Bain’s SC Company Took Gov Incentives, Went Belly Up But Took Huge Profits

January 13, 2012

This is also why I re-Tweeted an item about Bain helping Obama with the auto bail-out.

Romney's Former Firm Bain Advised Obama on Auto Bailout

And this is what really ticks me off. We're told what a great capitalist Romney is and if we attack him, we're attacking capitalism. So, then why did his firm engage in so much socialism and still manage to screw up businesses, after pocketing tons of cash for themselves? This doesn't sound like the kind of capitalism I believe in. The taxpayers often took part of Romney's risk, or bailed out his mistakes, as with a pension fund, but he always managed to feather his own nest pretty damned well. This is what's wrong with America, not what's worth defending. And if one digs deep enough to donations to politicians and such, it's invariably corrupt.

That abstract view quickly fades into real-life experience in this small, economically struggling community. A company owned by Romney's private equity firm set up shop just outside Gaffney in 1988, with considerable government incentives, but closed four years later.

About 150 people lost their jobs as Romney and Bain Capital collected millions in profits. The history clashes with Romney's narrative as a successful businessman who can help turn around the economy.

"I bet if Romney had to live here, he wouldn't have done it," said Tony Lipscomb, the owner of Harold's Restaurant who said he had been considering voting for Romney. "If that's his mind-set running a good business, then I don't think he's qualified."

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  1. sickofrinos says:

    Since you mentioned donations- does the LDS have what it takes to get the 4 state hobo over the finish line?
    They need more than money.

  2. Godzilla says:

    For a fuller story on the Holson company:
    A summary: US photo album companies were taking a beating in the 1980’s due to cheap imports. By 1985, two major US companies (not mentioned by name) had already declared bankruptcy. The Holson company was family owned, and they ran into the same problems that the others did. In 1986 they sold out to Bain, but the company remained under family management. However, the Holson company continued to have problems, so in 1988 a non-family member, Hoffmeister, was brought in to run the company. In 1990 Holson and Burnes merged, and also acquired a company called Terragrafics.
    Now here’s a key excerpt:
    “In 1990, the first full year that Holson and Burnes operated as a single entity, sales were $88 million. In 1991, the first full year that Holson Burnes and Terragrafics operated as a unit, sales jumped to $112. During the first few years Hoffmeister and fellow managers worked to streamline the company, eliminate overlap, cut production costs, and jettison poorly performing units. Largely as a result of reorganization expenses, Holson Burnes posted net losses in both 1990 and 1991. To help make up for the losses and to reduce the company’s debt load, Bain took the company public in 1992, raising about $30 million.”
    In the streamlining is where the Gaffney evidently suffered its layoffs.
    The Holson company might have gone under in 1986. It could be argued that Bain kept it afloat for 6 years: the two years that the family still managed it from 1986 to 1988, plus the four years it was run by Hoffmeister from 1988 to 1992.
    Can’t see Bain as a villain here.

  3. Dan Riehl says:

    You’re missing the point, Bain took it public and took away huge, huge profits for themselves. That money wasn’t there to either get through a downturn, or make changes. That is the key move that allowed Bain to rake in millions, while leaving the company vulnerable.

  4. Godzilla says:

    Dan, I don’t think I’m missing the point:
    “Largely as a result of reorganization expenses, Holson Burnes posted net losses in both 1990 and 1991. To help make up for the losses and to reduce the company’s debt load, Bain took the company public in 1992, raising about $30 million.”
    Okay, so Bain took the company public in 1992. That means Baine is out of the picture from then on, right? What happened then?
    “The company’s stock price shot up from about $15 to $19 after the offering, in part due to the 1992 introduction of the ‘Showbox’ photo viewer. Invented in Switzerland in 1987 and extremely popular in Europe, the Showbox was a photo frame that held 40 photographs, loaded very easily, and allowed a user to quickly shuffle through and view the photos without touching them. Although analysts expected the company to ship $13 million to $15 million worth of Showboxes for the year, Holson Burnes sold only $10 million worth of the Showboxes and posted a $12.35 million net loss. The company was left with excess inventory and forced to lay off some workers. By February 1993 Holson Burnes’s stock price had plunged to just $4 per share.”
    It seems that the company was banking on the ‘Showbox’ photo viewer, which didn’t pan out, and the stock price subsequently tanked in 1993, when Bain was out of the picture. All throughout Bain’s tenure with Holson, I don’t see what Bain did wrong. The IPO was a great success, and the company though it had a winner with the ‘Showbox’ viewer (whatever the hell that is). It’s not Bain’s fault that the company tanked when the viewer didn’t pan out.
    These excerpts are from that link I provided in my earlier comment. Sure, the people who got laid off are not going to have nice things to say about Bain, nor the Holson family either, I would suspect. That’s only natural, and understandable. But it’s a hard fact of life that businesses fail and people lose their jobs.

  5. m says:

    I read an article at Hot Air blog about Bain Capital advised Obama about the bailout and cutting dealerships. The GOP is going to lose the election in November. Romney can’t beat Obama. It is just like happened two years ago in 2008 election.

  6. A Stephens says:

    These things, and more I’m sure, are exactly why Obama, the Dems, and their establishment media campaign workers want to run against Romney. They have been telegraphing as much, same as they did with McCain, because once they’ve chosen our candidate for us, all hellfire will be thrust upon him in the general. Only the farking DC Republicans with their noses up each others butts are fooled. Idiots.

  7. gary gulrud says:

    Agree with Stephens, even if there is room to disagree on Bain, all those Indies you’ve been promised are not materializing.
    Only very recently is Romney even making noises that he would use his creative destruction experience in DC. I say ‘panderer’.

  8. Huey says:

    Wow! You mean that his company made a profit under the rules of the game which were in effect at the time?
    OMG! Flay him!
    All this line of attack does is force people who aren’t in Romney’s camp to begin with but are actual conservatives (as opposed to anti-Romney) to shake their heads.
    I won’t vote for Romney in the primaries, but this has NOTHING to do with him making a profit for his company by playing by the rules of the game in effect at the time.

  9. Xiaoding says:

    The “Rules of the Game” are fair game for critisism.
    Slavery was also in the “Rules of the Game”. Gosh, we can’t suggest there was something wraong with that?
    You want to make money playing the rules of the game, fine, go for it. Don’t expect my vote because you think that anything to do with money is automatically moral and good.

  10. Ragspierre says:

    100% Huey.
    I continue to be appalled.
    “Romney’s Former Firm Bain Advised Obama on Auto Bailout”
    That is just despicable guilt by association.

  11. Huey says:

    Xiaoding: Really? Really? You’re comparing Romney’s actions to slavery.
    Who said that “anything to do with money is automatically moral and good?” I just don’t see anything immoral or evil in THESE actions. In fact, the argument can be made that, from an economic perspective, the cutting of deadwood (a business which is, at best, floundering which is WHY it was sold in the first place) is good for the economy as it puts those human resources and capital to other, fruitful, purposes.
    Really. It’s BETTER to allow the company to go unsold and go belly up, losing all those jobs than it is to buy it up and then, do WHATEVER with it, when “WHATEVER” is, from the perspective of the employees, creditors, or whomever AT LEAST as beneficial to them as CLOSING THE DOORS?
    “Vulture capitalism” is only possible when there are BODIES to feed upon. We fault those who find those BODIES and feed upon them? (And, to be fair, there were examples where those BODIES were brought back to life either completely or partially – or were transplanted into (foreign) ground where they could actually thrive when they would die in native soil.)
    There are PLENTY of things to dislike about Romney.

  12. Ragspierre says:

    Huey, you can’t bother dingy with economics.
    He HATES market economics…and lots of other expressions of liberty. He tells us all the time.

  13. Trista says:

    “King Bain” ad receives 4 Pinnochios for intentionally misleading viewers and outright lying about facts.
    There are many good links in the article that detail the brilliant work Romney accomplished in his time at Bain.

  14. Ragspierre says:
    cnbc retracted story on Bain/auto bailout. They got it wrong.

  15. Sandy says:

    Please update your headline here to include the Washington Post article, above and the really really helpful cnbc article above this one.
    Bloggers that repeat what they see in partisan articles need to keep up to date on the conversation, and present both sides and all the facts, or else do your own journalism and document it.
    It is wrong to run the company Bain Capital, which is currently doing business in the U.S.A. and not running for president, into the ground on a daily basis, based on the ravings of hubris of a lunatic like Newt Gingrich. He can’t be our president now, he should pass the torch to Santorum…the Junior Partner.

  16. You freaking theologians are missing the point. No matter how many legal angels you stuff on the head of this particular pin, Romney cut American jobs. No matter what Galsworthy-esque paeans to the defense of capital you chant, in a country with over 12% actual unemployment, the RNC wants to anoint a candidate who CUT AMERICAN JOBS. This is so self-evidently a nonstarter that any further discussion just shows how far out of the loop the GOP and its commentariat have dropped.

  17. Ragspierre says:

    Wow, that was uncharacteristically dumb, richard.
    Henry Ford cut American jobs. LOTS of them.
    Steve Jobs cut American jobs, too. Whole industries died because of his success.
    Good grief.

  18. gary gulrud says:

    Blue states get to divide their vote among Ogabe, Romany, Nor Luap and America Elect(Bloomberg?).
    Time for a Red State write-in campaign.
    The GOP is telling us given Ogabe and Putin, vote the lesser of two evils, Putin the competent one.
    Pass the ammo and stand aside.

  19. Dave B says:

    This “Romney derangement syndrome” is becoming embarassing. Ragspierre said it all. I swear to God I never thought I’d see these types of comments on a conservative blog. Why don’t we just declare the Mormon anti-drinking, anti-swearing, anti-adultery candidate with the loving family as the anti-Christ and be done with it? That would make it easier to vote for Newt.

  20. Huey says:

    Dave: Don’t get me wrong. As between Newt and Romney, I’d vote for Newt. In fact, I’d vote for anyone (other than the insane Paul) besides Romney in the primaries.
    And, I agree that, if he’s going to be the candidate, he needs to be “vetted” not only with the arguments which come from the “right,” but with those which predictably will come from the left. The issue I have is that many of those who are making this Bain argument are doing so as if what he did in Bain was IMMORAL rather than it was contrary to conservative principles.
    Currently, my fiancee is working for a company which had its owner die. It was a family business. The owner did not make adequate preparations for what would happen to his business when he died although he had adequate time to prepare for it. As a result, the business is in turmoil. Competitors are taking advantage of its weakness, hiring away critical employees as well as important clients. I would be surprised if the business survives a year more even though, at the time of the owner’s death, it was a profitable concern.
    Are the competitors doing something “wrong” because they are, like “vultures” exploiting the weakness of their competitor? By actively seeking to undermine their competitor with full knowledge that, by doing so, they might cause the loss of jobs of their competitor?
    Of course not. In face, they are doing the OPPOSITE of doing “wrong,” since their ONLY MORAL OBLIGATION is to THEIR BUSINESS, to ensure that THEIR BUSINESS makes a profit. If the business is a corporation, they have an additional FIDUCIARY OBLIGATION to do that which is necessary, in good business practice and in conformity with the law, to run their business for the benefit of their shareholders – even if this means that the decisions they make HURT OTHER PEOPLE and/or destroy other businesses.
    It is the obligation of the attacked businesses to SEE TO THEIR OWN BUSINESS. And, if the business is run in such a manner that it becomes vulnerable, whether it is the fault of those who are running it or simply as a result of a changing economic landscape, then, when it is attacked (even if with the consent of the owner through buy-out) then THIS IS A GOOD THING from an economic perspective. The weak are devoured by the strong, making the strong stronger and excising the weak from the field.
    Is such “vulture capitalism” a course I would take in my own life? No. But, this internal squeamishness does not mean that what those who have a different outlook as to how they live their business lives and choose a business model which includes the above are doing anything immoral or evil. If no one did it, then the substandard businesses which cannot compete (or will not compete) will simply languish until such time as they go out of business with all the jobs lost and the assets, rather than being bought for a reasonable amount (market price) while the business is still a going concern, will receive only a fraction of that on the bankruptcy auction block.
    How any “conservative” believes that this is a “good thing” confounds me. There are PLENTY of things to hit Romney on WITHOUT attacking one of the foundational principles of a free market system, i.e., that the strong devour the weak.

  21. Ragspierre says:

    Another 100%, Huey.
    COMPETITION is how this system runs. I FORCES efficient use of scarce resources, while resulting in the RAISING of the standard of living throughout the system.
    It is analogous to a bio-system. Species die off. Tough. You’d only keep them around by screwing up the entire ecology, and PREVENTING the development of newer, better-adapted forms.

  22. smokedaddy says:

    Kudos to the commenters here when Dan has gone off the deep end. Here’s Kevin Williamson’s (no fan of Romney) take on his time at Bain Consulting and Bain Capital
    Of all the ironies, this whole thing may wind up making clear the true lack of electability of our least electable non-Paul candidate. My fear tho is that by using this canard, both Gingrich & Perry have sullied themselves to their and the party’s detriment. Of course my man Santorum will come out smelling like a rose. Lets hope the SC voters see it this way? Truly, if Romney had an ounce of core belief in capitalism, he’d do a 5 hour presser with detailed answers as detailed by Williamson & others, and make this baby into a net positive. That he has not is yes, evidence of his unsuitability to be our nominee. So, yes, the whole mess is a pile of contradictions leading to a good result.
    Question- Does the end of Romney’s candidacy justify these means? I say no. Attacking Romneycare and his other actions while governor would have been far more honorable and at least as effective.

  23. lj says:

    Dan Riehl, how about a correction to this post. When I checked the link, the article has been updated with a correction that Bain & Co consulted with Obama, not Bain Capital. They are not the same company. Your credibility has just gone down the toilet!