By Jim Schutze
By Rachel Watts
By Lauren Drewes Daniels
By Anna Merlan
By Lee Escobedo
By Eric Nicholson
Just a few months after being hammered by Kennedy, he set fire to another company.
The Price of Incompetence
The move was classic Bain. Before buying Georgetown, Romney had purchased the Armco steel mill in Kansas City, which had been in business more than 100 years.
"We were setting a lot of records for production at that time," employee Steve Morrow says. "We were making a lot of money, because we were getting profit sharing."
Romney purchased Armco with just $8 million down, borrowing the rest of the $75 million price tag. Then he issued bonds — basically IOUs — to borrow even more to pay himself and his investors $36 million.
Within a year, he'd already made four times his initial investment while barely lifting a finger. But he'd also run up a staggering $378 million in debt on GSI's tab.
Steel is an infamously cyclical business, a worldwide commodity prone to the same wild price fluctuations as oil. The Kansas City plant forged parts for equipment used in mining gold and copper, leaving it susceptible to the instability of those markets as well.
Yet the smartest guys in the room thought they could run the plant better than the people setting production records.
"They were getting rid of old managers and hiring new managers that didn't have any steel experience," Morrow says. "Some of the guys were nice guys and everything, but they didn't have a clue what was going on."
Many of the new supervisors were ex-military, people who believed that grown men and women are best motivated by punishment. Before Bain, Morrow says, "everybody got along."
Afterward? "They wanted to run the plant like a disciplinary environment. They wanted to discipline people for getting hurt on the job. They wanted to put us in an environment like a war, where we were always fighting with them."
Romney was charging GSI $900,000 a year in management fees to run the company. The Kansas City mill received $900,000 worth of ineptitude in return.
Although Bain borrowed $97 million to retool the plant so it could also produce wire rods, it left the rest of the facility to rot.
To save costs, Bain went miserly on everything from maintenance to spare parts and earplugs. Equipment deteriorated. Since the new managers didn't know how to repair it, "they'd want to rent a new piece of equipment out instead of maintaining what we had," Morrow says. The waste and inefficiency were breathtaking.
Bain's plan all along was to streamline the company into greater profitability, then reap the rewards with a public stock offering. But the exact opposite was happening. Even Roger Regelbrugge, whom Bain installed as chief executive officer, knew the debt was crushing GSI from within, according to Reuters. If a public offering didn't materialize, the company would collapse.
Steel was about to enter a periodic downturn. Countries around the world were locked in a war of tariffs and government-subsidized production, creating a glut and driving down prices. Romney's strategy of the flip was never meant to endure difficult times.
Workers saw the end coming; they were particularly worried that Bain was badly underfunding their pension plan. So they went on strike in 1997, bringing a traditional Rust Belt flair to the festivities by littering the streets with nails and gunning bottle rockets at security guards.
When it was all over, the Steelworkers' union agreed to wage and vacation cuts in exchange for extra health and pension safeguards should the plant close.
Yet GSI was now hemorrhaging money, says David Foster, the union official who negotiated the deal. He claims that Bain cursed the company by placing its own interests above those of customers or long-term stability.
"Like a lot of private equity firms, Bain managed the company for financial results, not production results," Foster says. "It didn't invest in maintenance or immediate customer needs. All that came second to meeting monthly financial goals."
It would take a few more years of bleeding, but GSI eventually fell to bankruptcy.
The Kansas City mill closed for good; 750 people lost their jobs. Worse, Romney had shorted their pension fund by $44 million. The feds were forced to cover the difference, while workers saw their benefits slashed in bankruptcy court.
The battered Georgetown plant and the foundries in Arizona and Minnesota ultimately were bought out of bankruptcy by new companies. Their workforces were halved.
Still, Romney walked away unbruised. All that debt was technically GSI's, not Bain's. Because he'd repaid himself and his investors just months after the purchase, Romney pocketed millions for running the company into the ground.
"They were clever and ruthless enough to pay their own investors back at a really high return rate," Foster says.
This was the beauty of Romney's racket. Even if he killed a company — and he tended to kill them fairly often — he still made out, leaving others to take the hit.
The Parasitic Capitalist
On the campaign trail, Romney describes his work at Bain as resurrecting distressed companies. In this version, he's the white knight lifting troubled firms from the precipice of failure.
I'm figuring it will only take another 10 years or maybe less, for humanity to tire of this and start the extermination. Lobbyists or Republicans, who knows which will be first to go!!!!
Free Market is not Capitalism, it is chaos and doesn't work. True Capitalism needs to be heavily regulated and Capitalism, the economic system, not the capitalist, is the primary consideration.
We are the worst possible example of what could be an ideal economic model.
Your conversation style is akin to kicking over trash cans and running, skipping, holding hands and giggling with your playmates.
did you not read the article? profitable companies with hard working employees are bought and guys like Romney use the company to get credit (which they can because the company WAS MAKING MONEY) they pay themselves and then leave the company to rot and to pay all the debt. Can someone please explain me how the F@#CK can you call that good capitalism
The real villain wasn't Romney or his kind, but the original owners who cashed out and threw their company to the wolves.
Josh Kosman is a media hack. His biased one sided stories are the worst sort of journalism, lies and distortions. This is why he writes for the Dallas Observer. His tripe is more suited for the National Observer. His source is a disgruntled union member. Kosman leaves out that Romney left Bain Capital 2 years before GS Industries filed bankruptcy. Or that Bill Clinton's kneeling lip jobs to the Chinese and union greed killed the US steel market leading to several steel companies going belly up including Bethlehem Steel.
More BS by the socialist Observer, hey earth to Observer, this is a CAPITALIST economy, (sort of at least it use to be) Socialism doesn't work, witness Russia, Europe and China that is now more capitalistic than we are! (and they are rubbing our faces in it!) We are now in a world economy and it's either compete or perish. The days of big labor are over with, if you don't believe it look at Europe. With the recent events in France look forward to it only getting worse.
HelloA more indept article on Parasit romney is check out this link. http://www.informationclearing... This is the best on the subjectPeaceStephen Schweter
what the hell is wrong with you?youve read a story about man whose job was to shut down businesses (which put people out of work),move it to mexico and write himself a fat check and wants to be president and all you can do is finger point which political part did what or is worse! theres no difference between the parties because they are all rich like romeny.most of you are pathetic and contribute to the problems you complain about!
Long story, but worth the read. It just goes to show that because you have money and you know how to make it, it does not mean that you are right to lead this country. We need someone who will restore the country, not the same old BS where the politicians look out for thier own pocket books instead of looking out for the people they represent. Ron Paul 2012!
And perpetual politician and "waitress sandwich" womanizer Teddy Kennedy was not a parasite? You guys are pathetic... (lol)
Go down thru history and you will find many, and I believe more than Republicans, presidents were Democrats and rich before taking office. They made their money off the sweat and misfortune of others Cleveland, Van Buren, Monroe, Clinton, Tyler, FDR, Johnson, Madison, Jackson, Jefferson, Washington and least but not last JFK. They may have been pricks in business but not all ran the country in to the ground as president like Obama will do given 4 more years to complete the job!
This is not a partisan conversation, it is about the rape of a country which relies on an economic system that, when respected, is the greatest in the world. Both political parties are complicit in enabling huge holes in the protective wall around our economy that allows unscrupulous people to "game" the system at the expense of hard working owners and workers in the American business community. You'd really have to read the article to figure that out though and, well, it does have a few big words in it.
Other's action can not be used to rationalize evil deeds. I don't who else did it. It is just wrong period.
The Republican Party needs a transformation. This country needs to get away from Corporcrat rule, which is what Mitt Romney and Obama are all about. Young people, the future of our country, recognize someone who can direct us back in the right direction - - towards true LIBERTY for its people. RON PAUL has the right message to reinvigorate the Republican Party. Mitt Romney is its doomed past.
Mr. Kosman, and David Foster talk like typical union people(yes I am one also) If Romney is a parasite, and vulture, then please tell me just what is Obama? He is a communist, and never worked a day in his pathetic life. Community organizer, Ha! what a laugh. Even now as president he has a hard time working like a president should, vacation after vacation. I agree I can't wait until election so I can vote for Romney. I agree with Thomas_Avit. The Republoican party does need a transformation, and people like the tea party people are trying to do just that, by getting rid of all the old moderate conservatives like Richard Lugar and others. I like RON PAUL but I don't like his foreign policy. Mr Avit needs to read more history. Ron Paul is an isolationist---That is exactly what got the world into WWII. The world let Hitler go too long without trying to stop him. Don't wait on the young people to lead the U.S. out of this mess, they tend to go for guys like Obama. YOU Mr. Avit probably would not vote for the right person to lead us back to a strong nation. Tell me,Did you vote for Reagan? I'll bet you didn't.
What a dumb person you are. You must be wealthy too and have done the same thing costing people their jobs, homes, cars and way of life and you think that's okay. And you even called that working... The president worked many days of his life and the only sorry, useless person in this scenario is Mitt Romney a destroyer of families and their dreams so he could be wealthy. A disgrace to mankind.
Did you even read the article? - eg Romney - like so many private investors and big corporations - used taxpayer money to fund their investments - paid themselves and walk away after taking the companies. Being a CEo doesn't mean someone is a good President. Both our parties work the system - but Republicans are the biggest hypocrites because they take government money and then badmouth it as if they don't. And President Obama isn't a communist - do you even know what that word means? Apparently most Republicans are either over the age of 60 are not well educated -- their points of reference - Hitler; Nazis'; Marxism -- are outdated and irrelevant. And it was Nixon and George Bush Sr. who proudly opened up the doors for our country to do business with China - Bush Sr. turning his head as tanks ran over students in Tieaman Square. People like Romney criticize China - yet all do business with them - and they ARE communists. At least Democrats pretend to want to help people - wherewas Repbulicans try to blame everything on the poor, unemployed and workers who actually make our economy work. If our minimum wages was higher, then our gov't wouldn't have to help as many people. It's the Mitt Romneys of the world - who are born rich but yet take tax money to continue to line their pockets - who are the true "evildoers." As for Reagan - he was the cause of our gov't deficit -- if you actually can read - go back and you'll discover that when he cut taxes for the rich - our gov't deficit began. And the results of that were why George Bush Sr. had to raise taxes and was voted out of office. The same is hapning now -- Baby Bush tanked our economy and now the Republicans try to blame President Obama - some things never change. But ask yourself -- if things are so bad - how is it the 1% have made even more money even during the worst recession in a half century?
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Wow. I was going to vote for Romney. Looks like I have more reading and research to do. Interesting story. I may still vote for him.If it ends up Romney versus Obama; I will definitely vote for Romney. He is the better of the two evils.
Mitt's a job creator in the same sense that Lucifer is a soul saver. No more, no less. He helps his friends, which amount to an extremely small group. Everyone else pays a steep price, and Mitt feels no remorse. None at all. If you hope for more than that, you're pipe dreaming. nothing more.
alot of firms under the tutelage of the Fed sent the country to ruin some don't exist anymore so what is the moral imperative, make Chavez President because we need to do good for the proletariat? Capitalism never ran that way at best trickle down good times after a holocaust No we aren't that big a losers just a little slow sometimes when misguided, if you don't like Romeny then vote for Ron Paul but don't vote for big governement and suppression of entrepeneurialsim unless your an A 1 leach or satisfied on a welfare haul
You can't trust unions, the govt, or extreme profit minded, ok, greedy corporate types. What's left?
After reading this, I don't have much regard for Romney. However, the article makes the companies out to be the victim.
Anyone stop to think that that's what the CEO of said companies were shopping for when they partnered with Bain?
I know when CompUSA went under that's precisely what they had in mind when they liquidated the company. They weren't trying to get back on their feet.
Sure, great story, if you take everything it says as the gospel. How about a story regarding how unions destroy companies by draining them for THEIR profit? Union bosses get rich and the workers get the shaft after it's all said and done. Ask auto workers, American Airlines pilots/mechanics, steel workers. But they did one thing good, they provided a great atmosphere for robotics companies to flourish!
that would be a great topic if this story was about Unions. Its not. Stick to the topic. Your boy is a pariste. deal with that on election day.
Last time I checked union members elected their leaders, don't cry when you do nothing to change the folks at the top, then complain when they continue to do the same thing over and over again.
Badmann,Corporations of the likes run by Romney are robbing you blind while they distract you w/the fear of losing your liberties! Open your eyes man. Freedom should not come at the price of losing your home, your healthcare, and your job to the 1%!!!
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Thinking progressively? If you mean thinking like a progressive, you are wanting us to reach the end of the road we are now on rather than turning around and taking a different course. Progressivism means you have no natural rights. That means you only have rights that the government allows you. I hardly think surrendering our liberty is the way to prosperity.