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View Diary: Private equity-owned Hostess blames striking workers as it liquidates (263 comments)

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  •  I'm watching an odd thing unfold in Kitsap County (7+ / 0-)

    My wife worked for a prosthetics company in Poulsbo, and this company is run by a venture capital firm that takes a hardcore stance on wages and has suck-ass management to boot.  My wife is a highly skilled production assembler and couldn't get more than $10.50 per hour.  She quit about 18 months ago when her boss was disrespectful toward her for no particular reason.

    Fast-forward 12 months.  Her former employer could not maintain production levels or quality in the product line she was working, so they began losing business.  A competitor sets up shop in the local area, and hires my wife at 50% higher wages.  They also hire a cadre of other highly skilled castaways from the former employer.

    Fast-forward another 6 months.  Orders are pouring into the startup while the older company is planning layoffs and a possible factory move (back to the midwest, as rumor has it).

    In this case, private equity fucked itself.

    "First they ignore you, then they laugh at you, then they fight you, then you win". Mohandas K. Gandhi

    by DaveinBremerton on Fri Nov 16, 2012 at 09:21:24 AM PST

    •  Not necessarily... (2+ / 0-)
      Recommended by:
      DaveinBremerton, LostBuckeye

      The goal of private equity is not always to build a successful business, but to buy something cheaply, chop it up and make a profit, and move on.
      Whether or not another company steps in to fill the void makes no difference to these guys, they get their fix and then move on to the next deal. They don't have any real connection to the company itself, or it's product, only to the numbers on the ledger.
      As far as "staying in business" or "providing a service," they don't care. They move in, take profit, and move on to the next deal. They are not in it for long-term commitment.
      Buying companies, perhaps injecting a little capital at first, then destroying the whole thing when they can make maximum profit from doing so is what they do.

      See Gordon Gecko in Wall Street:
      Why did you wreck it? Because it was wreckable.

      Everybody got to elevate from the norm....

      by Icicle68 on Fri Nov 16, 2012 at 09:41:28 AM PST

      [ Parent ]

      •  It still requires a Bigger Fool (1+ / 0-)
        Recommended by:
        DaveinBremerton

        to buy up the wreckage.

        It's been a hundred years, isn't it time we stopped blaming Captain Smith for sinking the Titanic?

        by happymisanthropy on Fri Nov 16, 2012 at 12:07:42 PM PST

        [ Parent ]

        •  The wreckage is generally not sold as one piece (0+ / 0-)

          Equipment/land/buildings/stocked materials and etc. are not sold as a unit, but seperately to whomever will buy each of them.
          The American Taxpayer goes on the hook for part of the employees' pensions via the Pension Benefit Guarantee Fund.
          The private equity guys take the cash. And don't forget, those private equity guys borrowed a ton of money in the business' name, in the guise of "turning it around." Their names aren't on that debt, it belongs to the business.
          All of those parts (named above) are much easier to move individually than they are packaged in one bundle.

          Everybody got to elevate from the norm....

          by Icicle68 on Fri Nov 16, 2012 at 12:38:16 PM PST

          [ Parent ]

    •  in an improving economy (1+ / 0-)
      Recommended by:
      DaveinBremerton

      there may indeed be a lot of opportunities like this for markets left wide-open by these "artificial collapse" scenarios. Some of it will be good, though for employees with long term benefits it will be brutal in the short term.

      •  Indeed it may (2+ / 0-)
        Recommended by:
        decembersue, Reepicheep

        The company I work for just started a Lean / Six Sigma journey.  Our management is in it for the right reasons--thus far--but I'm going to take every training and experience opportunity I can grab so if management starts acting stupid I can jump ship to some other startup.

        The only problem with this plan is the nature of startups:  egotistical owners who excel at designing products and services but really suck at being businesses.  Generally they aren't any good at spotting the need for us efficiency people before they get themselves in trouble and end up being bought out by private equity.  If private equity has any brains at all, the first thing it does is bring in a cadre of pros to get the ship floating level again.  I would so love to get onboard with a small private firm before it gets into trouble and help steer it clear of private equity.  Let the original owners and their original employees keep the fruits of their labors.

        "First they ignore you, then they laugh at you, then they fight you, then you win". Mohandas K. Gandhi

        by DaveinBremerton on Fri Nov 16, 2012 at 09:54:33 AM PST

        [ Parent ]

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