Meet The Manufacturing Czar
The Obama administration has portrayed Ron Bloom as a “restructuring expert”, the liberals writing for CNN hail him as the “champion for the little guy”, and organized labor sees him as a visionary who is out to reform capitalism in organized labor’s favor. He can be better described as a guy with a knack for rolling onward and upward unscathed while a trail of bankrupt companies, SEC investigations and criminal indictments follow along in his wake.
The ‘official bio’ for Bloom has him working for the Service Employees International Union as an organizer and negotiator until he was struck by the inequity of it all – the capitalists knew more about the intricacies of finance and business, rendering the playing field very uneven. So off Bloom went to Harvard to gain the education necessary to level the field and champion the workers. That version seems at odds, however, with Bloom’s curious choice of employers once he had that Harvard education. Rather than return to the union to start championing things on the level field, he went to work for Lazard Freres, the Wall Street investment banking firm. Ostensibly, the motivation was to work for Felix Rohatyn, the Lazard boss who demonstrated sympathy to unions while he helped the city of New York dig out of a financial mess. While Bloom was not involved in municipal finances, his idol Rohatyn was up to his neck in it during the period from 1985 to 1990, while Bloom was an executive. In fact, Lazard was into municipal finance a little too deep, and after paying a $12 million fine to the SEC and in the face of investigations of Lazard’s practices in Kentucky, New Jersey and Louisiana, they wisely decided to get out of the business before they were run out. To close that chapter, Bloom’s mentor, Felix Rohatyn, bounced around Clinton administration politics, pushed hard to be Treasury Secretary, and at last check was a senior advisor to Lehman Brothers when they collapsed.
By the time things got ugly at Lazard, however, Bloom had hooked up with Gene Keilin and the idea of representing unions in negotiations with troubled companies blossomed. It did not take long for them to leave Lazard. Perhaps they did not want to share the $75,000 per month these ‘champions of the little guy’ were charging the ‘little guys’ with the firm any more, but for whatever reason, they went on their own and formed Keilin and Bloom. The business model of using the bargaining power of the unions to negotiate equity deals became their standard. Essentially they were able to promise favorable union relations to potential buyers of troubled companies willing to buy in on their terms, and promise big labor problems to the current owners if they failed to go along with the deal. A lot like the old union shake-down approach, only done by guys with MBA's, wearing very expensive suits.
Keilin and Bloom reaped millions in fees championing the little guys in the United Airlines pilots’ union in their buyout efforts, and for helping the TWA pilots kick out the current management and put the company in the destructive hands of Carl Icahn. Of course, by the time Icahn was finished there was no more TWA. Steel companies fell under the same deals - Wheeling-Pittsburgh was manipulated away from CSN and into the union-friendly ownership of Esmark - and Bloom had created a the mechanism for having unions get in on the ground floor of managing the business, while reaping fantastic personal wealth along the way – a beautiful combination of championing little guys for everyone else, while championing himself in grand style at the same time.
For reasons known only to himself, Bloom eventually moved on from Keilin and Bloom to go to work for the Steel Workers union – perhaps he had made enough money to be able to afford to actually champion little guys – or perhaps another shoe will drop and his payoff will become apparent. At any rate, he went to work for the Steelworkers – although he did some moonlighting for the UAW – and there he put together the deal that really shows the core of his thinking.
Enter David Stockman – former Reagan Budget Director – who had gone on to form an investment company called Heartland Industrial Partners. Stockman’s idea was to buy distressed manufacturing companies, sell off pieces of them, and turn around the parts that could not be sold. He needed two things: money and labor cooperation. Not all of the factories he was going to buy were union plants, however. Stockman and Bloom negotiated a deal in November of 2000 that had the Steelworkers’ pension fund invest $25 million in Stockman’s company and the Steelworkers promise no strikes, in exchange for Stockman to roll over and let the Steelworkers organize the rest of Stockman’s factories without resistance.
For those who have not been through it, when the union seeks to organize a factory, or bargaining unit, they run around and get a bunch of employee signatures on pledge cards, then present them to management claiming they represent a majority of the employees, demanding the right to represent them. Management then refuses to recognize the validity of the cards, and a vote is scheduled under the auspices of the NLRB. A couple of months of campaigning takes place with both the union and management extolling their point of view, then a secret ballot is cast and the matter is decided. Stockman’s deal with Bloom was for management to simply accept the cards and dispense with the elections.
Stockman’s big acquisition was auto parts supplier Collins & Aikman, with Stockman setting himself up as CEO. There were a few rough spots, however, and the plant management at C&A and other plants owned by Heartland Industrial Capital didn’t roll over quite as easily to the union as they were supposed to. While Stockman was the guru of trickle down economics, he apparently had not let the word trickle down to local management that the fix was in and they were supposed to roll over and let the steelworkers have the plants they had bought and paid for. Almost two years later to the day, they met again at the Detroit airport to smooth things out. At that meeting, specific plants were scheduled for union takeover - to be represented by the steelworkers without management opposition - the plant managers were duly notified that normal management communications to the employees would not be tolerated, and harmony was restored.
Of course the story does not have a happy ending. For starters, it seems that neither Stockman nor Bloom took into account the fact that it was not up to them to determine who would be represented and who would not. They had essentially negotiated away workers rights that were not theirs to give away. So a group of C&A employees sued.
Some of the employees of the C&A plants felt that a number of the pledge cards had been signed as a result of steelworker union harassment and intimidation, and that having the final decision made in a secret ballot was their protection against such strong arm tactics. The company, so they thought, had sold out their protection from the union thugs for $25 million from the pension fund.
How the legal issues would have been ultimately decided, however, will never be known. While Stockman and Bloom were carving up Collins & Aikman, it never occurred to either of them that the company actually had to be managed in order to have something to carve up. Stockman was not only a poor excuse for a manager – federal prosecutors indicted him for fraud and the SEC sued him for the same. He was booted out of C&A, the company went bankrupt, the law suit filed by the employees against both Bloom and Stockman’s organizations was dismissed as moot. Earlier this year the criminal charges against Stockman were dropped, but the results are what they are.
If the employees of C&A wanted to join a union, they obviously would have done so without Messrs. Bloom and Stockman having to cut such a shady deal. The upshot of the deal was that Bloom shelled out $25 million of pension money to pay managment to stand aside while he rammed the steelworkers union down the throat of employees against their wishes.
And now Mr. Bloom finds himself at the center of a deal that looks and smells just like the long history of deals he cooked up with his old cronies at Lazard and with his partner Keilin. Through pressure tactics and financial chicanery, Bloom has been instrumental in putting unions in the drivers seat at Collins & Aikman, TWA, United Airlines, Wheeling-Pitt Steel and others. Collins & Aikman and TWA are bankrupt. Now the union sits in the board of GM.
The more ominous pattern is the complete disregard Bloom has shown for the necessity for good management. Who actually runs these companies and how well they do it have been of no concern to him – just that the union controls the purse strings. Manufacturing, to him, is a goose that lays unlimited golden eggs and his track record has been to associate with the worst elements Wall Street – Felix Rohatyn, Carl Icahn, David Stockman – to cut unscrupulous deals to get as many of those golden eggs into union pockets – and his own. The fact that many of the geese are killed along the way seems to matter to him not one iota.
And this is the new manufacturing czar.
The ‘official bio’ for Bloom has him working for the Service Employees International Union as an organizer and negotiator until he was struck by the inequity of it all – the capitalists knew more about the intricacies of finance and business, rendering the playing field very uneven. So off Bloom went to Harvard to gain the education necessary to level the field and champion the workers. That version seems at odds, however, with Bloom’s curious choice of employers once he had that Harvard education. Rather than return to the union to start championing things on the level field, he went to work for Lazard Freres, the Wall Street investment banking firm. Ostensibly, the motivation was to work for Felix Rohatyn, the Lazard boss who demonstrated sympathy to unions while he helped the city of New York dig out of a financial mess. While Bloom was not involved in municipal finances, his idol Rohatyn was up to his neck in it during the period from 1985 to 1990, while Bloom was an executive. In fact, Lazard was into municipal finance a little too deep, and after paying a $12 million fine to the SEC and in the face of investigations of Lazard’s practices in Kentucky, New Jersey and Louisiana, they wisely decided to get out of the business before they were run out. To close that chapter, Bloom’s mentor, Felix Rohatyn, bounced around Clinton administration politics, pushed hard to be Treasury Secretary, and at last check was a senior advisor to Lehman Brothers when they collapsed.
By the time things got ugly at Lazard, however, Bloom had hooked up with Gene Keilin and the idea of representing unions in negotiations with troubled companies blossomed. It did not take long for them to leave Lazard. Perhaps they did not want to share the $75,000 per month these ‘champions of the little guy’ were charging the ‘little guys’ with the firm any more, but for whatever reason, they went on their own and formed Keilin and Bloom. The business model of using the bargaining power of the unions to negotiate equity deals became their standard. Essentially they were able to promise favorable union relations to potential buyers of troubled companies willing to buy in on their terms, and promise big labor problems to the current owners if they failed to go along with the deal. A lot like the old union shake-down approach, only done by guys with MBA's, wearing very expensive suits.
Keilin and Bloom reaped millions in fees championing the little guys in the United Airlines pilots’ union in their buyout efforts, and for helping the TWA pilots kick out the current management and put the company in the destructive hands of Carl Icahn. Of course, by the time Icahn was finished there was no more TWA. Steel companies fell under the same deals - Wheeling-Pittsburgh was manipulated away from CSN and into the union-friendly ownership of Esmark - and Bloom had created a the mechanism for having unions get in on the ground floor of managing the business, while reaping fantastic personal wealth along the way – a beautiful combination of championing little guys for everyone else, while championing himself in grand style at the same time.
For reasons known only to himself, Bloom eventually moved on from Keilin and Bloom to go to work for the Steel Workers union – perhaps he had made enough money to be able to afford to actually champion little guys – or perhaps another shoe will drop and his payoff will become apparent. At any rate, he went to work for the Steelworkers – although he did some moonlighting for the UAW – and there he put together the deal that really shows the core of his thinking.
Enter David Stockman – former Reagan Budget Director – who had gone on to form an investment company called Heartland Industrial Partners. Stockman’s idea was to buy distressed manufacturing companies, sell off pieces of them, and turn around the parts that could not be sold. He needed two things: money and labor cooperation. Not all of the factories he was going to buy were union plants, however. Stockman and Bloom negotiated a deal in November of 2000 that had the Steelworkers’ pension fund invest $25 million in Stockman’s company and the Steelworkers promise no strikes, in exchange for Stockman to roll over and let the Steelworkers organize the rest of Stockman’s factories without resistance.
For those who have not been through it, when the union seeks to organize a factory, or bargaining unit, they run around and get a bunch of employee signatures on pledge cards, then present them to management claiming they represent a majority of the employees, demanding the right to represent them. Management then refuses to recognize the validity of the cards, and a vote is scheduled under the auspices of the NLRB. A couple of months of campaigning takes place with both the union and management extolling their point of view, then a secret ballot is cast and the matter is decided. Stockman’s deal with Bloom was for management to simply accept the cards and dispense with the elections.
Stockman’s big acquisition was auto parts supplier Collins & Aikman, with Stockman setting himself up as CEO. There were a few rough spots, however, and the plant management at C&A and other plants owned by Heartland Industrial Capital didn’t roll over quite as easily to the union as they were supposed to. While Stockman was the guru of trickle down economics, he apparently had not let the word trickle down to local management that the fix was in and they were supposed to roll over and let the steelworkers have the plants they had bought and paid for. Almost two years later to the day, they met again at the Detroit airport to smooth things out. At that meeting, specific plants were scheduled for union takeover - to be represented by the steelworkers without management opposition - the plant managers were duly notified that normal management communications to the employees would not be tolerated, and harmony was restored.
Of course the story does not have a happy ending. For starters, it seems that neither Stockman nor Bloom took into account the fact that it was not up to them to determine who would be represented and who would not. They had essentially negotiated away workers rights that were not theirs to give away. So a group of C&A employees sued.
Some of the employees of the C&A plants felt that a number of the pledge cards had been signed as a result of steelworker union harassment and intimidation, and that having the final decision made in a secret ballot was their protection against such strong arm tactics. The company, so they thought, had sold out their protection from the union thugs for $25 million from the pension fund.
How the legal issues would have been ultimately decided, however, will never be known. While Stockman and Bloom were carving up Collins & Aikman, it never occurred to either of them that the company actually had to be managed in order to have something to carve up. Stockman was not only a poor excuse for a manager – federal prosecutors indicted him for fraud and the SEC sued him for the same. He was booted out of C&A, the company went bankrupt, the law suit filed by the employees against both Bloom and Stockman’s organizations was dismissed as moot. Earlier this year the criminal charges against Stockman were dropped, but the results are what they are.
If the employees of C&A wanted to join a union, they obviously would have done so without Messrs. Bloom and Stockman having to cut such a shady deal. The upshot of the deal was that Bloom shelled out $25 million of pension money to pay managment to stand aside while he rammed the steelworkers union down the throat of employees against their wishes.
And now Mr. Bloom finds himself at the center of a deal that looks and smells just like the long history of deals he cooked up with his old cronies at Lazard and with his partner Keilin. Through pressure tactics and financial chicanery, Bloom has been instrumental in putting unions in the drivers seat at Collins & Aikman, TWA, United Airlines, Wheeling-Pitt Steel and others. Collins & Aikman and TWA are bankrupt. Now the union sits in the board of GM.
The more ominous pattern is the complete disregard Bloom has shown for the necessity for good management. Who actually runs these companies and how well they do it have been of no concern to him – just that the union controls the purse strings. Manufacturing, to him, is a goose that lays unlimited golden eggs and his track record has been to associate with the worst elements Wall Street – Felix Rohatyn, Carl Icahn, David Stockman – to cut unscrupulous deals to get as many of those golden eggs into union pockets – and his own. The fact that many of the geese are killed along the way seems to matter to him not one iota.
And this is the new manufacturing czar.
Add a Comment
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Comment by Rich Gimmel on September 8, 2009 at 6:15pm - Things are getting scarier by the minute in Washington.
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Comment by Conrad Bessemer on September 8, 2009 at 4:49pm -
Bill-excellent research here! I was very familiar with the mismanagement at Collins & Aikman, but had no idea that the esteemed Mr. Bloom was in the background.
I have no idea where anyone got the idea that this guy is a turnaround expert or for that matter has any real ideas about manufacturing--or even a vision.
Unfortunately it meets my expectations re the Administration. Definitely a union payoff--and somehow the unions have become the good guys even though they own a huge piece of automotive, steel and other jobs failures in this economy.
The good news is that I expected nothing from the administration in regard to manufacturing so I suspect this "show" appointment will not produce anything meaningful other that getting some headlines for a few days. Of course as long as we keep adding jobs to the government and health-care rolls, we don't really need manufacturing jobs--do we? (just kidding)
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