Re: EOpriv: LTV to go coop? Algoma worker/ownership scheme inCA bankruptcy

["Norman G. Kurland" <thirdway@cesj.org>]

Dan,

Impressive statistics and track record.  Congratulations.

Norm


Dan Bell wrote:

> Dear Mike Wood,
>
> Your 4/26/01 question regarding LTV and the success ratio of last-gasp
> purchases by workers would probably fit better in the discussion
> on promoting employee ownership at the subnational level,
> eosubnat@cog.kent.edu.
>
> Nevertheless, allow me to respond to your question:
>
> >I'm wondering what the success ratio
> >on these last-gasp purchases by workers in industries that are
> >undergoing upheaval. The results of emergency surgery are never as
> >positive as those of a planned operation, so I would probably expect a
> >low success ratio where the corporation was already in bankruptcy.
>
> Regarding the success ratio of last-gasp worker buyout efforts, there
> are two "successes" to measure:
>
> 1. Success at completing the buyout
> 2. Success at running the company profitably going forward
>
> Our Center, the Ohio Employee Ownership Center at Kent State University,
> has worked with about 380 buyout groups and companies exploring
> employee ownership since 1987.
>
> Of these, 51 employing 11,000 people implemented some form of employee
> ownership. So about 1 out of every 7 considering ESOPs actually
> implemented them.
>
> Of the 51, 13 were implemented to avert a shutdown. The other 38
> were non-stressed succession planning situations or employee
> benefit decisions by healthy companies.
>
> While not having the specific numbers at my finger tips, I would
> describe these 380 efforts as follows:
>
>   144 healthy businesses exploring of which 38 chose to go forward
>   (one in four).
>
>   236 stressed situations exploring of which 13 successfully completed
>   the buyout. Of the 236, about 52 (one in five) decided after their
>   initial assessment interview with the OEOC to have a prefeasibility
>   study done (paid for by state and local government grant money in most
>   cases) by professional consultants. Following the results of the
>   study, perhaps 16 were closed, 7 were retained by existing ownership
>   utilizing the findings of the studies, 16 remained open under new
>   ownership, and 13 became employee owned.
>
> Of all 51 ESOPs mentioned, only 2 failed. Assuming these were part
> of the 13 (which may be a mistake), 5 in 6 succeeded in preserving
> the jobs.
>
> Of all 51:
>
>   2 failed
>   1 repurchased the stock back from the employees
>   5 were subsequently sold by the employees
>   43 remained partially or wholly employee-owned
>
> The last time LTV went into Chapter 11, several ESOPs emerged
> around the late 1980s. These include Republic Container and Republic
> Storage Systems, which are still operating as 100% employee-owned
> companies, and Republic Engineered Steels, Inc. (RESI).
>
> RESI was an LTV bar mill division which was slated to be closed in
> 1989. The employees bought it and operated it for 10 years, keeping
> their jobs with union level wages and benefits, cutting $80 million
> in annual operating costs out of a $800 million budget through
> ownership education of the 4500 employees and employee involvement
> teams. Around 1999, the employees sold the company, each walking
> away with on average $40,000 in capital. Employment was downsized
> to about 3200. Under the current steel crisis, the company is now
> operating in Chapter 11.
>
> When compared to being shut in 1989 and putting 4500 people on the
> street, I'd say this was a great success.
>
> --
> Dan Bell
> International Program Coordinator
> Ohio Employee Ownership Center
> Kent State University
> Kent, OH 44242
> (330) 672-0333 << New direct number!
> (330) 672-4063 fax
> dbell@kent.edu
> http://www.kent.edu/oeoc/
> http://cog.kent.edu