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.)
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JANUARY 18, 2013