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Can bankrupt American Apparel stay American?

As the hipster retailer struggles to turn around $340 million in losses, its new CEO insists it can stay afloat without resorting to overseas production.

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Brendan McDermid/REUTERS/File
A man walks past an American Apparel store in New York in this file photo from June 19, 2014.

鈥淎merican Apparel will live beyond my lifetime,鈥 founder Dov Charney just three years ago. 鈥淲e鈥檒l be a heritage brand. It鈥檚 like liberty, property, pursuit of happiness for every man worldwide. That鈥檚 my America.鈥

The love it or hate it hipster clothing store, which filed for bankruptcy on Monday, is scrambling to find a business model that will help it survive in an , particularly those few that still insist on being 鈥榤ade in America.鈥 American Apparel just might make it 鈥 but will it still be, well, American?

Paula Schneider, the fiercely US-based company鈥檚 CEO since Mr. Charney鈥檚 ouster in June last year over ongoing sexual harassment charges, reassured customers that the debt-for-equity deal struck with creditors would not push production overseas.

鈥,鈥 she said. 鈥淭hat鈥檚 what the brand is. That鈥檚 what it鈥檚 about,鈥 she told The New York Times this week.

American Apparel is based in Los Angeles, where it employs over 4,500 workers. Although most famous for its reliance on the assumption that sex sells, despite recent evidence to the contrary, the brand was first based on Mr. Charney鈥檚 conviction that he could sell patriotism to young, cool customers by emphasizing its sweatshop-free, made-here-at-home production chain.

Nevertheless, if 鈥淎merican Apparel鈥 brings the flag to mind, it鈥檚 likely from ads where a patriotic t-shirt or bikini is draped over an otherwise barely-clad model. The brand鈥檚 racy advertisements have raised eyebrows, protests, and 聽for years, a strategy that seemed more distasteful in the wake of a slew of sexual misconduct accusations toward Charney, which led to his firing.

Ms. Schneider is tasked with finding a way to preserve the appeal of the company鈥檚 au natural models while helping the retailer grow up a bit, restoring its reputation from 鈥渃haotic to iconic鈥 and swapping 鈥渘udity and blatant sexual innuendo鈥 to 鈥渃onfident and naturally beautiful,鈥 .

The stakes are as high as they come: can American Apparel simply survive after losing $340 million in five years, not turning a profit since 2009?

Business consultants warn that it may have to to stay afloat.

: Minimum wage in California is $9 an hour, giving full-time workers roughly $1440 per month. If the same clothing were produced in Bangladesh, employees would take home just $68, according to the Los Angeles Times.

Los Angeles鈥 , set to gradually increase pay to $15 by 2020, will only widen that disparity.

Thanks to those realities, more than 90 percent of Americans鈥 clothing is now made overseas, including garments from practically all of American Apparel鈥檚 competitors. But the retailer still thinks it can buck the offshore manufacturing trend.

Seventy-eight percent of Americans still to one made abroad, even if it costs slightly more 鈥 although only 25 percent would pay more than 20 percent more.

Add to that consumers鈥 increased interest in socially responsible purchases, like American Apparel鈥檚 sweatshop-free production, and perhaps their plan to stay on American soil is a harbinger of a 鈥渞eshoring鈥 trend, driven in part by 聽in developing countries.

Even if Los Angeles' $15 wage law proves too tough for American Apparel, relocating within the US to cheaper regions might help it pull off a financial transformation, .

Reacting to news of the company鈥檚 bankruptcy, one Twitter user found a silver lining:聽

Perhaps he spoke too soon.

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