Malden Mills, a family-owned textile mill based in Lawrence, Massachusetts, has annual sales of
$400 million and is the exclusive producer of Polartec
® and Polarfleece® synthetic fabrics, andvarious other upholstery fabrics. Henry Feuerstein, grandfather of current CEO and owner
Aaron Feuerstein, founded Malden Mills in 1906. When a fire destroyed three out of ten
buildings on its complex in December 1995, Aaron Feuerstein decided to rebuild the mill rather
than relocate or dissolve the business. He later won numerous accolades for his decision to
continue paying employees for three months while the mill was being rebuilt.
From the The Globe:
If Aaron Feuerstein can pull off his latest miracle, he will have written another improbable chapter in his own amazing story. But more importantly it could mean two things that Massachusetts desperately needs: saving good-paying manufacturing jobs and building affordable housing. Money, of course, is what stands in the way. But for the giant creditors like General Electric that now own Malden Mills, the money is chump change.
Even chump change, it turns out, is too much.
Consider the numbers. Tomorrow, Feuerstein, the man who became a national hero when he refused to lay off his workers following the fire that destroyed his mill just before Christmas 1995, and his new partner, Boston developer Winn Cos., are expected to formerly deliver their proposal to buy the Lawrence textile company and build 600 units of housing in the abandoned mill that sits beside the state-of-the-art factory Feuerstein built after the fire. They are expected to offer about $75 million for Malden Mills, or about $18 million less than the creditor's group said it was willing to resell the company to Feuerstein for as it came out of bankruptcy in August.
That would cost GE, Malden Mills's largest equity holder, an additional $2.7 million. To repeat: It would cost GE $2.7 million. Last year the company made a profit of $14 billion, meaning it earned $2.7 million every hour and 45 minutes a day last year, or in less time than it takes you to watch a movie at home. It is also less than half the $6.9 million in bonus and salary GE paid its chief executive, Jeffrey Immelt, last year.
GE's response? The Feuerstein-Winn offer is "far too low an amount to be acceptable," a spokesman for GE Corporate Financial Services told me yesterday. This from the company that brings good things to life. Feuerstein wouldn't comment.
At 77, Feuerstein is a folk hero, a businessman with a heart, to many of us. But to many in business he is nothing short of nuclear waste. He uses his bully pulpit on "60 Minutes" or the front page of The Wall Street Journal to make anyone who stands in his way look bad, and to get what he wants, his critics say.
Good for him. In a world where the mantra is lower costs and higher profits, Feuerstein uses what he has, and what he has is the appreciation of a nation that saw one executive stand by his workers in a way that few would. Feuerstein is flawed -- his overbuilding after the fire helped put his company back into bankruptcy -- but no one doubts the man's heart.
Right now Feuerstein sees an opportunity to buy back his textile plant and build housing in Lawrence, one of America's poorest cities. Feuerstein and Winn make an oddly complementary pair: Winn brings capital and housing know-how, and Feuerstein's goodwill could be a powerful magnet in attracting highly competitive government dollars. If the creditors say no and Winn walks, the entire Merrimack Valley will have lost a precious opportunity.
To say nothing of Malden Mills's 1,200 workers. Their tenuous future was spelled out in a letter from David Orlofsky of Kroll Zolfo Cooper, a workout firm now running Malden, to the US Export-Import Bank, which is considering loan guarantees for the sale of the mill. "It has become clear that a majority of investors or managers charged with running Malden's business would be likely to make the strategic decision to relocate a substantial part of Malden's operations overseas over the next several years," Orlofsky wrote. He added: "By contrast, Malden's current chairman and president, Mr. Aaron Feuerstein, believes that it is not only feasible, but desirable, to maintain manufacturing operations in the United States."
What a concept. No wonder the man makes some people uncomfortable.
Steve Bailey is a Globe columnist. He can be reached at 617-929-2902 or at bailey@globe.com.
From the Quality Monitor Newsletter:
Conviction. The story of Malden Mills and Aaron Feuerstein is the story of leadership. Business proceeds in cycles and the most recent cycle is one in which extremely highly paid CEOs are celebrated for cutting costs, downsizing, moving plant to venues of cheap labor and delivering maximum worth to stockholders. Leadership would appear to be synonymous with profit maker. Aaron Feuerstein spent millions keeping all 3,000 employees on the payroll with full benefits for 3 months. Why? What did he get for his money? Is he a fool? Did he have some dark motive? Here is Aaron Feuerstein’s answer: “‘The fundamental difference is that I consider our workers an asset, not an expense.’ Indeed, he believes his job goes beyond just making money for shareholders, even though the only shareholders of Malden Mills are Feuerstein and his family. ‘I have a responsibility to the worker, both blue-collar and white-collar,’ Feuerstein added, his voice taking an edge of steely conviction. ‘I have an equal responsibility to the community. It would have been unconscionable to put 3,000 people on the streets and deliver a death blow to the cities of Lawrence and Methuen. Maybe on paper our company is worth less to Wall Street, but I can tell you it’s worth more. We’re doing fine.’" Feuerstein did not throw his money away. It was not largesse. It was a well reasoned and sound leadership decision to invest millions in Malden Mills’ most critical asset, its workers. The contrast between this CEO and the currently celebrated CEOs making 30, 60 or 100 million dollars a year by eliminating jobs and moving plants is simply astounding. How much are you willing to wager that every company that closed a plant in recent years to boost stock prices has a vision statement with words like …we value and respect our employees as our most important asset? How many of the laid off employees do you suppose believe that? To a leader that has the conviction of his beliefs, words like value and respect must be backed up with hard decisions and actions. The real test of leadership is maintaining those convictions during change and upheaval. Communication. What sets Aaron Feuerstein apart from the CEOs of AT&T (44,000 layoffs), IBM (over 100,000 layoffs) is that he is a leader. He has a conviction that employees are his most critical asset and lives by it. The most important communication is not what you say but what you do. The first major test of Feuerstein’s convictions as a leader came during the bankruptcy. Many of us might conclude that a bankrupt textile mill in a 300 year old mill town in 1981 was the end of the road. Not Aaron Feuerstein. He spent millions to develop a new product and re-opened the mill in Massachusetts with all the high paid workers (by global standards). His firm created Polartec® and Polarfleece®, revolutionary new products. As a result "Aaron [Feuerstein] came out [of the bankruptcy] stronger than he went in." The fire was the second test, and again Feuerstein vowed to stay in business. These two actions were the most powerful communications he could have made to his workers that he had the courage of his convictions. He was willing to put his money, reputation and business on the line to move the company forward in an ever changing business climate and ever present risk. When the management gurus write books, articles and speeches about leadership and organization development they always talk about the need to balance the needs of all stakeholders: employees, customers, stockholders, vendors, community and so on. It is not irrational to invest millions in your employees, but today most workers see that the stockholder is the only stakeholder that counts. When I ask senior managers about communication within their organizations, I often hear about newsletter articles, speeches at the annual meeting and official memos. There are other and more powerful ways to communicate. Day-to-day decisions and actions communicate volumes about actual positions on key issues, e.g., talking about productivity and performance but keeping an old friend on the payroll who is notoriously ineffective, or talking about cost control while the company picks up the lease on the executive’s new Jaguar. Courage. What distinguishes Aaron Feuerstein and other leaders like him is courage. Feuerstein has the courage to stand by his convictions and take the appropriate actions. If Feuerstein showed courage by committing his wealth and good name in rebuilding Malden Mills—he only has done what leaders through the centuries have done. He lead the way, blazed the trail, so that his followers could do the impossible. "‘Before the fire, that plant produced 130,000 yards a week’, Feuerstein said. ‘A few weeks after the fire, it was up to 230,000 yards. Our people became very creative. They were willing to work 25 hours a day.’" How many corporate CEOs in the downsize-crazed companies today could ask their employees to double production in a few weeks given no changes in the current plant—much less given temporary plants set up in old warehouses? How many of your employees would come through for you if your company needed their help? They might work 25 hours a day for you if they thought they were valued as important assets. If the communication has been that employees are movable and expendable, they may abandoned ship for a more pleasant work place given the extra demands. Conclusion: Conviction, Communication and Courage. The message from Malden Mills is that Aaron Feuerstein did what any rational person might do given time to reflect and with her priorities in perspective. Reconsider the priorities of your company. Rethink the values you communicate and how you communicate them to your employees, customers, stockholders and community. What are your convictions as a leader, how do you communicate them and do you have the courage to stand by those convictions under any circumstances? Answer these questions in a quiet moment of self reflection. Most companies will not have to face a fire to find out what their leaders are made of, ask your employees and customers what they notice every day. Ask them what happens:
How you respond to these everyday issues communicates your leadership convictions. Your convictions drive employee loyalty to you, your products and your customers. Your courage to honor your convictions through changes both small and large is a measure of your leadership. ¨ |
Malden Mills became the focus of national attention in December 1995, when CEO Aaron Fuerstein continued to pay employees through the holiday season while he rebuilt the business after a major fire devastated the family-owned textile mill. The company statement said the filing was necessitated by the cost of servicing the company's bank debt, much of which was incurred as the company rebuilt after the blaze.
The company's press release mentioned in its headline that the company had received $20 million in funding, but gave no details; nor did it name the lenders. But earlier published reports have listed GE Capital Corp., a unit of Connecticut-based General Electric Co., as leading the group of lenders renegotiating the mill's $140 million debt.
A Malden Mills spokesman could not be reached for further comment.
Leadership
Focus
On December 11, 1995 a fire burned
most of Malden Mills to the ground and put 3,000 people out of work. Most of
the 3,000 thought they were out of work permanently. A few employees were
with the CEO in the parking lot during the fire and heard him say “This is
not the end.” With these words began a saga that has made Aaron Feuerstein a
legend among American leaders and a hero to his employees. Quotes are from
Parade Magazine 9/8/96, pp. 4-5.