What Really Happened In Gaffney?

by John Hinderaker in Economy, GOP Presidential Race 2012

The Left is carrying out a coordinated attack on Mitt Romney’s business career. One sees exactly the same allegations, often phrased identically, whether you look at the Daily Kos, the Associated Press, Slate or Think Progress, or listen to Newt Gingrich or Rick Perry. The centerpiece of the Left’s attack has been Bain’s involvement with two companies that merged to become Holson Burnes Group, Inc.

Holson made photo albums, and Burnes made picture frames. In the late 1980s, Holson was in deep trouble because of competition from cheap imports. Bain helped to save the company, then encouraged its merger with Burnes:

Partly because of the import problem, the Holson family sold out to Bain Capital in 1986; however, the Holson Company, which was still managed by family members, continued to have problems under the Bain umbrella. To return the organization’s competitive edge, Bain called in a series of consulting teams, including one from Price Waterhouse. Among the members of the Price Waterhouse team was Hoffmeister. Bain asked Hoffmeister to join Holson as head of the company in 1988 to effect a turnaround.

In the same year, 1988, Holson opened a factory in Gaffney, South Carolina, where photo albums were produced. The factory initially employed 100 people and eventually around 150–all brand-new jobs that were created by Holson under Bain’s guidance.

Unfortunately, the new company, Holson Burnes, was losing money, suffering net losses in both 1991 and 1992. The new management “worked to streamline the company, eliminate overlap, cut production costs, and jettison poorly performing units.” Those efforts succeeded in making Holson Burnes profitable; they also resulted in closing the Gaffney plant in 1992, after four years of operation.
Rick Perry says, referring specifically to Gaffney:

[T]he idea that you get private equity companies to come in and, you know, take companies apart so they can make quick profits and then people lose their jobs, I don’t think that’s what America’s looking for. I hope that’s not what the Republican Party’s about.

Other demagogues like Gingrich and the goofs at Think Progress say essentially the same thing. From the brief narrative above, one can see how ludicrous these charges are. Bain didn’t “come in and take companies apart;” on the contrary, it brought Holson and Burnes together in what became a profitable enterprise for decades. Bain didn’t make “people lose their jobs;” on the contrary, it created all of the jobs in Gaffney that Perry is talking about. It would have been good if the jobs had lasted more than four years, but there was obviously a net benefit of four years’ work to the employees.

Moreover, Bain’s stewardship helped to ensure that Holson Burnes survived and prospered. At the end of 1992, the company had 588 employees. Profitability returned in 1993 and 1994, and in 1996 Bain and the other shareholders of Holson Burnes sold the company to Newell Rubbermaid for $33.5 million. Leftists grumble that Bain and the other shareholders made money on the deal. I hope they did; they deserved to. Newell Rubbermaid’s purchase of Holson Burnes made it “the world’s largest manufacturer of picture frames, framed art and photo albums.” In the years that have gone by since then, Holson Burnes has changed names and owners, but has continued to prosper and has employed thousands of people. It is now known as Burnes Home Accents, LLC, and has its headquarters in Atlanta.

As for Gaffney, South Carolina, the fact that its 150 citizens had jobs at Holson Burnes for only four years was unfortunate, but hardly catastrophic. The county’s top economic official says:

A 1992 decision by a company controlled by an investment firm once led by former Massachusetts Gov. Mitt Romney to close a Gaffney plant and lay off 150 workers did not have a major impact on the local economy, according to Cherokee County’s top economic development official. …
Jim Cook, executive director of the Cherokee County Development Board, said the county was able to lure another manufacturer in the Meadowcreek Industrial Park off Interstate 85 the same year the Holson Burnes Group — the company controlled by Bain — left town.
“It was not devastating to our economy,” Cook said Wednesday. “The overall impact on the economy was typical of any small business going out. Nobody remembers it, so how significant was that? If anything, it helped us start the industrial park.”

If this is really the best that Think Progress, Barack Obama, Newt Gingrich, the Daily Kos, Rick Perry and the rest of the country’s know-nothings can come up with to smear Mitt Romney’s business career, they had better give it up before they make complete fools of themselves.

http://www.powerlineblog.com/archives/2012/01/what-really-happened-in-gaffney.php