Mitt The Marauder

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.

Johnson said:

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.

5 Comments

  1. janice reed

     /  July 11, 2012

    What do you mean Romney once had the soul of a marauder? I can’t see that THAT has changed.

    Like

    • Ah, Janice, you caught me in a purposeful but awkward sentence construction. I added “once had” in place of the original “has” for two reasons:

      1) The point of the piece was something that happened in the 1990s, thus the use of the past tense. If Romney were still doing things like he did in Marion, Indiana, a present tense would most certainly be appropriate.
      2) Just because he “once” was a marauder doesn’t logically entail that he is not now a marauder, even though I admit, as I recognized when I changed the wording, that it seems to suggest as much. Technically, he can “once” have had the soul of a marauder and still possess such a soul.

      My point in changing the description to the past tense was to emphasize the Romney of Bain Capital against the Romney we see today. Readers can draw their own conclusions as to whether his old marauding soul still animates him, particularly as they look at his embrace of the Paul Ryan budget framework.

      Gawd, this is fun!

      Duane

      Like

  2. ansonburlingame

     /  July 12, 2012

    As I read the above sequence of events, one thing jumps out at me. The “hanging file” company had a union contract that made the product uncompetitive. There is nothing in the above “tale” that says “bad management” alone caused the decline in profitability of the company, other than negotiating a union contract that hurt to company.

    So here comes an LBO/private equity firm trying to return the company to profitability. The “tale” does not tell us how many ‘old managers” were canned or what other cost cutting measures were taken as well. All we know for sure is one guy’s pay was cut by 22%.

    When people of any sort decide to work for a failing company, their choice to do so ultimately, then bad things might happen to ALL the workers, managers, suppliers, etc.

    One other point to consider in the “tale” above. What kind of bank would lend $40 Million to a firm that had a history of “rape and pillage” thru bankruptcy? The worker lost $3 an hour but who lost (or may have lost) $40 million?

    Anson

    Like

    • Besides the other nonsense, Anson wrote,

      What kind of bank would lend $40 Million to a firm that had a history of “rape and pillage” thru bankruptcy?

      “What kind of bank?” Ha, ha, ha, ha, ha, ha! Oh, my, God! Ha, ha, ha. That’s a good one.

      Like

  3. Treeske

     /  July 12, 2012

    Anson, no 1%r is going to approve of any Union contract, they want a better return on their money and supporting human resources or Patriotic pride don’t fall into that.

    Like

%d bloggers like this: