Deb Olson facilitated a Worker Co-op Development workshop at the New Work New Culture conference in Detroit on 10-19-14. Deb provided an overview on all types of co-ops and worker ownership, and an update on the projects of the Center for Community Based Enterprise in the power point "Strategies for Community Wealth Building through Cooperation" as background for a focus on union worker co-ops. The other panelists were Kristen Barker and Phil Amadon, who spoke about the Cincinnati Union Co-op Initiative, and Chris Michalakis from UFCW Local 876 who explained the Local’s participation in Community Growth Partners, a non—profit which is developing a worker owned grocery store chain in metro Detroit through conversion of existing independent groceries. Their goal is creation of a unionized, worker owned grocery chain in Detroit providing the best locally-sourced food.
Franklin Forge: Full Case Study
Unprofitable SubsidiaryUnprofitable subsidiaries are often offered for sale to employees. Employees should approach such opportunities with care and predicate their actions on feasibility studies conducted by skilled consultants who know when to say no to a bad idea. The feasibility and success of the Franklin Forge worker buyout depended on a number of factors including strength and skill of both the workers and management, the community's need for ht plant, the fact that the workers initiated the buyout, and the parent corporations' motivation to sell at a low price and make the deal work.Located in West Branch, Michigan, Franklin Forge was a subsidiary of Capitol Manufacturing, a company in the oil field equipment business. Franklin was and continues to be one of Capitol's suppliers. During most of the years it was owned by Capitol, Franklin lost money. These losses resulted mainly from Capitol's cost structure and lack of experience in the forging business. Yet because Capitol was quite profitable prior to 1982, Franklin's losses did not become important to Capitol until 1983 and 1984.In early 1984, Franklin Forge employees sensed that the company's continuing losses threatened their future. The union, International United Automobile, Aerospace and Agricultural Implement Workers of America (UAW) Local 1874, organized a jobs committee to explore how they could save their jobs. After investigating Franklin's financial condition, the employees determined that purchasing the company was the best way to protect themselves.At the same time, Harsco Corporation, which owned Capitol Manufacturing, decided to sell Franklin due to the increasing significance of Franklin's losses. Harsco could not close Franklin without a buyer because it had a take-or-pay contract with the gas utility that ran a gas line to Franklin. Since the contract was in effect for at least another year, and no buyer seemed interested in the less than desirable West Branch manufacturing location, Harsco knew that the employees' offer was the best it would get.The employee effort to buy Franklin began in earnest when UAW International Representative Jack Laskowski sought assistance from the Michigan Employee Ownership Center (MEOC). The employees subsequently formed a buyout association, retained Groban Olson and Associates as counsel, and commissioned a feasibility study. The employees recognized that they needed strong management to make Franklin profitable and asked the company's former manager to be the plant's new manager and chief executive officer. He had managed the plant for several years, was well-acquainted with the forging business, and was well-respected by local businesses and lenders.Franklin's recent losses made it difficult to raise the money to finance the buyout. Union members made numerous calls to lenders and worked hard to raise funds from employees and various government bodies. The perseverance and positive attitude of the buyout association impressed the lenders. The National Bank of Detroit (NBD), for example, became involved in finding other lenders to join it in financing the deal.In addition to raising money, the buyout association worked hard to educate themselves and the community on the concept of employee ownership. Aided by MEOC, the association developed its own employee ownership education program. As a part of this program, the Industrial Cooperative Association (ICA), MEOC, NBD, and the Michigan Department of Labor, led education sessions attended by those involved in the buyout and interested community members.As a result of the buyout association's efforts, Franklin Forge became a worker cooperative. Each worker owns one voting membership share and a proportionate share of capital in the company's internal equity accounts. The workers were able to purchase their membership shares, which initially cost $5,000 with loans primarily from the Industrial Cooperative Association Revolving Loan Fund and the Farmers and Merchants Bank of Hale. These loans required down payments of $250 and payments of $1 per working hour for 3 years to settle the $4,750 balance. Other lenders whose help was essential to finance the buyout included the State of Michigan, Ogemaw County, the National Bank of Detroit, the seller, and Franklin's chief executive officer. In the fall of 1986, employees invested an additional $2,000 each to cover working capital costs caused by a rapid increase in business.In 1984, when the employees first contemplated a buyout, Franklin employed 20 people and had 82 on a seniority list. At the time of the buyout, management projected that Franklin would employ 38 workers by the end of the first full year of operation. After six months of operation, Franklin already had 38 employees, and by the end of 12 months, it employed 54 people. By December of 1986, Franklin employed 68 people. The 1988 employment averaged 82. For the year of October 1988 through September 1989, the average employment is expected to be approximately 100.
MBC Ventures, Inc.- Full Case Study
MBC Ventures, Inc. (formerly “Maryland Brush Company”)
A 100% employee owned old industrial company develops new green tech product with money saved as an S corporation ESOP.Maryland Brush Company, Inc. (MBC) located in inner city Baltimore, is now a one-vote-per-person, unionized, 100% employee-owned company.After Pittsburgh Plate & Glass divested Maryland Brush Company, Inc. (MBC) in 1990, management and the United Steelworkers members bought the company through an ESOP.Through the continuing assistance of Attorney Deborah 
Groban Olson, corporate, and ESOP counsel since 1998, MBC has been able to establish and maintain its place as a worldwide manufacturing leader as well as a desirable, democratic, workplace. MBC is a full-service manufacturer of industrial brushes and paint brushes. The employees have one vote per person on shareholder issues, as in a co-op, and regularly participate in making company decisions.As an ESOP, MBC is uniquely positioned to compete in the global economy, establishing the company as one of the most progressive employers in the industry, the majority of whom do not offer similar programs.In 2000, the tenth year of the ESOP, MBC had experienced increased sales for the five preceding years and its stock value had increased by 133% since becoming an ESOP. From inception of the ESOP in 1990 through 2008, the company’s stock has consistently met or exceeded the earnings charted by the S&P, completely turning around MBC’s financial picture and its prospects going forward.In 2007, after paying off its stock acquisition debt, MBC elected Subchapter S status. As a 100% ESOP owned company, it was thereafter exempt from paying federal corporate income tax. These savings have enabled it to invest over $1,000,000 in the purchase and product development of its new Skylouver™ product.Since 2008, the maturing market for industrial brushes caused MBC to seek new product lines.In 2010, MBC invested in a start-up company making the SkyLouver™ technology (a combination skylight and solar thermal power collector) in exchange for manufacturing rights.MBC later decided to buy all the intellectual property rights to SkyLouver ™ to ensure successful management of the commercialization process.The new SkyLouver™ product line, launched in 2013, is expected to increase employment, employee ownership and profits. MBC will have shifted its product focus from a mature shrinking market to a dynamic growing one.In September 2010, the US Department of Energy in conjunction with the State of Maryland’s Clean Energy Economic Development Initiative (CEEDI) grant program, provided $770,000 to MBC to retool a production line at its Baltimore facility to manufacture SkyLouver™ products.MBC estimates that this project will result in 10 jobs in Baltimore during the first year. MBC has gone first to the Steelworkers to make the initial manufacturing worker hires for SkyLouver™. To accommodate its new product and market expansion, the company’s name is now MBC Ventures, Inc.
National Forge: Full Case Study
National Forge Company
Contract ESOP with Formula Vote for Union
Ended by premature sale of management sharesThe Employee Stock Ownership Plan (ESOP) at National Forge was a contract ESOP with a formula vote and not a traditional leveraged ESOP.The National Forge ESOP acquired its 63.5% interest in the company over a period of 5-7 years but the ESOP participants stock had a special formula vote giving participants 63.5% of the voting rights prior to their acquisition of that stock.National Forge Company, located in Irvine, Pennsylvania, was a leading manufacturer of very large precision machined forging, and a market leader in the crankshaft, pipe mold, and defense markets. Founded in 1915 by Clinton Wilder, it continued under the Wilder family ownership until June of 1995. In May of 1994, the Wilder family provided the National Forge employees with an opportunity to make a bid for the Company.In June of 1995, 676 employees of National Forge Company purchased the 80 year old family-owned business utilizing an ESOP. Approximately 550 of them are represented by the Independent Union of National Forge Employees (IUNFE).An employee buyout committee comprised of senior management, salaried employees, and representatives of the IUNFE led the transaction. The IUNFE retained Deborah Groban Olson as counsel to represent them in negotiations with the Wilder family, the lenders, and management.A consortium of lenders led by Chemical Bank provided financing. Senior management provided initial cash equity via private placement. The seller also maintains a small continuing interest in the business.The National Forge employees agreed to a 10% wage and benefit reduction in order to facilitate the buyout. These reductions were offset with a new profit-sharing plan plus the ESOP shares. The company’s board of directors included hourly employees and IUNFE representatives, as well as senior management and outside directors, chosen jointly by labor and management.The successful purchase of National Forge Company by its own employees allowed the Wilder family to retire from management of the company, obtaining a tax deferral on the capital gains, while still retaining a small interest, kept the jobs and wealth generated by National Forge in the Irvine community for a few years, and gave the National Forge employees a voice and financial interest in the continued growth and prosperity of National Forge. It created a new voice for all employees and the IUNFE in making corporate decisions.However, when the management had the company buy back all their stock upon converting to an S corporation, the cash flow strain led to bankruptcy for National Forge. National Forge was reopened in Irvine, PA in 2005 after its assets were purchased out of bankruptcy by the Ellwood Group in 2003.
Rosauers Supermarkets, Inc.: Full Case Study
Rosauers Supermarkets, Inc.
ESOP Organized As a Taft-Hartley TrustIn July 1990 several unions and management at Rosauers Supermarkets, a regional grocery chain of 15 stores headquartered in Spokane, Washington, entered into an ESOP buyout to save 1,250 jobs. The union buyout team was led by Sean Harrigan, then president of the UFCW local union. They developed some interesting procedures to ensure proper protection and representation of unionized employees interests in an employee owned company where high level management employees own a portion of the company outside the ESOP. The ESOP trust is designed as a Taft-Hartley Trust with labor and management exercising block votes and the provision for a neutral third party to solve potential disputes within the ESOP Committee. They designated a number of shareholder and board of director issues as supermajority issues. They also provided for a termination of their wage set-aside agreement in the event of any foreclosure, liquidation or sale of the company without union approval.In an effort to improve competitiveness and save jobs the United Food & Commercial Workers (UFCW), Bakery Workers and Teamsters joined in a cooperative effort with management to buy the chain in order to implement a change in marketing strategy. This involved a sliding scale sacrifice in pay affecting all but the lowest paid employees and an end to the management pension plan. Certain high-level management employees made cash investments in stock outside the ESOP, while all unionized employees over age 21 were eligible to participate in the ESOP. Although this ESOP allocated stock based on pay and most employees were eligible, unionized employeesl owned approximately 55-60% of the stock when the initial acquisition loan was paid off. Thus the Taft-Hartley ESOP, supermajority provisions and termination of wage set-aside provisions were made to protect the stock rights gained in exchange for sacrifices.In June of 2000, the approximately 2,100 employees, by unanimous vote, re-sold the company to URM stores.
Republic Container: Full Case Study
Republic Container
Use of Employee Buyout Association to Buy
Profitable Subsidiary
Restructured as Democratic/ Co-op Style ESOPLTV Steel Corporation's divestiture of its profitable subsidiary, Republic Container, presented Republic Container's employees with an ideal opportunity to buy the company and prevent job loss. Mike Cable, President of the United Steelworkers of America ("USWA") Local 5712, recognized this opportunity and aggressively led a worker buyout effort. As a result, the employees out-bid and out-maneuvered competitors who sought to buy the business. Situated in Nitro, West Virginia, Republic Container was a producer of fifty-five gallon drums used largely by the chemical industry.In 1985, LTV Steel decided to sell all the companies in its manufacturing division. Many of these companies, including Republic Container, were profitable and had been captive markets for LTV's steel. Unlike many companies acquired by their employees, Republic Container was not threatened with bankruptcy. During its twenty-seven years of operation, Republic Container turned a regular profit making steel barrels for Union Carbide, DuPont, Monsanto, and other customers.After learning that LTV Steel was seeking a buyer for Republic Container, the local president of the USWA sought information on the sale and competing offers, made the union's interest in the sale known, and organized the employees to form a buyout association. All Republic Container employees, including nonunion workers and the plant's general manager, became members of the buyout association. The State of West Virginia granted $30,000 to the buyout association for consultants to study the feasibility of the employee buyout plan. When the consultants advised that the buyout could succeed, the association then obtained a $61,000 grant from Kanawha County to pay the lawyers, business consultants, and appraisers needed to implement the buyout. The association retained Groban Olson & Associates as counsel and Chuck Jacobs, as business consultant, to represent them in negotiations with LTV Steel and the lenders and help structure the deal. Atty. Deborah Groban Olson also assisted the union and employees establish the buyout association as an entity which involved all employees in decisions about the structure of the ESOP, the new corporation, and the revisions in their compensation package.In September 1985, sixty-six Republic Container employees purchased the company from LTV Steel. The purchase was accomplished through the use of an employee stock ownership plan, which holds all the stock of the company in a trust for the employees. Stock gave the employees two benefits: voting rights and financial rights. Employees were entitled to vote in the election of the company's board of directors and on other matters resolved through voting. When employees retired, they were paid the value of their shares.Republic Container's ESOP gave each employee one vote. By creating two classes of stock, voting and nonvoting, only one share of voting stock, with a value set at $1 per share, was allocated to each employee. 3,000 shares of nonvoting stock, with an initial 1985 appraised value of about $475.00 per share, which increased to $575.00 in 1986, to $626.00 in 1987 and to $835.28 per share in 1988 and $1,225 per share in 1992, were gradually allocated to the employees' ESOP accounts over seven years. The amount of nonvoting stock an employee received was based on annual wages not exceeding $22,500 per year. The value of an employee's ESOP stock, however, depends on the fortunes of the company. If Republic Container prospers, the value of the stock is likely to increase. If the company falters, retiring employees may find that the shares in their account are worth less than they had anticipated. At the end of 1992, the typical employee's vested ESOP account was estimated to be worth approximately $72,000.00.Republic Container employees did not have to make any out-of-pocket payments as part of the purchase or put up personal property as collateral for the loans used to purchase the company. Republic Container was sold for $1,424,000, an amount raised by two loans: $924,000 from the National Bank of Commerce and $500,000 from the West Virginia Economic Development Authority. The Bank of Nitro lent the new company an additional $600,000 for working capital. The loans are being repaid out of company profits over seven years.As part of the buyout, employees agreed to take a one-year wage adjustment of $1.25 per hour. Union wages after the cut ranged from $9.20 to $11.60 per hour. Wages rose, under the union contract, an average of 42.5 cents per hour each year over four years after the buyout.In January 1986, Republic Container employees elected their first board of directors. The board has final authority to operate Republic Container and to hire and fire management employees. Due to a compromise reached prior to closing the buyout sale, voting and nonvoting directorships were allotted to certain groups. Among the five voting directors, one represents the lenders, one represents management, and one is a member of the USWA. The only restriction on the other two voting directors is that they cannot be employees of Republic Container. The one nonvoting director must be a member of the USWA.During its first four months of operation after the buyout, Republic Container cleared a $78,000 profit, higher than that originally projected, and it has been profitable ever since.In sum, the purchase of Republic Container by its own employees demonstrated that organized and knowledgeable employees can successfully purchase a profitable company and increase its profitability while giving employees a strong voice concerning its future direction.After preserving good jobs in West Virginia for 15 years beyond the time that LTV sought to liquidate it, Republic Container was a casualty of the steel dumping crisis in the 1990s.
