Wells Fargo's Counter-Stimulus Strategy
Roger Bybee’s feature in our current issue shows how big corporations are taking the financial crisis and recession/depression as an opportunity to eliminate jobs in the United States. ArcelorMittal, the world’s largest steel company, is trying to shut down two steel mills, one in Hennepin, Ill., and one in Lackawanna, N.Y., despite the fact that the mills are profitable and have willing buyers.
Today’s New York Times includes an article indicating that at least one corporation—Wells Fargo—is willing to follow this sort of strategy, even though it was the recipient of tens of billions of dollars of government bailout money. Wells Fargo, the main creditor for the clothing manufacturing company Hartmarx, which is in bankruptcy, is trying to prevent the company’s board from selling the company to Emerisque, a London-based private investment firm specializing in “reviving heritage brands,” according to its website.
According to the Times article (see part of it below), Unite Here (“the union that represented Hartmarx’s workers”—do the not represent them anymore, now that the company is in bankruptcy?—the article doesn’t tell us) is threatening to kick up a fuss if Wells Fargo succeeds in blocking the sale. The article quotes Unite Here president Bruce Raynor as saying: “The surest route for the bank to recover its money is to make a deal with a well-respected private equity firm that owns and runs several successful brands,” Mr. Raynor said. “Emerisque is not only offering substantial recovery for the bank, but to protect the jobs of workers.” It seems a little odd for the union to be finding common cause with private equity, given the track-record of private equity firms of stripping companies of assets and downsizing workforces, as we reported in a feature article in our July/August 2008 issue. Should the Hartmarx workers trust Emerisque’s promises?
Pres. Obama’s statements in support of the Republic Windows and Doors workers’ sit-in in December was encouraging, if only because it indicated a strategy that workers can take in confronting banks and companies that are trying to screw them, and can bring public opinion to bear on the occasional politician. Given that workers at the Hart Schaffner Marx plant (owned by Hartmarx) outside of Chicago made the tuxedo that Obama wore on his inauguration day, can those workers count on him to stand by them, too? —cs
Wells Fargo Said to Be Squeezing Clothier Hartmarx, Raising Liquidation Fears
By STEVEN GREENHOUSE
Published: May 21, 2009
The board of Hartmarx, the Illinois-based men’s clothier that is in bankruptcy protection, faced a surprise obstacle to its plan to designate a London-based investment firm as its preferred buyer.
Organized labor has risen up against Wells Fargo, hoping that a buyer can keep Hartmarx alive and its workers employed.
The investment firm, Emerisque, would take Hartmarx out of bankruptcy, with the promise of keeping the American company operating.
But officials close to the bankruptcy negotiations said Thursday that executives from Wells Fargo, Hartmarx’s main creditor and the provider of its operating funds while it is in bankruptcy, threatened to cut off future credit, perhaps preventing Hartmarx from making payroll, if its board chose Emerisque.
The threat increased fears that the bank favored liquidation.
Neither Wells Fargo nor the bankruptcy judge overseeing Hartmarx would be under any legal obligation to follow the wishes of the bankrupt company’s board, but Wells Fargo has faced increasing pressure to let the company be sold to a buyer likely to keep it operating rather than liquidate it.
Officials said Hartmarx’s board was planning to choose Emerisque early Thursday, but the threat from Wells Fargo delayed that decision, pushing the board’s deliberations into the night.
Emerisque had gone public with its bid on Wednesday, which it said was final and would expire on Thursday.
Fearing that Wells Fargo was pushing to liquidate Hartmarx, a 122-year-old company known for its Hart Schaffner Marx and Hickey Freeman men’s wear, 43 members of Congress wrote Treasury Secretary Timothy F. Geithner on Thursday, urging him to press Wells Fargo to help preserve Hartmarx and its more than 3,000 jobs.
Read the rest of the article.