"We were setting a lot of records for production at that time," says employee Steve Morrow. "We were making a lot of money, because we were getting profit sharing."

Bain combined Armco with the mill in Georgetown and foundries in Tempe, Arizona, and Duluth, Minnesota, to form the newly christened GS Industries.

Romney purchased Armco with just $8 million down, borrowing the rest of the $75 million price tag. Then he issued bonds — basically IOUs — to borrow even more to pay himself and his investors $36 million.

Romney has taken center stage in the race for the almighty dollar, consequences be damned.
Romney has taken center stage in the race for the almighty dollar, consequences be damned.
Union official David Foster sees Romney as an early pioneer of gaming the system.
Jayme Halbritter
Union official David Foster sees Romney as an early pioneer of gaming the system.

Within a year, he'd already made four times his initial investment while barely lifting a finger. But he'd also run up a staggering $378 million in debt on GSI's tab.

Steel is an infamously cyclical business, a worldwide commodity prone to the same wild price fluctuations as oil. The Kansas City plant forged parts for equipment used in mining gold and copper, leaving it susceptible to the instability of those markets as well.

Yet the "smartest guys in the room" thought they could run the plant better than the people setting production records.

"They were getting rid of old managers and hiring new managers that didn't have any steel experience," says Morrow. "Some of the guys were nice guys and everything, but they didn't have a clue what was going on."

Many of the new supervisors were ex-military, people who believed that grown men and women are best motivated by punishment. Before Bain, says Morrow, "everybody got along."

Afterward? "They wanted to run the plant like a disciplinary environment. They wanted to discipline people for getting hurt on the job. They wanted to put us in an environment like a war, where we were always fighting with them."

Romney was charging GSI $900,000 a year in management fees to run the company. The Kansas City mill received $900,000 worth of ineptitude in return.

Although Bain borrowed $97 million to retool the plant so it could also produce wire rods, it left the rest of the facility to rot.

To save costs, Bain went miserly on everything from maintenance to spare parts and earplugs. Equipment deteriorated. Since the new managers didn't know how to repair it, "they'd want to rent a new piece of equipment out instead of maintaining what we had," says Morrow. The waste and inefficiency was breathtaking.

Bain's plan all along was to streamline the company into greater profitability, then reap the rewards with a public stock offering. But the exact opposite was happening. Even Roger Regelbrugge, whom Bain installed as CEO, knew the debt was crushing GSI from within, according to a report from Reuters. If a public offering didn't materialize, the company would collapse.

Steel was about to enter a periodic downturn. Countries around the world were locked in a war of tariffs and government-subsidized production, creating a glut and driving down prices. Romney's strategy of the flip was never meant to endure difficult times.

Workers saw the end coming; they were particularly worried that Bain was badly underfunding their pension plan. So they went on strike in 1997, bringing a traditional Rust Belt flair to the festivities by littering the streets with nails and gunning bottle rockets at security guards.

When it was all over, the Steelworkers' union agreed to wage and vacation cuts in exchange for extra health and pension safeguards should the plant close.

Yet GSI was now hemorrhaging money, says David Foster, the union official who negotiated the deal. He claims that Bain cursed the company by placing its own interests above those of customers or long-term stability.

"Like a lot of private equity firms, Bain managed the company for financial results, not production results," says Foster. "It didn't invest in maintenance or immediate customer needs. All that came second to meeting monthly financial goals."

It would take a few more years of bleeding, but GSI eventually fell to bankruptcy.

The Kansas City mill closed for good; 750 people lost their jobs. Worse, Romney had shorted their pension fund by $44 million. The feds were forced to cover the difference, while workers saw benefits slashed in bankruptcy court.

The battered Georgetown plant and the foundries in Arizona and Minnesota ultimately were bought out of bankruptcy by new companies. Their work forces were halved.

Still, Romney walked away unbruised. All that debt was technically GSI's, not Bain's. Because he'd repaid himself and his investors just months after the purchase, Romney pocketed millions for running the company into the ground.

"They were clever and ruthless enough to pay their own investors back at a really high return rate," says Foster.

This was the beauty of Romney's racket. Even if he killed a company — and he tended to kill them fairly often — he still made out, leaving others to take the hit.


On the campaign trail these days, Romney describes his work at Bain as resurrecting distressed companies. In this version, he's the white knight lifting troubled firms from the precipice of failure.

Not true.

Private equity companies like Bain rarely buy anything but profitable firms for one very compelling reason: The patient must be healthy enough to be force-fed all that debt. So it's something of a misnomer for Republican opponents to slur him as a "vulture capitalist."

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74 comments
Hernando Jaramillo
Hernando Jaramillo

LA VERDAD SOBRE EL CANDIDATO REPUBLICANONO TODO LO QUE BRILLA ES ORO

FQS9000
FQS9000

I don't have to imagine what will happen if Barak the Fool is re-elected.

More tax cash to his union buddies.More regulations and less freedom.More taxes.More ass kissing of foreign socialists.Higher oil prices.Crappier medical care.A weaker military.Fewer jobs for us and more bureaucrats.

Any Democrap who says this will not be so is either a fool or a liar.  ANYBODY but Barak the fool.

Vanessa L. Smith
Vanessa L. Smith

Mitt Romney is a Job Annihilator. 

It's dangerous how blatantly Mitt Romney will fabricate his record.  It's appalling and reckless and the American ppl deserve a person of high caliber for our President.     Wake-up independents, undecideds & Obama republicans!  Yes, Obama republican…I know u are out there because I’ve met some of you.

To  Mitt we will all be mere overhead.   We will continue to be marginalized; we will be slashed and cut.  We will be expected to do even more with even less.   In the end we will have less and the Mitt's of the world will have even more.    It is time to take a stand!  Pick the team that is fighting for you and not against you.  It’s a non-decision decision that should not be fuel by a single issue let alone hate, race or religion.  Obama2012 is the only choice for our future prosperity.  

Jayne Chapman
Jayne Chapman

What has changed the most in the last several years is companies shipping jobs overseas and manufacturing overseas. That is the biggest challenge we face as a country in the coming years - getting Americans to get it - we all have to be willing to pay a little more and buy American - we should buy stocks only in Companies who keep jobs here in America and only demand that they give us a dividend in return for our investment - not expect that each quarter has to be better then the quarter before - the only way to keep doing that is to have less workers doing more for less money. 

Matt
Matt

Capitalism built and made this country great. Good bad or indifferent. You can all thank the fact you have or had a job on capitalism.

feralblue
feralblue

Capitalism relies on resources to process and sell and thus create wealth. What made America great was its untapped resources that were exploited for a century or two.  But, as these resources are diminished, capitalism resorts to concentrating existing wealth in fewer hands. This is the difference between a true entrepreneur like Bill Gates, and a vulture capitalist like Mitt.

Dew
Dew

Insanity: Doing the same thing over and over and expecting different results.  People keep voting for him.  I am seriously wondering what is it going to take for people to see what is going on right in front of them?

richdoll
richdoll

so much for a job creator .. job destroyer

EdieVP
EdieVP

Romney Gaming the System why am I not Surprised, his record follows him sad. 

AKRNC
AKRNC

Just think, Mitt Romney wants to help the U.S. workers just like he did all those he "helped" right out of their jobs via takeovers by Bain.  This is just the type of help that nobody needs or wants.  He made his millions on the backs of those workers who he cheated out of their pensions and their jobs.  Worst of all, the fed gov't bailed out the pension funds for him.  He's been telling us all alone who he is when he speaks of letting the housing market drop even further, let everything go into foreclosure so investors can buy up those homes and rent them out.  He did the same when he spoke about the auto industry. What really ticked him off the most was the fact that the pension funds were taken care of before the big investors on Wall St. which proves he doesn't give a damn about the people, just the $$$ he can make off their misfortune and misery.  God help us if he ends up in the White House!  He doesn't care about anyone but his wealthy friends and he'd ignore them if they ever lost their money. 

KatieAnnieOakley
KatieAnnieOakley

I call Mitt and Bain Capital Management "Capitalistic Cannibals."

alwaysthink
alwaysthink

I think the best term for Mitt is Business Pirate, he and Bain just looted these companies and the workers pensions for everything they had.

Aargh!

Very well done story, BTW.  You can still see When Mitt Came to Town here:  http://youtu.be/2wGZRJG4ZJE  Neuton's PAC owns the rights so who know how long it will stay  up before it is deep sixed.

LanceThruster
LanceThruster

Great depiction of Rmoney as parasite. Maybe the Reich Wing can market him using (cough) science.

see: http://www.astrobio.net/pressr...

Summary: Scientists have discovered that parasites are surprisingly important in food webs. According to a new study in the Proceedings of the National Academy of Sciences, parasites may be the thread that holds the structure of ecological communities together.

John Washington
John Washington

Romney has been knee deep in dirt for a long long time.......

Matt
Matt

Going to Bain Capital's website reveals that not even Bain has any jobs available.  So much for creating jobs!

James
James

We barely survived one MBA President.  We can't afford another. 

Especially not from the same B-school.

Matt
Matt

Except, George W. Bush failed his original investors as well.  He not only single-handedly destroyed the company but left his pals high and dry.  But, his pals didn't care, they treated him like a wayward child.  They probably said, "You'll get 'em next time, tiger."

Atlantichvac54
Atlantichvac54

Typical union operatives. The union leaders try to take all the money. And right know we need Romney to save our country from the tyranny that this president is bringing to us. Next issue why dont you air Obamas dirty laundry to be fair. I bet you wont because you are a left wing liberal. Go ahead i dare you.

neil_0226
neil_0226

maybe you should try airing obama's dirty laundry and explain why it is dirty. everyone have a opinion, just don't jump on someone else's band wagon and started blaming obama for the state the economy is in, if so blame him for U.K. sliding back into a recession that was fueled by the former president. remove the veil from your eyes, obama has already done a whole lot more good for this country, than what george did in both terms. As for Rommey, any level headed person can reason as to why he is not forth coming with his tax statement. you think the unemployment rate was bad, make Rommey president and you may realize how good you had it.

Matt
Matt

Not quite!  Ask some of the suppliers for GSI how they felt about Romney raiding that company.  It effects more than just the rank and file workers.  A large company not only employs people directly but creates jobs at its suppliers too.  It sounds like you are parroting back what the politicians are saying rather than thinking for yourself. 

Chris Lynch
Chris Lynch

Guys like Romney are obsessed with trimming surplus expenditures and capturing surplus value. The problem in the real world is that what is surplus on a balance sheet might be someone's livelihood. We didn't do business like this a generation ago.

Matt
Matt

Very well said!  Surplus on a balance sheet might also be someone's health benefits being used to care for a sick family member.

XXxxMacleodxxXX
XXxxMacleodxxXX

If your companies were doing so well, why were they able to be purchased?  If an owner sees tons of money coming in on their already established business, why would he sell the business? This was coming from a workers perspective.  They knew nothing of what was on the books.  If your manufacturing facility is constantly upgrading machinery and giving profit sharing checks then that means they were living off credit and were close to bankrupting anyways.

Bryan Gifford
Bryan Gifford

That is where the big payday is for the owners ... punch out when the going is good.  Then Romney comes in, fills it with debt, runs with the cash, and leaves the workers on government aid and the company torn apart in BK court for the vultures to pick apart.  Not the American model I believe in.

dr.jaya
dr.jaya

I believe in Americans .. but NOT the campaign slogan of Mitt Romney .. 'Believe in (creative destruction of) America' ..Every American should read this well written, very informative article ! Don't miss it ..

Rick
Rick

Yes, one sided, well written by a left wing, anti capitalist, pro union, member of the lame stream media.

theodoric of athens
theodoric of athens

Did you have a point here, or did you just drop by to call people names?

obelus .
obelus .

Please pick an assertion in the article to refute.  I am willing to listen to your rebuttal.

Peter Charbonneau
Peter Charbonneau

so is that how you characterize any article you don't like? Instead of petty, tired attacks, care to dispute anything that was written in the article? We're waiting...

Vhale
Vhale

If you're in certain industries, this is all too familiar a story. I've been through this a few times. People learn to recognize that when  one company buys another, it's a kiss of death and it's time to start job hunting. Of course, the new company will promise the sun moon and stars to get everyone to stay. The smart ones go and get promotions at other firms. This is why there's no loyalty between worker and employer anymore. Once you've been through this you understand, you are only a dollar in someone's pocket. And if you don't watch out for yourself, you will get trashed as soon as they get their  money out of you. I'm lucky in that there is enough business here I've always been able to move sideways with a pay upgrade. Small towns with only one shop, not so lucky. But a smart worker can't afford to be loyal to a company anymore.

Nate
Nate

I am going with the only honest, decent, and intelligent man that has predicted everything going wrong with the US for the past fifteen years. I probably don't even have to say his name and you already know who I am talking about. Ron Paul is the only brilliant man running. I would walk through hot coals to elect this great man. You people need to wake up and actually research his ideas if you don't agree with them because it will make a lot of sense when you know the history and facts. 

JoeCasepack
JoeCasepack

What a load of BS.

Kory Tarr
Kory Tarr

Very insightful.  

JoeCasepack
JoeCasepack

 Far more insightful than this article.

James Stemba
James Stemba

Please cite just ONE inaccuracy in this article.  As someone who lives near Gaffney, SC, and as a child would drive by Georgetown Steel on the way to the beach, this article hits close to home for me.  It's a shame that folks see Romney as some sort of hero because he's able to strip money from companies and siphon it to select investors.  I'd be more impressed if he was a true job creating venture capitalist, like Ross Perot or Ted Turner, Bill Gates or the late Sam Walton (fuck his children, bloodsucking leeches.)  Even Ayn Rand hated so called "capitalists" like Romney.

xboxershorts
xboxershorts

Remember this article well. In Romney's world, labor adds almost no value.

Joe
Joe

Rasmussen Poll: "Adults under 30 are essentially evenly divided: 37% prefer capitalism, 33% socialism, and 30% are undecided."

tripletail
tripletail

Earth to Peter we are Americans and we love capitalism

Hearear2
Hearear2

spending to get out of debt.....    how can that work? 

why is Greece, Portugal,   Spain, and Italy, being forced to cut govenment spending?  (by the EU), rather than increase spending to get out of its debt?

Why should it work here and not in Europe? 

can someone explain that?

xboxershorts
xboxershorts

 Austerity isn't working. Anywhere. It is physically impossible to cut gov't deficits during a recession.

Also, you are off topic.

If you value your labor, this model of capitalism, as practiced by BAIN should offend you. Perfectly healthy companies, providing liveable wage jobs to middle class skilled workers, bought up with borrowed money and all the value possible extracted from those companies, and then the pieces are sold off for pennies on the dollar.

BAIN's profits were, literally, taken out of these skilled employees wallets.

Hearear
Hearear

 <-----  socialism is that way. 

where has socialism succeeded?

-don't forget, as bad as this country seems, its still the best in the world, and where everyone else want to be. 

Lll
Lll

haha

noone wants to be in the USA anymore.

My delicious chocolate ice cre
My delicious chocolate ice cre

Even though they're not remotely close to the invisible bogeyman you're looking for... the fact is that the social democracies of Scandinavia have long since passed us in nearly every measurable facet of "best".  Your blind faith isn't helping.

Paximadk
Paximadk

You obviously haven't ever been in places like, say, Scandinavia. More probably never left good ol' US of A...

Rhoman62
Rhoman62

And everyoine I talk to says this isn't so Romney never did this

Nyan
Nyan

 LMAO - interesting that you talk to people that know him so well personally, and not just know him, but are privy to what he has and hasn't done.  If they know so well, and if this truly isn't so, then why doesn't he himself prove it and release all the information that would be necessary to support that statement?  Makes no sense whatsoever that random people know what goes on behind his closed doors...

Hearear
Hearear

Capitalism  is making money for owners of businesses. 

what is the alternative to Capitalism?  Socialism?  Communism?

or something else?    What is it that you favor and works better than Capitalism?

everyone has the same opportunity to make money in this country (still).    - look at the owner of 5 hour energy drinks.  he is now a multi millionaire.  - you can be too. 

just create a business, and succeed. 

I don't get attacking someone that makes money for himself and shareholders. 

(respond quick before this post is deleted!)

law
law

why are you making this about capitalism vs everything else? this article is about how romney is using his experience as a private equity executive as good experience for economic management, whereas his track record says that whilst he was good at extracting short term profits but these actions would be incredibly destructive in the long term.

seeing as he is a candidate for the most powerful office in your country, and where long term prosperity should be a primary concern, his track record should be of interest. 

also, equality of opportunity is a complete and utter myth... do you really think everyone has equal access to education or capital for instance? infact, i think its lower in the USA than in other comparable countries!

At least five large studies in recent years have found that vertical inter-generational mobility is lower in America than in comparable nations, belief in America as a land of opportunity not withstanding:

http://www.nytimes.com/2012/01... 

 
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