Lerer: “Firms like Bain Capital buy controlling stakes in troubled companies, then revamp them and sell them for a profit —a process that can include management changes and “cost-cutting,” often code for job cuts”

January 30, 2008 in 2008, analysis, argument, campaign communications, campaign communiques, campaign management, conservatism, election, election 2008, GOP, incompetence, media, mitt romney, republicans, rhetoric, romney, strategy, stupidity, the dark soul of Mitt Romney, triumph of unreason
Tags: Bain Capital, debt, economy, human lives, jobs, leveraged buy-outs, lies, lisa lerer, Politico.com, profits, suffering

[…] “Neither Hillary nor McCain can claim the economy as an especial preserve,” argues Dick Morris in a http://www.dickmorris.com blog titled McCain may win, Romney can’t

Can Romney? Inexplicably, the McCain campaign has not spoken of the layoffs that must have accompanied Romney’s efforts to “turn around” failing companies. Hedge funds are notorious for cutting jobs and the Clintons will make Mitt eat every single one. McCain has no such vulnerability and, hopefully, will make Romney’s layoffs an issue before Super Tuesday.So McCain can win and Romney won’t. That’s the long and the short of it […]

More on this issue:

“On the stump in economically struggling Michigan and South Carolina recently, Mitt Romney has been making the case that ‘it always makes sense to fight for every single good job,'” writes Lisa Lerer for the Politico in an article titled Romney changes tune on layoffs

But this position seems to be at odds with the Republican contender’s one-time role as chief executive officer of Bain Capital, a large private equity firm.

In 1992, the firm acquired American Pad & Paper. By 1999, the year Romney left Bain, two American plants were closed, 385 jobs had been cut and the company was $392 million in debt.

The next year, Ampad was forced into bankruptcy.

Bain Capital and Goldman Sachs bought Dade International for about $450 million in 1994.

The firm quickly fired or relocated at least 900 workers. Over the next several years, it sunk increasingly into debt and laid off 1,000 workers.

In 2002 — after Romney had left Bain — it filed for Chapter 11 bankruptcy protection.

A 1997 buyout of LIVE Entertainment for $150 million resulted in 40 layoffs, roughly one in four of the company’s 166 workers.

The job cuts affected all aspects of the company, from production and acquisition to legal and public relations.

In 1997, Bain bought a stake in DDI Corp., a maker of electronic circuit boards.

Three years later, Bain took the company public and collected a $36 million payout.

But by August 2003, the company filed for bankruptcy protection, laying off more than 2,100 workers.

Four months after the bankruptcy, unhappy shareholders sued company executives, the initial public offering underwriters and Bain for mismanaging the IPO and failing to disclose company financial information. (Romney was not named in the suit.)

In March, all the defendants settled for $4.4 million.

Some job losses can be a natural part of the private equity business.

Firms like Bain Capital buy controlling stakes in troubled companies, then revamp them and sell them for a profit — a process that can include management changes and “cost-cutting,” often code for job cuts […]

Yuh-huh. See:

• Gavin: “Throughout his 15-year career at Bain Capital, which bought, sold, and merged dozens of companies, Romney had other chances to fight to save jobs, but didn’t—His ultimate responsibility was to make money for Bain’s investors, former partners said.”
• Romney: MY feelings are more important than YOUR jobs

yours &c.
dr. d.g.

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Scott Rasmussen: “McCain actually holds a slight lead over Romney among voters who name the economy as the top issue”—Nutting of MarketWatch: “Seven of 10 Republicans say the best thing the government can do to help the economy is get out of the way, which is more McCain’s view than Romney’s”

January 29, 2008 in 2008, analysis, argument, campaign communications, campaign management, conservatism, election 2008, GOP, incompetence, media, mitt romney, polls, republicans, rhetoric, romney, strategy, stupidity, the dark soul of Mitt Romney, triumph of unreason
Tags: Bain Capital, capital, capitalism, duplicity, economy, equity-sector, Florida, jobs, lies, marketwatch, rex nutting, scott rasmussen, Sen. John McCain

[…] “It’s the perfect opportunity for a Wall Street Republican to make the case that what the country needs now is good business mind, not a former war hero,” writes Rex Nutting, Washington bureau chief of MarketWatch, in a MarketWatch article titled Romney running for tycoon in chief; Commentary: Will business background be a plus?

Unfortunately for Romney, that appeal isn’t working in the Republican primaries.

Polls show that national security concerns continue to rank much higher among Republican voters, even if worries about the economy are growing. According to the Rasmussen Poll, Republican voters in Florida would rather pick a commander in chief than a chief executive for the U.S. economy.

Romney’s support has soared over the past two weeks, especially in Florida. He’s tied with Sen. John McCain in the latest polls ahead of Tuesday’s vote. But the Romney surge isn’t related to the bad news about the economy; rather, he’s picking up conservative voters stranded by Fred Thompson’s withdrawal from the race and Huckabee’s partial pullback from Florida.

Romney leads McCain among conservative voters, and he’s hoping that his message of economic competence could gain him support among voters who see themselves as moderates, where McCain holds a sizable lead.

Romney has been going directly after McCain, his chief rival for the nomination, accusing him of being out of touch on the economy. He has mocked McCain for saying “economics is not something I’ve understood as well as I should.”

McCain has fired back, saying that while Romney was making millions and working for “profit,” he was serving “patriotism.”

So far, the economic themes haven’t been registering for Romney.

According to pollster Scott Rasmussen, “McCain actually holds a slight lead over Romney among voters who name the economy as the top issue.” Seven of 10 Republicans say the best thing the government can do to help the economy is get out of the way, which is more McCain’s view than Romney’s.

Maybe Romney understands the economy, but it looks as if it’s McCain who understands Republicans.

If Romney can get past McCain and win the nomination, he’ll try to persuade independents and hesitant Democrats that his business background qualifies him to be president.

But if he does make it past the convention, it’ll be an uphill struggle to run as a tycoon after the mess Wall Street has made of the economy, with its overhyped dotcoms, its phony accounting, its bloated bonuses, and its toxic mortgages […]

The emphases are ours, all ours.

We heartily concur. See:

• Gavin: “Throughout his 15-year career at Bain Capital, which bought, sold, and merged dozens of companies, Romney had other chances to fight to save jobs, but didn’t—His ultimate responsibility was to make money for Bain’s investors, former partners said.”
• Flaherty: “Layoffs are a common result of private equity takeovers, with [Romney’s] Bain Capital no exception”
• Romney in FL wants credit for being a major player in the financial services sector—at the very moment that that sector is crashing and taking the US economy down with it

yours &c.
dr. g.d.

Gavin: “Throughout his 15-year career at Bain Capital, which bought, sold, and merged dozens of companies, Romney had other chances to fight to save jobs, but didn’t—His ultimate responsibility was to make money for Bain’s investors, former partners said.”

January 27, 2008 in 2008, analysis, argument, conservatism, election 2008, GOP, mitt romney, policy, republicans, romney, stupidity, the dark soul of Mitt Romney, triumph of unreason
Tags: ampad paper, anti-american, Bain Capital, Boston Globe, economic ruin, economy, employment, equity-sector, financial services, insanity, investors over workers, jobs, lies, obscene profits, randy johnson, www.boston.com

“In early 1995, as the Ampad paper plant in Marion, Ind., neared its shutdown following a bitter strike, Randy Johnson, a worker and union official, scrawled a personal letter to Mitt Romney, pouring out his disappointment that Romney, then chief executive of the investment firm that controlled Ampad, had not done enough to settle the strike and save some 200 jobs,” writes Robert Gavin of the Boston Globe in an article titled As Bain slashed jobs, Romney stayed to side

“We really thought you might help,” Johnson said in the handwritten note, “but instead we heard excuses that were unacceptable from a man of your prominent position.”

Romney, who had recently lost a Senate race in which the strike became a flashpoint, responded that he had “privately” urged a settlement, but was advised by lawyers not to intervene directly. His political interests, he explained, conflicted with his business responsibilities.

Now, Romney’s decision to stay on the sidelines as his firm, Bain Capital, slashed jobs at the office supply manufacturer stands in marked contrast to his recent pledges to beleaguered auto workers in Michigan and textile workers in South Carolina to “fight to save every job.”

Throughout his 15-year career at Bain Capital, which bought, sold, and merged dozens of companies, Romney had other chances to fight to save jobs, but didn’t. His ultimate responsibility was to make money for Bain’s investors, former partners said.

Much as he did when running for Massachusetts governor, Romney is now touting his business credentials as he campaigns for president, asserting that he helped create thousands of jobs as CEO of Bain. But a review of Bain’s investments during Romney’s tenure indicates that job growth was not a particular priority.

Romney’s approach at Bain Capital was more reflective of the economic philosophy articulated by his opponent, John McCain: to acknowledge that some less efficient jobs will be lost and concentrate on creating new jobs with potential for higher growth.

In many cases, such as Staples Inc., the Framingham retailer, and Steel Dynamics Inc., an Indiana steelmaker, the companies expanded and added thousands of jobs. In other cases, such as Ampad and GS Industries, another steelmaker, Bain-controlled companies shuttered plants, slashed hundreds of jobs, and landed in bankruptcy.

But in almost all cases Bain Capital made money. In fact, the firm earned substantially more from Ampad than Staples. Staples returned about $13 million on a $2 million investment; Ampad yielded more than $100 million on $5 million, according to reports to investors.

“It’s not that employment grows, it’s that their investment grows,” said Howard Anderson, a professor at MIT’s Sloan School of Management. “Sometimes its expansion, and sometimes it’s shutting things down” […]

[…] Bain acquired GS Industries in 1993. The steelmaker borrowed heavily to modernize plants in Kansas City and North Carolina, as well as pay dividends to Bain investors. But as foreign competition increased and steel prices fell in the late 1990s, the company struggled to support the debt, according to Mark Essig, the former CEO. GS filed for bankruptcy in 2001, and shut down its money-losing Kansas City plant, throwing some 750 employees out of work.

Ampad, too, became squeezed between onerous debt that had financed acquisitions and falling prices for its office-supply products. Its biggest customers – including Staples – used their buying power and access to Asian suppliers to demand lower prices from Ampad.

Romney sat on Staples’s board of directors at this time.

Creditors forced Ampad into bankruptcy in early 2000, and hundreds of workers lost jobs during Ampad’s decline. Bain Capital and its investors, however, had already taken more than $100 million out of the company, in debt-financed dividends, management fees, and proceeds from selling shares on public stock exchanges.

By the time Ampad failed, Randy Johnson, the former union official in Marion, Ind., had moved on with his life. After the Indiana plant shut down, he worked nearly six months to help the workers find new jobs. He later took a job at the United Paperworkers union.

“What I remember the most,” said Johnson, “were the guys in their 50s, breaking down and crying.”

In his reply to Johnson’s letter, Romney said the Ampad strike had hurt his 1994 bid to unseat Senator Edward M. Kennedy, and no one had a greater interest in seeing the strike settled than he.

“I was advised by counsel that I could not play a role in the dispute,” Romney explained, adding, “I hope you understand I could not direct or order Ampad to settle the strike or keep the plant open or otherwise do what might be in my personal interest” […]

Yuh-huh. See:

• Romney: MY feelings are more important than YOUR jobs
• Flaherty: “Layoffs are a common result of private equity takeovers, with [Romney’s] Bain Capital no exception”
• Samuelson: “it is becoming clear that capitalism’s most dangerous enemies are capitalists”—our conclusion: capitalists like Romney
• Etc., etc.

yours &c.
dr. g.d.

Romney: MY feelings are more important than YOUR jobs

January 25, 2008 in 2008, analysis, argument, campaign communications, campaign communiques, campaign management, conservatism, election 2008, GOP, mitt romney, republicans, rhetoric, romney, strategy, stupidity, the dark soul of Mitt Romney, triumph of unreason
Tags: Bain Capital, cbsnews.com, Daniel Larison, duplicity, economy, equity-sector, Florida, jobs, lies, protectionism, scott conry, south, South Carolina

“MIAMI — As the economy takes center stage in the Republican presidential race, Mitt Romney spoke in unusually personal terms about his own business experience during remarks to the Latin Builders Association this morning,” writes the credulous Scott Conroy in a cbsnews blog burst titled Romney: Making Layoffs “An Awful Feeling”

“I’ve had settings where I’ve had to lay people off,” Romney said. “It’s an awful feeling. No one likes laying people off. Someone who thinks you’re a bad person if you lay someone off doesn’t understand. You feel bad. It’s probably the hardest thing I’ve done in business was asking a person to be let go.”

Remarks:

(1) Follow Romney’s “reasoning”

(a) Someone who thinks you’re a bad person if you lay someone off doesn’t understand.

(b) You feel bad.

(c) It’s probably the hardest thing I’ve done in business was asking a person to be let go.

Note the passive voice in (c)—Romney’s awkward attempt to obscure his own agency—not lay a person off, or let a person go, but “ask a person to be let go.” But this bizarre locution implies consent, as if those “to be” laid off were given a choice!

(2) So we should not resent those who like Romney lay people off because they feel bad about it? Is Romney serious? Is Romney really making the case that his feelings are more important that peoples’ jobs?

(3) Does it not follow that Romney can excuse himself of any act by referring to his hurt feelings? Yes, I campaigned negatively against McCain and Huckabee—I lied, and I distorted their records—but anyone who would call me a bad person just doesn’t understand—I felt really bad about it.

(4) How do you reconcile Romney’s appeal to the sufferings of fund managers who engineer layoffs to benefit investors at the expense of workers with Romney’s repeated promise “to fight for every job”:

[…] [Romney:] “You’ve seen it here, in furniture. You’ve seen the textile industry, where Washington watched, saw the jobs go and go,” the Republican presidential contender told a group of senior citizens at the Sun City Hilton Head Retirement Center.

“I’m not willing to declare defeat on any industry where we can be competitive. I’m going to fight for every job,” Romney said […]

Answer: You can’t. The two positions cannot be reconciled.

Back to the credulous Conroy:

Throughout the campaign, Romney has touted his success in the consulting and venture capital fields in contrast to the “lifelong politicians” in the race. But yesterday, Mike Huckabee alluded to a negative impact of Romney’s days at Bain Capital, as the former Arkansas governor continues to brandish his own brand of economic populism.

“And I would also suggest one needs to look very carefully at what exactly the business record is,” Huckabee said. “If it’s taking companies who are in serious trouble, buying them when they are in pain, selling off their assets, and then making a huge profit off of it, that’s not something a lot of Americans can relate to, except those who have lost their jobs because of those kinds of transactions. If that’s the turnaround, there are a lot of Americans who would really not like to see their own lives turned around quite like that” […]

Yes. We have harped on these finely tuned strings for a long, long time:

• Flaherty: “Layoffs are a common result of private equity takeovers, with [Romney’s] Bain Capital no exception”
• Samuelson: “it is becoming clear that capitalism’s most dangerous enemies are capitalists”—our conclusion: capitalists like Romney

Back to the credulous Conroy:

[…] “If you haven’t changed and improved the way you provide your product to the marketplace, your competitor will, and ultimately you’ll be gone,” Romney said. “Constant improvement, constant change is called for. And that’s where I spent my life, where you have, in the private sector” […]

Here is the problem: the marketplace operates according to different rules than the state. Citizens have a right to expect continuity from the decisions and operations of a state. Citizens also have a right to expect continuity from their elected officials. For example, Romney’s sudden conversion to the notion of Washington supervising industry, here neatly summarized and commented upon by the estimable Daniel Larison:

[…] There is a developing conventional wisdom that Mitt Romney primarily appeals to and represents “economic conservatives” within the Republican coalition, a view that has not been shaken very much by the candidate’s interventionist promises to quintuple government spending on technology research to benefit Michigan’s battered auto industry. Romney backers seem to be unfazed by this, just as his record of signing universal, government-mandated health care into law did not deter them from labeling him sound on economic and fiscal policy, but among those not already declared for the former governor, Romney’s latest round of telling his audience whatever they wanted to hear has gone over very badly.

Romney must be one of the first Republican candidates ever to be likened to a Soviet premier on account of his economic proposals […]

[…] There are two things particularly striking about Romney’s appeal to Washington for the solution to Michigan’s economic woes. The first is that Romney has partly built his “transformation” campaign around the argument that the federal government has been overspending, but has vowed to increase spending within the “first 100 days” in a transparent (and successful) effort to buy votes in Michigan—his own fortune is no longer sufficient to buy supporters, so now he must draw on our money as well. The second, more telling problem is that Romney embodies not only the image of corporate America, but also possesses the mentality and ideology of the free-trading globalists who policies have worked to reduce manufacturing in Michigan and across the Midwest and the country to its present state. Even if Romney’s proposals were sincere (doubtful) and even if they were efficacious (unlikely) in ameliorating some of the damage of broader trade policy, he has stated that he has every intention of pushing for additional free-trade agreements and exacerbating the causes of de-industrialization and job losses. It is therefore all the more disturbing that someone who embraces the policies that have contributed to the economic ravaging of his home state can win over a plurality of voters based on little more than sentiment and promises to make them more dependent on the government that has failed them […]

yours &c.
dr. g.d.

Flaherty: “Layoffs are a common result of private equity takeovers, with [Romney’s] Bain Capital no exception”

January 24, 2008 in 2008, analysis, argument, conservatism, election 2008, GOP, mitt romney, republicans, rhetoric, romney, strategy, the dark soul of Mitt Romney, triumph of unreason
Tags: economy, equity-sector, financial services, jobs, lies, michael flaherty, reuters.com

“NEW YORK (Reuters) – Recalling his days as a businessman, Republican U.S. presidential contender Mitt Romney often cites the 25 years he spent in the private sector creating jobs,” which apparently isn’t true, writes Michael Flaherty of reuters.com in an analytical discursus titled Private equity past may cloud Romney’s jobs pitch

But as the leader of private equity firm Bain Capital from 1984 to 1999, Romney’s record shows that while some of the firm’s investments helped companies grow, others ended in thousands of layoffs, and in some cases, bankruptcy.

Layoffs are a common result of private equity takeovers, with Bain Capital no exception. Although Romney is credited with helping make Bain the private equity powerhouse it is today, buyout firms are known more for cutting jobs — not creating them.

“I believe most Americans want their next president to remind them of the guy who they work with, not the guy who laid them off,” Republican rival Mike Huckabee said in a campaign ad and in many campaign speeches.

Companies such as office supplier Staples Inc. and pizza company Domino’s were successful Bain investments under Romney.

But medical test maker Dade Behring, circuit board maker DDi, American Pad & Paper and auto parts company Cambridge Industries are among the companies that went bankrupt after Bain invested in them with Romney at the helm.

“The bottom line of a private equity buyout is not to create jobs. The point is to make money,” said Marisa DiNatale, senior economist at Moody’s Economy.com. “In many cases, the point is to pare down the company and make it run as efficiently and as profitably as possible. Oftentimes that includes cutting jobs.”

Private equity firms buy companies by borrowing most of the money, and sell them later, keeping about 20 percent of the profit on the sale and giving the rest back to their institutional investors.

Romney worked as a consultant at Boston-based Bain & Co before he was tapped to run Bain Capital. The firm started out with more of a venture capital strategy and later moved more toward traditional leveraged buyouts.

The private equity model is built on loading companies up with debt — which can ultimately prove too heavy a load for the business, as was the case with DDi […]

Precisely. This is not jobs creation or even wealth creation. Private equity is about gaming the system; it is about optimizing, eking out hairline efficiency gains, discovering opportunities for consolidation or liquidation etc. We harp on these strings often around here:

Romney in FL wants credit for being a major player in the financial services sector—at the very moment that that sector is crashing and taking the US economy down with it

This is what interested us the most in Flaherty’s analysis:

[…] Romney knows a lot about the economy, says a former Bain Capital employee who worked under him. But on the topic of jobs, he says Romney was never one to put expanding a company’s payroll ahead of keeping costs low.

“It’s fair for him to claim that he spent 20 years of his life in the private economy. And therefore he understands what makes businesses succeed and fail,” said the former Bain employee, who did not want to be identified. “But that’s different from saying he was in a position to oversee job creation as a whole. Bill Gates grew a business from scratch. That’s not what you do in private equity. You’re an investor” […]

A former Bain employee willing to speak frankly?

yours &c.
dr. g.d.