA shop contained only four items listed as made in the United States.

This was exactly what I feared would happen when I wrote in 2010: "How much do you want to bet that probably includes outsourcing overseas, chasing the dream of cheap labor nirvana?"

Charney didn't disappear after his 2014 firing. He launched Los Angeles Apparel in 2016, just four miles from American Apparel's former headquarters. The company operates as a wholesale brand selling blank t-shirts and basics, attempting to recreate the American Apparel model of domestic manufacturing and fair wages. But the shadow of his past continues to follow him.

And, as the documentary's synopsis notes, "staff members are forced to come to terms with the toxic work environment Charney has created." The real tragedy isn't just what happened to the employees who suffered under this culture – it's that the failure of leadership destroyed a genuinely innovative approach to American manufacturing.

The Lessons That Endure

American Apparel's story offers a crucial lesson for our times: tyrants may create short-term success, but they inevitably engineer long-term failure. Whether in corporate boardrooms or political arenas, we see the same pattern – leaders who achieve initial results through division, humiliation, and exploitation, only to watch their achievements crumble under the weight of their own toxicity.

The challenge for other companies attempting sustainable domestic manufacturing is to capture Charney's genuine innovations while rejecting his toxic methods. More broadly, we must resist the temptation to overlook abusive behavior because of compelling short-term results. History shows us repeatedly that the ends do not justify the means – ethical and respectful leadership isn't just morally right, it's the only foundation for lasting success.

The Netflix documentary serves as an uncomfortable but essential reminder: operational innovation without character is ultimately hollow. In business, politics, and life, how you treat people determines how long your achievements will survive. No matter how brilliant your strategies or impressive your initial results, toxic leadership will eventually destroy everything you've built.