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About Northwest labor press. (Portland , Ore.) 1987-current | View Entire Issue (Jan. 18, 2013)
State Treasurer gets involved KKR-controlled Sealy to close North Portland factory Despite offers of across-the-board wage cuts by union officials and “in- centives” by an elected official, Sealy Mattress Company is going forward with plans to shutter its North Portland manufacturing plant, eliminating 128 family-wage jobs. Portland has been home to the mat- tress factory since the 1940s, though not always under the name Sealy, said Scott Reeves, vice president of Steel- workers Local 330, which represents 78 workers there. Reeves has worked at the factory for 29 years. Teamsters Local 206 represents 14 warehouse workers, and Teamsters Local 162 rep- resents 14 truck drivers. The other 22 jobs are management and non-bargain- ing unit positions. Wages range from $15.50 to $34 an hour, plus benefits. Sealy operates 25 factories in North America. More than half are union- ized, including eight by locals of the Steelworkers Union. Other unions are the Laborers; United Food and Com- mercial Workers; the Seafarers Union; Teamsters; and the International Union of Electronic, Electrical, Salaried, Ma- chine and Furniture Workers, a divi- sion of Communications Workers of America. Those unions are not im- pacted. The private equity investment firm Kohlberg Kravis Roberts (KKR) owns controlling interest in Sealy. “Private equity” is somewhat of a reinvented name for “leveraged buyout (LBO),” of which KKR is king. The playbook for this type of investment is borrow- ing large sums of money to buy, re- structure and resell companies. Much of the time the restructuring involves selling assets and laying off workers. Private equity firms make money from management fees they charge investors and the companies, plus huge divi- dends. Oregon’s Public Employees Retire- ment System (PERS) has invested more than $7 billion with KKR since 1981. According to a report in the New York Times, Sealy has been in private equity hands since 1989, when it was purchased by Gibbons, Green, van Amerongen, a New York-based buyout shop. Bain Capital acquired the com- pany in 1997 on a $40 million invest- ment — shutting down Sealy’s corpo- rate headquarters in Ohio and shifting all of those jobs to North Carolina. It sold the company to KKR in 2004 for $1.5 billion. Two years later, KKR took the mattress-maker public, but maintained a sizable stake and influ- ence in the company. Workers at the North Portland plant were notified in August 2012 that the factory was relocating to Lacey, Wash- ington, where it would operate non- union. A month later, Sealy announced that it was being acquired by rival mat- tress-maker Tempur-Pedic Interna- tional Inc., of Lexington, Ky. The transaction is valued at $1.3 billion and is expected to close this spring. Bob Tackett, president of Steel- workers Local 330 (Tackett also is ex- ecutive secretary-treasurer of the Northwest Oregon Labor Council), said that after hearing the news the union offered to take a 20 percent across-the-board cut in wages — as long as management did, too. “They balked at the management cuts right away and then answered with a ‘thanks, but corporate has de- cided to make the move to Lacey.’ ” Tackett told the Labor Press last week. The Steelworkers then asked what it would take to keep the factory in North Portland. “We told them what- ever it was, we would try to meet those concessions,” Tackett said. “They told us they didn’t think the people here do- ing the same work for less money would be productive.” In a November 2012 press release officially announcing the closure, Sealy wrote: “Ultimately the parties were not able to sufficiently address the service and cost issues in order to remain in Portland.” Tom Leedham, secretary-treasurer of Teamsters Local 206, said the Steel- workers “went the extra mile” to try to keep the factory in Portland. “KKR clearly had no interest in reaching an agreement,” he said. The Teamsters then turned their at- tention to Oregon Treasurer Ted Wheeler and the Oregon Investment Council, which oversees the state pen- sion fund. Last year PERS invested an additional $700 million with KKR (in- cluding $225 million in a Asian private equity fund), pushing its current in- vestments with KKR to $3.5 billion. “It’s outrageous that the State of Oregon gives KKR billions of dollars to invest, and in return for that we get the closure of one of its factories that has been providing family-wage jobs for many, many years. What kind of re- turn on investment is that?” Leedham said. Wheeler, a former Democratic chair of the Multnomah County Board of Commissioners in Portland, responded with a letter to KKR’s co-chief execu- tive officer George Roberts, asking what the state could do to keep the fac- tory in Portland. “While I understand that KKR is selling its ownership stake in Sealy this spring, I believe you still control oper- ations in the company until the trans- action is finalized,” Wheeler wrote. “I request that you ask the management team at Sealy to meet with Business Oregon, our public economic develop- ment agency, and labor leaders to ex- plore the options for keeping this plant operating in North Portland. From what my team and I have heard, lead- ers from all of these organizations are standing by to see what changes or in- centives may help retain these impor- tant jobs.” In the letter, dated Dec. 31, Wheeler referenced the state’s long relationship with KKR, including the recent $225 million investment. Meantime, the Oregon Working Families Party launched an online peti- tion to KKR urging Roberts not to close the factory. “As the leader of an investment firm that receives billions of dollars of Ore- gon’s investment money, we call on you to not take the state’s money and run,” the petition read. Despite the effort, in a letter dated Jan. 4, 2013, Sealy wrote to Portland Mayor Charlie Hales, Multnomah County Board of Commission Chair Jeff Cogen, and Laura Roberts of Workforce Development, notifying them that the “workforce reduction process will begin on or near March 4, after the WARN (Worker Adjustment and Retraining Notification) period ex- pired.” Tackett said the Steelworkers have entered into effects bargaining with the company. The union is hoping to get some extended pension and health in- surance contributions for its members. (Editor’s Note: KKR in 2008, owned or co-owned companies that employed 855,000 people, making it effectively America’s second biggest employer behind Walmart.) (International Standard Serial Number 0894-444X) Established in 1900 at Portland, Oregon as a voice of the labor movement. 4275 NE Halsey St., P.O. Box 13150, Portland, Ore. 97213 Telephone: (503) 288-3311 Fax Number: (503) 288-3320 Editor: Michael Gutwig Staff: Don McIntosh, Cheri Rice Published on a semi-monthly basis on the first and third Fridays of each month by the Oregon Labor Press Publishing Co. Inc., a non- profit corporation owned by 20 unions and councils including the Oregon AFL-CIO. Serving more than 120 union organizations in Ore- gon and SW Washington. Subscriptions $13.75 per year for union members. Group rates available to trade union organizations. PERIODICALS POSTAGE PAID AT PORTLAND, OREGON. CHANGE OF ADDRESS NOTICE: Three weeks are required for a change of address. When ordering a change, please give your old and new addresses and the name and number of your local union. POSTMASTER: Send address changes to NORTHWEST LABOR PRESS, P.O. BOX 13150, PORTLAND, OR 97213-0150 PAGE 2 NORTHWEST LABOR PRESS JANUARY 18, 2013
