Mitt Romney’s history with a plastics company is now a campaign issue. So since we’re likely to hear more about it in the next five months, let’s take a closer look.
Plastics News readers in the auto industry will remember the plastics company that’s at the center of the story, Cambridge Industries Inc. To refresh your memory this was the Madison Heights, Mich., company headed by Richard Crawford.
In the early 1990s, Crawford started buying automotive suppliers, most of which specialized in making big parts out of sheet molding compound. Many were on shaky financial footing — Crawford once told Plastics News that he specialized in buying “three-legged, one-eyed-dog” companies that nobody wanted.
So keep that in mind — before he purchased them, some of these companies lost millions of dollars annually. And that was during a period that many will remember as pretty good for U.S. automakers.
So Crawford’s specialty was as a consolidator, specifically in corporate turnarounds.
At first, Crawford was backed by investment firm Donaldson, Lufkin and Jenrette. But in 1995 he turned to Boston-based Bain Capital Inc., which bought a 39 percent stake in Cambridge.
At the time, Crawford told PN that Bain had “tremendous depth of resources” and that it would assist Cambridge in its quest to strengthen its position in the industry and expand globally.
Mitt Romney was a co-founder of Bain Capital. His name doesn’t appear in the PN archives from those long-ago stories on Cambridge— our focus was typically on Crawford.
With Bain’s help, Cambridge became such a major player in SMC parts for the auto industry that Plastics News called the company “too big to fail.” (And don’t we all wish that was the last time anyone used that term.)
Crawford decided to test that idea on Feb. 14, 2000, when he announced that Cambridge needed a cash infusion to stay afloat, and that he was seeking buyers for part or all of the company. He claimed that the company needed cash to gear up for new projects, and that Bain had decided not to ante up.
Ford Motor Co. and General Motors Corp. stepped in because they had too much at stake to let Cambridge collapse.
A few months later, on May 10, 2000, Cambridge voluntarily filed for protection under Chapter 11 of the U.S. Bankruptcy Code. Eventually the company was purchased out of bankruptcy by Dearborn, Mich.-based Meridian Automotive Systems Inc. — a company that had been pursuing a deal with Cambridge for several years.
Now, somewhat out of the blue, Romney’s role in Cambridge has become an issue in the 2012 U.S. presidential campaign.
David Shepardson of The Detroit News reported May 24 that President Obama’s re-election campaign cited Cambridge as a company that lost more than 1,000 jobs as a result of Bain — and Romney’s — role.
According to the Obama campaign, Bain “went on an ‘aggressive acquisition binge,’ racking up hundreds of millions of dollars in debt and laying off hundreds of workers, while paying itself millions of dollars in management fees,” Shepardson reported.
Is that fair criticism? That will be up to the voters.
Certainly the former Cambridge workers will have an opinion. But I doubt that, until now, many of them put the blame directly on Mitt Romney.
Loepp is editor of Plastics News and author of “The Plastics Blog.”