“None of what happened in Marion in the 1990s would be very interesting, if Mitt Romney had not built his entire political career on the claim that he’s a job creator.”
—Randy Johnson, former employee of a company once owned by Bain Capital
f you’ve ever scribbled on a yellow legal pad, you owe American Pad & Paper, which brought us the product in the late 19th century, your thanks. Ampad, as the company was known, was quite successful as a manufacturer of paper products until “big-box” retailers, with their economies-of-scale profit plans, began to drive Ampad’s customers—much smaller, independent office supply stores—out of business.
The big-box behemoths, with their enormous purchasing power, had the ability to force manufacturers like Ampad to lower prices, which in turn led to downward pressure on American workers’ wages. Cheaper foreign paper goods made their way into the mix, also putting downward pressure on domestic wages.
In 1992, Mitt Romney’s Bain Capital acquired Ampad by putting up only $5 million of its investors’ money, and borrowing the rest of the $40 million purchase price, using the company’s future earnings as collateral (more debt would follow). As Paul Barrett of Bloomberg Business Week put it:
If all went well, the acquiring firm would whip the target company into shape, sell it in an IPO, repay the debt out of the sale proceeds, and clear a handsome profit for its investors. If things went less well, the acquired company might end up in bankruptcy proceedings—but the LBO firm would lose only its modest equity investment. In more recent years, image-conscious LBO financiers have rebranded their businesses as private equity firms.
Well, whether one calls them LBO firms or private equity firms, the deal involving Ampad didn’t go all that well for some folks. The bad stuff started with Ampad—now controlled by Bain—purchasing a hanging-file-folder plant in Marion, Indiana, owned by SCM (Smith Corona). Here is how Paul Barrett described what happened next, involving a man named Randy Johnson, a union steward at the plant:
At the time, Johnson worked the night shift making hanging files. “We come back from the July 4th holiday, and this is what we find posted,” Johnson says, producing from the Romney box a one-page notice: “As of 3 p.m. today, July 5, 1994, your employment with SCM Office Supplies Inc. will end.” Most of the 258 employees were allowed to reapply for jobs at reduced wages and benefits. Johnson’s pay fell 22 percent, he says, from $10.05 an hour to $7.88. Dismayed to see their old union contract torn up, the Marion workers negotiated with Ampad management for several months, then called a risky strike. In early 1995, Ampad called the union’s bluff, closed the plant, and laid off the remaining workers.
We never heard of Bain. All we knew was that some company called Ampad took over the factory. … We were getting paid a lot less for working longer hours, and now we were paying big premiums we never paid before for health insurance.
That sad story had a happy ending for Bain, which reportedly made away with almost $100 million for its trouble.
Now, to some of you the story of Ampad is familiar, what with the Obama campaign using it to its advantage against Romney. But in its familiarity is lost the rather simple idea that never in our modern history have we had a man run for president with not only the instincts, but the practical experience of a vulture capitalist, a man whose business, at times, was to prey on the unfortunate.
And when Americans contemplate Romney’s wealth, some of it hiding far away from the shores of the country that enabled him to gain it, it would serve them well to think about how he amassed some of it.
And it would serve them well to think about that little factory in Indiana, that once provided jobs to Americans, jobs lost partly because a man running for president and bragging up his business savvy once had the soul of a marauder.