Ford Is Pushing Buyouts to Workers
A tale of two industries tells the story of where the U.S. economy is headed along with the President's popularity:
Kevin Ford, left, and Troy Marks, right, talk with a job recruiter Friday at the Ford stamping plant in Woodhaven, Mich.
New York Times
February 26, 2008
Ford Is Pushing Buyouts to Workers
By BILL VLASIC
WOODHAVEN, Mich. — The Ford Motor Company is applying the hard sell these days — piling on incentives, doling out marketing DVDs and brochures, and making offers it hopes are too good to pass up.
But Ford’s big new push is not to sell cars. Instead, it is trying to sign up thousands of workers to take buyouts, partly by convincing them that their brightest future lies outside the company that long offered middle-class wages for blue-collar jobs.
So, Ford is pitching a buffet of buyout packages that are easily among the richest ever offered to factory workers, including one-time cash payments of $140,000 or college tuition plans for an entire family.
The automaker is also putting on job fairs in its plants and mailing each of its 54,000 hourly workers a feature-length DVD, titled “Connecting With Your Future,” that extols the promise of new careers beyond the assembly line.
Last Friday, inside a huge sheet-metal stamping plant in this industrial center south of Detroit, Ford workers spent their lunch hour perusing opportunities to go back to school, hire on at growing companies and open fast-food franchises.
“I am taking it seriously, but it’s really hard to think about leaving,” said Jerry Thomas, a 37-year-old millwright with 12 years at Ford. “The only thing that would make me do it is the uncertainty. We just don’t know what’s going to happen with Ford.”
The push to move workers out reflects the tough times in Detroit. Ford has lost $15 billion in the last two years, and General Motors and Chrysler are also revamping after heavy losses.
While Detroit’s Big Three have already cut about 80,000 jobs through buyouts and early retirements since 2006, a new blitz is under way to shrink employment even further to make way for lower-paid workers in the future.
The aggressive approach to buyouts is particularly striking at Ford.
In the early 1900s, the company founder, Henry Ford, transformed the American workplace by pioneering $5-a-day wages on the assembly line. And the company’s paternalistic culture still lingers in the way workers often refer to the company as “Ford’s,” in reference to the family that provided them a comfortable income.
Ford executives say the buyout packages, which are the most lucrative and diverse ever offered in the industry, reflect a belief that Ford should look after its workers and ease their transition into different careers.
“We need to restructure, and it’s important to our business to do so,” said Joseph R. Hinrichs, Ford’s head of global manufacturing. “But we want to do it in the best way for our employees.”
But there is no mistaking Ford’s message that this is the last companywide offer, and there could be layoffs if further downsizing becomes necessary.
Ford is not saying how many workers it expects to take the buyouts by a March 18 deadline. But Wall Street analysts say the company has set a goal to get 8,000 employees to sign up.
General Motors is also extending buyout offers to all of its 74,000 hourly employees, while Chrysler is offering buyouts to workers on a regional and individual plant basis.
The belt-tightening comes after years of declining market share and increased competition from foreign automakers, led by Toyota.
“These companies are trying to do in the last 24 months what they should have done over the last 24 years,” said John A. Casesa of the automotive consulting firm Casesa Shapiro Group. “That’s why it’s such a shock to the system.”
Ford has eliminated more than 32,000 jobs over the last two years through buyouts and early retirements. But it needs to cut more to improve productivity, make room for transfers from its former Visteon parts plants, and pave the way for new hires at wages of $14 an hour — roughly half of current pay scales.
“We always prefer for people to voluntarily leave and that’s why we put the energy and effort into this package of buyouts,” said Martin J. Mulloy, Ford’s vice president for labor affairs.
The buyout deals were developed with the United Automobile Workers union. In fact, one senior union official endorsed the downsizing effort in a cover article titled “Fresh Opportunities” in the company’s internal Ford World magazine.
“Because of the loss of market share and because the economy is so bad, there aren’t enough jobs for everybody,” said the official, Bob King, the U.A.W.’s Ford division vice president.
The company is offering a broad range of buyout and early retirement packages.
Employees with as little as one year of seniority can receive $100,000 cash, although they give up all health benefits after a six-month period. For employees at least 55 years old and with at least 10 years on the job, the payout jumps to $140,000.
Ford, which has a younger work force than G.M., also included many educational options. One buyout offer provides a worker four years of tuition reimbursement up to $15,000 annually, plus health care coverage over that period and a stipend equal to 50 percent of base wages.
At the Woodhaven stamping plant, the 1,142 hourly workers are wrestling with the many choices facing them.
“They want to give people incentive to walk away,” said Jim Irey, who has worked in the plant for 40 years. “It’s the reality of the business, whether you like it or not.”
Another worker, Andy Linko, contrasted the buyout deals to how he fared when his previous job as a steel worker disappeared.
“We never had this type of opportunity when I was in the steel industry,” Mr. Linko said. “We knew for years that the industry was in trouble, and one day the doors just shut.”
The job fair at Woodhaven offered a mix of career prospects, from truck driving to electrician work at the local utility to franchise opportunities at the Little Caesars pizza chain.
One recruiter, Heidi Daniels of DTE Energy, said the plant was a “great opportunity” to find skilled labor. “I’ve heard of offering out-placement assistance, but this is unique,” Ms. Daniels said. “It’s almost unheard-of.”
Ford has also gone to great lengths to promote the promise of life after the auto industry.
In its DVD, Ford employs actors to urge workers to take “the opportunity to step out and try something new.” Various segments of the DVD highlight former Ford workers who have started their own businesses after taking buyouts.
The company does not track the fortunes of all its former employees, but said it was proud of the “success stories” of people who have taken buyouts.
One such worker, Dale Beck, took a $100,000 buyout in 2006 to open a Little Caesars outlet in St. Louis.
“I went from making cars to making pizzas, and it’s turned out pretty well for me,” Mr. Beck said. “I also know some people who took the money and spent it, and now they’re struggling.”
Workers in the Woodhaven plant seem to split among younger workers who see the buyouts as a window to a new life, and older employees who cannot imagine giving up their Ford paychecks.
“I’m taking the $100,000,” said Stacy Haynes, a 34-year-old mother of four children. “I’ve been here 12 years, and I can’t believe I lasted this long.”
Bill Fender, a 58-year-old tool and die maker with 37 years on the job, sees it differently.
“I’d like to retire, but it’s just not enough money for me now,” Mr. Fender said. “I’m making almost $80,000 a year, and I can’t see leaving that behind.”
One thing Ford workers are proud of is that their buyout options are more extensive and, in some instances, better paying than those at G.M.
Those bragging rights seem a poignant commentary on the depth of Detroit’s difficulties, said the historian Douglas Brinkley, author of a book on Ford titled “Wheels for the World.”
“There was a time in the 20th century when you flashed a Ford badge in Detroit and it meant you were a man on the rise,” Mr. Brinkley said. “Now, the new status symbol of the Rust Belt is they are downsizing people better than other companies are.”
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Lillian Vernon Corp. files for bankruptcy protection
Virginia Beach, Virginia
Employees leave Lillian Vernon on Friday, Feb. 15, after layoffs were announced earlier in the day. (Vicki Cronis-Nohe | The Virginian-Pilot)
Creditors holding the largest unsecured claims against Lillian Vernon Corp.:
- Smart Post, Pittsburgh, Pa. - $2.2 million
- Direct Holdings Worldwide, N.Y. - $1.4 million
- Gift (VA) LLC, New York - $1 million
- Federal Express Corp., Pittsburgh - $990,359
- Graphic Communication, Atlanta - $901,101
- Quad Graphics Inc., Atlanta - $830,684
- Li & Fung (Trading) Limited - $604,767
- Linkshare Lockbox , New York - $498,619
- Paradysz Matera, New York - $473,431
- International Paper Co., Pittsburgh - $455,298
By Gregory Richards
The Virginian-Pilot
February 20, 2008
VIRGINIA BEACH
It started in a New York housewife's kitchen 57 years ago. It could end in a Delaware courtroom.
On Wednesday, five days after Lillian Vernon Corp. laid off half its year-round work force, the catalog and Internet retailer filed for Chapter 11 bankruptcy protection in Delaware.
The company, which became a retailing icon by selling low- cost personalized gifts and gadgets, has determined that "a sale or orderly wind down of the debtors' business is in the best interest of all stakeholders," said Robert J. Eveleigh, its chief financial officer, in the bankruptcy filing.
The filing was not a surprise. Last week, the chief executive of Lillian Vernon said the bankruptcy track was a possibility.
"I was very sad to hear the news today," said Lillian Vernon, through her oldest son Fred Hochberg, who spoke with his mother Wednesday. Vernon, 80, founded the company as a newlywed in 1951 and was its chairman when it was sold five years ago.
"The Lillian Vernon company was a great American success story," she said. "Only in America could a young woman immigrant build a public company and a brand known to millions of consumers."
The company asked Wednesday for court approval to hire a liquidator to help it conduct a going-out-of-business sale to pay off debts. T he company already is advertising a sale on its Web site, offering as much as 85 percent off dozens of products.
It also has employed an investment banking firm to explore selling the company, which now has about 189 employees based mostly in Virginia Beach.
Slowing sales and increasing costs over the past decade have led to the bankruptcy, the company said in court documents filed in U.S. Bankruptcy Court in Wilmington, Del. Also contributing were the "significant" quarterly rent payments for its 870,000-square-foot distribution center off Lynnhaven Parkway. Lillian Vernon's headquarters and customer call center are at that site.
An increasingly weak retail environment is proving to be the breaking point not only for Lillian Vernon but other retailers as well. The Sharper Image Corp., another retailer, which has one store in Hampton Roads at MacArthur Center in downtown Norfolk, filed for bankruptcy on Tuesday.
In its filing, Lillian Vernon listed assets and debt of between $1 million and $100 million. It estimates that it owes money to between 5,001 and 10,000 creditors.
Six affiliates of Lillian Vernon - including Lillian Vernon International Ltd., The Corporate Solution Inc. and Rue de France Inc. - also are seeking Chapter 11 bankruptcy protection. Lillian Vernon is asking the court to jointly administer the cases.
Among local companies owed money in a 112-page listing are The Virginian-Pilot, Food Lion store 1333 in Virginia Beach and Forbes Candies Inc.
The 30 largest unsecured creditors are owed $11.6 million. The top four unsecured creditors are Smart Post, which is owed $2.2 million; Direct Holdings Worldwide, a former owner of Lillian Vernon, which is owed $1.4 million; Gift (VA) LLC, $1.1 million; and FedEx Corp., $990,360.
Lillian Vernon also said it owes about $15.5 million to secured lender Wachovia Bank, and roughly $7.5 million to investors.
The company is so crunched for cash that it is unsure whether it will be able to keep its lights on. The retailer is asking the court to prevent utility companies from shutting off electric, gas, sewer, water and telephone/data service. The company's monthly utility bill averages about $130,000, according to the filing.
The company has "insufficient available cash to meet ongoing obligations necessary to run their business, accomplish their business goals and effect their reorganization," Eveleigh wrote. "As a result, the debtors urgently need credit and additional capital to continue their business and operations."
Sun Capital Partners Inc., a Boca Raton, Fla.-based private investment group, bought Lillian Vernon in May 2006. Shortly after the acquisition, the retailer's headquarters was moved from White Plains, N.Y., to the Virginia Beach distribution center that it has operated since 1988. Richard A. Hurwitz, Sun Capital's spokesman, did not return a call for comment Wednesday.
Over the years, Lillian Vernon Corp. grew to become one of Virginia Beach's largest corporate citizens. Vernon gave up control of the then-publicly-held company in 2003, when it was sold to two companies that formed a partnership called Direct Holdings Worldwide.
Recent years have been difficult financially for the retailer. Lillian Vernon has lost money every year since 2000, Michael D. Muoio, its chief executive, said on Friday. It had sales of $156.7 million in its fiscal year that ended in June, he said.
After Muoio took over leadership in June 2006, he pledged to restore the company. Muoio did not return calls for comment Wednesday.
"I told her the day I joined the company that every fiber in my brain and in my body is dedicated to getting her name back to the iconic status it deserves," Muoio said in December 2006, recalling a conversation with the company's founder. "Those were the right words. I think that brought a tear to her eye."
A hearing on the case is scheduled for today at the Delaware bankruptcy court.
Bloomberg News, The Associated Press and staff writers Carolyn Shapiro and Tom Shean contributed to this report.
Gregory Richards, (757) 446-2599, gregory.richards@pilotonline.com
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Lillian Vernon Corporation files for bankruptcy after years of exploiting thousands of workers in Virginia Beach sweatshop
Bankruptcy hits Lillian Vernon, Sharper Image
Weak holiday season and a struggling economy have forced the gadget retailers to file for bankruptcy; Shaper Image hurt by liquidity crisis, tough competition.
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NEW YORK (AP) -- Troubled retailers Sharper Image Corp. and Lillian Vernon Corp. have filed for bankruptcy, pointing to the effects of a weak holiday season and a struggling economy.
Sharper Image, known for its high-tech novelty gadgets, and Lillian Vernon, which sells low-cost gifts and gadgets through its catalog and Web site, have long been plagued with falling sales.
But an increasingly weak retail environment proved to be the breaking point for the retailers. Consumers have cut back on discretionary spending as credit and housing markets remain weak and high food and gas prices persist.
In an affidavit filed with the U.S. Bankruptcy Court for the District of Delaware on Tuesday, Sharper Image Chief Financial Officer Rebecca L. Roedell said the company has experienced declining sales since 2004 and recorded net losses in fiscal 2005 to 2007, continuing into 2008.
She said the company is in a "severe liquidity crisis," hurt by tougher competition, deteriorating gross margins, pending litigation and the volatile credit and financing markets, among other factors.
A rejected settlement offer related to a class-action lawsuit involving its air purifiers led to a drop in the company's stock price, loss in market confidence and eventually contracted credit terms from vendors and suppliers, Roedell said.
Sharper Image names third CEO in 17 months
San Francisco-based Sharper Image plans to close 90 of its 184 stores as soon as possible after it sells their inventories. It plans to continue to conduct business as usual while it develops a reorganization plan.
Meanwhile, Lillian Vernon Chief Financial Officer Robert J. Eveleigh said in an affidavit Wednesday that the company, which has a highly cyclical business that peaks during the Christmas holidays, has experienced declining sales and rising costs over the past decade.
"During the past holiday season expected sales growth did not occur, which resulted in lower profitability and significant unsold inventory," Eveleigh wrote. "These factors combined to significantly impair (Lillian Vernon's) ability to find additional financing."
The company is evaluating whether it is in the best interest of its shareholders to sell itself or liquidate.
Both companies had recently attempted management changes and other moves to try and help results.
Last week, Sharper Image named a crisis-management expert as its new chief executive, while Lillian Vernon laid off half its year-round work force at its Virginia Beach, Va., distribution center.
Soleil Securities Group Inc. analyst Scott Tilghman said in a note to investors on Wednesday that Sharper Image's filing was not a surprise.
"Sales have simply failed to normalize given the sustained pressure on the company's two core product categories, air purifiers and massage chairs, while macroeconomic pressures have heightened the challenges for the company," he wrote. "The series of management changes over the last couple of years have not stopped the company's poor fundamental performance nor have they materialized in significant strategic changes."
Tilghman, who had rated Sharper Image "Hold," said he was discontinuing coverage of Sharper Image.
"We find no reason for investors to be involved with Sharper Image in the near term," he wrote.
Sharper Image (SHRP) shares lost 71.5% in morning trading on the Nasdaq Wednesday.
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Lillian Vernon files for bankruptcy
Chantal Todé
February 21, 2008
On February 19, Lillian Vernon filed for Chapter 11 protection in the District of Delaware, along with several other entities including Lillian Vernon International Inc., LV Catalog Holding Corp., LVC Retail Corp., Everyday Celebrations Inc. and Rue de France Inc.
Lillian Vernon laid off 50% of its workforce on February 15, saying that it is considering strategic alternatives including a possible sale of the company.
The news follows a series of staff reductions and other cutbacks, including a reduction in circulation, over the past year.
When Sun Capital acquired the company in 2006, Lillian Vernon's losses were around $22 million, said Michael Muoio, president/CEO of the company. Merchandising, overhead and other issues were resolved during the following year, reducing losses to $3.9 million. However, increasing paper, postage and freight costs made it impossible for Lillian Vernon to entirely bounce back from its earlier problems.
“The cost increases were impossible to overcome,” Muoio said. The current economic situation hasn't helped, either.
Sun Capital has said it is not going to fund Lillian Vernon going forward. As a result, it is cutting back staff and looking for a potential buyer with the help of investment bank Gruppo, Levey & Co.
“The company will probably be sold in a relatively short period of time,” Muoio told DMNews. Lillian Vernon will consider selling the company in pieces if necessary.
In the mean time, Lillian Vernon will “continue to operate as long as it possibly can,” Muoio said.
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More Layoffs, Likely Sale for Lillian Vernon
Feb 15, 2008 3:25 PM , By Jim Tierney
Things have gone from bad to worse for Lillian Vernon. Two months after it cut 25% of its staff, the struggling gifts and housewares cataloger on Feb. 15 laid off about half of its full-time staff, or nearly 200 employees.
The situation is so dire that Lillian Vernon is actively seeking a new owner, says CEO Michael D. Muoio.
The Virginia Beach, VA-based merchant has in fact hired New York-based investment bank Gruppo, Levey & Co. to explore strategic alternatives for Lillian Vernon. “We’re looking at all alternatives in terms of sale of the company,” Muoio says.
Citing devastating increases in postal and parcel rates, coupled with a paper price hikes and a decrease in value of the U.S. dollar, Muoio says the company was left with no alternative than to find a new owner.
And finding a new owner is a top priority. “We’re moving as fast as we possibly can,” Muoio says. “Eighty people have been contacted as potential buyers."
Lillian Vernon has been privately held since Direct Holdings purchased it in 2003. It was sold again to Sun Capital Partners in 2006 and later that year moved operations from White Plains, NY, to Virginia Beach, VA.
Muoio says there is a possibility the company would move after a new owner is found. “We may stay here or we may relocate,” he says. “We can’t handle the infrastructure here. It’s too big.” The mailer currently has a 1 million-sq. ft.- facility.
In the past year, Muoio says the company reduced its EBITDA (earnings before interest, taxes, depreciation and amortization) loss from $22.1 million to $3.9 million, but the cost of rent, utilities, and maintenance accounted for $4.6 million.
“We actually made money on an EBITDA basis,” he says, “but we got whacked in the head with the postal, freight, and paper cost increases. And we started to shrink the business.”
As of June 30, 2007, the company had 564 employees; 374 employees as of Dec. 31, 2007; and it now has 177 employees. Worse yet, Muoio says that more layoffs are possible. “That’s in the cards because we don’t know the future of the company.”
He remains confident about Lillian Vernon’s outlook, however: “It’ll all be Lillian Vernon again.” And he’s proud of the fact that “we managed to get this thing to profitability inside of 12 months.”
Nonetheless, “It’s a sad day here at Lillian Vernon,” Muoio says. “But we’re continuing to operate and are working very hard to find a partner. Something is going to happen. I’m very confident of that. It’s too good of a company to have it stop shipping. We haven’t finished our work here.”
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