Feinberg Despised in Wisconsin Where Cerberus Lives Up to Name
By Bob Ivry
Dec. 23 (Bloomberg) -- Just about everyone in Kimberly, Wisconsin, hates billionaire Stephen Feinberg.
“This is a greedy, extremely greedy guy who doesn’t care about other human beings,” said Jeffery Wyngard, a third- generation Kimberly mill worker with 30 years on the job.
“Feinberg has no morals,” said paper mill workers union local president Andy Nirschl.
“There won’t be a lot of Stephen Feinberg Little League fields,” said Bob Brukardt, who also worked at the mill for 30 years. “He sold his soul to the devil.”
Feinberg inspires this reaction in Kimberly because Cerberus Capital Management LLC, the company he founded in 1992, owns NewPage Corp., which closed the town’s 119-year-old paper mill that Local 2-9 of the United Steelworkers says was profitable when NewPage bought it nine months ago. Six hundred people are out of work in the town of 6,200 at the same time Cerberus’s money-losing Chrysler LLC automotive unit was seeking a taxpayer loan.
The Kimberly workers are searching for new jobs as the U.S. unemployment rate reached a 15-year high last month. The government has pledged more than $8 trillion to rescue cash- strapped financial companies, plus $4 billion for Chrysler.
‘Pent-Up Anger’
“There’s a pent-up anger wherever I travel,” said Leo Gerard, president of the Pittsburgh-based United Steelworkers, which represents 1.2 million members, including the Kimberly mill workers. “People feel very much like they’re being screwed. I really think you’ll see tens of thousands of people if not hundreds of thousands taking to the streets and protesting across the country.”
During the Great Depression of the 1930s, Kimberly paper mill bosses spread the work around so every family in the Wisconsin town could put food on the table, said Mark Van Stappen, whose grandfather started at the mill in 1892.
Cerberus’s investors include pension funds, endowments and family savings, and the company has a fiduciary responsibility to protect those investments, Tim Price, a Cerberus managing director, said in a phone interview.
NewPage has about 8,000 employees whose livelihoods would be in jeopardy if the company hadn’t closed the Kimberly plant, Price said. NewPage’s management runs the day-to-day operations of the company, while Cerberus functions as an investor, he said.
Price said NewPage was doing the responsible thing by terminating the Kimberly employees rather than putting them on furlough.
Severance Pay
“They wanted to make sure people would get severance, vacation pay, holiday pay and outplacement services, because if they weren’t terminated they would not receive these services,” he said.
The workers are getting six months severance pay with health benefits.
NewPage, the Miamisburg, Ohio-based paper manufacturer controlled by Cerberus since 2005, took on almost $3.1 billion of debt when it bought Kimberly and six other mills in December 2007. NewPage Chief Executive Officer Mark Suwyn said the Kimberly facility was “pretty close to breaking even” in 2008. The mill had about $55 million of profit last year before interest, taxes, depreciation and amortization, according to a NewPage document provided by Nirschl, the union president. NewPage said it closed the mill because it was the company’s most expensive to run.
“Nobody likes to take a mill which is the heart and soul of a community and shut it down,” Price said. “It was a very difficult decision for NewPage to make. Each of Cerberus’s portfolio companies operate independently of each other. As investors, Cerberus entrusts each organization to make independent decisions based on the needs of the business. We believe the board and management of NewPage acted responsibly and with compassion for the displaced employees through this process.”
Three-Headed Dog
Still, the workers blame Cerberus, named after the three- headed dog from Greek and Roman mythology who guards the gates of hell, and Feinberg, its 48-year-old founder.
Feinberg “is partly responsible for my little girl not being able to sleep at night, the 9-year-old girl who worries about her father losing his job,” Brukardt said. “That’s why he hides under his rock. Because in his heart he knows he isn’t right.”
As CEO of a $26 billion company, Feinberg has a net worth of about $1 billion, according to Forbes Magazine’s 2008 list. Brukardt made $24 an hour, or about $80,000 last year including overtime. Brukardt said he owes $160,000 on the mortgage for his five-bedroom duplex on College Avenue in Appleton, Wisconsin, and he doesn’t know how long he can keep making payments.
Caring Person
Price said Feinberg was a responsible person who agreed to give up Cerberus’s stake in Chrysler if the automaker takes any taxpayer money.
Cerberus acquired 80 percent of Chrysler, the third-largest U.S. carmaker, in 2007 from Daimler AG for $7.4 billion. Because it is privately owned, Chrysler does not report its financial results.
Feinberg “is a good guy and a caring person,” said Price. “Steve is the kind of guy who’s shy about publicity. He doesn’t feel he’s worthy of it and he’s embarrassed by it. He has very high integrity and I think in every case he tries to do the right thing.”
As unemployment grows, displaced workers are starting to protest. In Chicago, employees of Republic Windows & Doors occupied a factory earlier this month after Bank of America Corp. of Charlotte, North Carolina, forced the company out of business by cutting its credit line. Bank of America and New York-based JPMorgan Chase & Co., a part-owner of Republic Windows, agreed Dec. 10 to a $1.75 million loan to cover the severance pay of 240 employees.
Militancy
“With nothing left to lose, militancy gave them their one hope,” said Harley Shaikin, a labor relations professor at the University of California, Berkeley. “We’ll see more rather than less of this.”
In Kimberly, on the Fox River 115 miles northwest of Milwaukee, blue-and-white lawn signs urge NewPage to reopen the mill or sell it. Workers set up what they call Camp Kimberly in a park across the street from the mill, which stretches almost a quarter mile along the river. The encampment is part vigil, part protest and partly a place for the men to hang out, waving to neighbors who honk as they drive by.
Christmas Tree
Three weeks ago, they put up an artificial Christmas tree in a snow bank and Rick Hardrath, who worked at the mill for more than 25 years, wound a pipe cleaner around the neck of a Grinch doll and hooked it to a branch. He attached a sign that made the other guys get out their cell phones and snap photos: “How Cerberus Stole Christmas!”
To keep warm, the workers moved a trailer onto the lot. Inside on a morning in early December, a dozen men, with room for another dozen, drank coffee around a portable heater. The men mostly wore hunting gear -- heavy boots, overalls, hooded camouflage coats, Green Bay Packers ski hats.
They talked about job prospects -- a recycling center was hiring, at about half the pay the men were earning at the mill -- maybe getting their truck drivers’ licenses once their severance ran out, or going back to school. All of them talked about returning to the mill.
“My trouble is, I’m a paper maker,” said Randy Gossens, who worked briefly at a mill in next-door Appleton after losing his Kimberly job of 32 years. “I’m not sure I can do anything else.”
‘Ironic’
Dan Sawall, a 30-year mill veteran, said he had watched Chrysler Chief Executive Officer Robert Nardelli on television “with those granny glasses at the end of his nose,” Sawall said, telling Congress the automaker needed billions in taxpayer money to stay afloat.
“How ironic is that? You’re taking people’s lives and ripping them apart and now you want those same people to bail you out?” Sawall said. “If I don’t have a job to pay my taxes, how am I supposed to bail you out? Personally, I don’t know how those guys sleep at night.”
Karl Hooyman shook his head. He calculated that $54 from his weekly unemployment compensation of $355 would go to taxes that might be funneled to the Chrysler loan.
“Thirty-eight years gone in the blink of an eye,” he said. “It don’t make sense.”
The Kimberly facility had an experienced workforce, state-of- the-art equipment and a community that has weathered the ups and downs of the industry since John Kimberly started making paper there in 1889, said U.S. Representative Steve Kagen, a Democrat who represents neighboring towns. The mill eventually became part of Kimberly-Clark Corp.
“The reason why the Fox River valley was so successful is that wealth wasn’t concentrated in one family, it was spread out among dozens who were part of this community so they had a personal stake,” said State Assembly Majority Leader-Elect Tom Nelson, a Democrat who represents Kimberly.
Weakening Demand
After NewPage bought the Kimberly facility and six other mills a year ago from Helsinki-based Stora Enso Oyj, the world’s largest paper maker, the Cerberus unit closed mills in Maine, Ohio and Niagara, Wisconsin, and shut one of three papermaking machines at the Kimberly plant.
The Kimberly mill was closed on Sept. 18 because of its cost to run, weakening demand and a surge of less expensive imports from China, according to NewPage CEO Suwyn. North American demand for the coated paper that NewPage makes dropped 19 percent in October from a year earlier while prices were “holding firm,” according to Toronto-based TD Newcrest, a division of TD Securities Inc.
NewPage’s prices were higher than its competitors, said Verle Sutton, Chicago-based editor of Reel Time Report, a unit of industry data provider Forestweb Inc. in Los Angeles.
“If NewPage was more reasonable about price increases, they wouldn’t have driven out demand and they wouldn’t have had to diminish capacity like they have,” Sutton said in an interview.
Prices of NewPage’s bonds have been knocked down to 29 cents on the dollar, according to Trace, the market reporting system of the Financial Industry Regulatory Authority.
Cost-Effective
The Kimberly mill probably would be more cost-effective today than NewPage’s other mills because it’s the only one that doesn’t produce the pulp used to make paper, Sutton said. Pulp prices declined 16 percent in the U.S. since July, according to ERA Equity Research Associates Inc. in Gibsons, British Columbia, Canada. That makes pulp cheaper to buy than to make, Sutton said.
Suwyn and representatives from Cerberus met union leaders Dec. 11 in a closed-door, two-hour session at the Kimberly Municipal Complex, while about 60 workers and their family members waited in the halls.
Because the company officials were coming to Wisconsin, Nirschl, the local union president whose father Jim designed the papermaker wasp mascot for Kimberly High School in 1951, said he hoped they would announce the reopening of the facility.
Hard Times
The employees got no such assurances. When Mike Schuler, a Cerberus vice president and the firm’s representative at the meeting in Kimberly, emerged from the meeting, he said selling the mill wouldn’t help Chrysler.
“All Cerberus’s companies operate independently,” Schuler said. “It’s not feasible at all for the money to go to Chrysler.”
Jim Dercks, who worked 29 years at the mill, said the workers are planning a bus trip to New York to picket Cerberus’s Park Avenue headquarters.
“We don’t want the mill to go down without a fight,” Dercks said.
Hard times have come to Kimberly, Hardrath said. The fake Christmas tree, the one where he hung the Grinch, was stolen from the park across from the mill.
“Somebody must have really needed one,” Hardrath said.
Bla Yao Vang, who survived the Vietnam War and its bloody aftermath in Laos, didn’t survive losing the job he held since 1978 when he arrived in the U.S. from a Hmong refugee camp in Thailand.
“He took the mill closing very hard,” said his 32-year-old son, Lue Vang. “He didn’t like seeing the bills pile up. He felt a lot of pressure.”
Bla Yao Vang was deer hunting with his sons Nov. 29 when he sat down on a stump, had a heart attack and died.
He was 54.
To contact the reporter on this story: Bob Ivry in New York at bivry@bloomberg.net.
Last Updated: December 23, 2008 00:01 EST |
