There was, however, a problem that few considered: Libbey led the market for food service glassware—the glasses used by restaurants, hotels, cruise lines, institutions. The little cursive “L” on the bottoms of bar glasses was as ubiquitous as the little anchor was on glass measuring cups, pie plates, and tumblers in homes all across America. Anchor also sold to the food service segment. The Libbey-Anchor combination could result in overwhelming domination.
The Federal Trade Commission thought so. In December, it registered its opposition to the sale. Local officials were outraged. Mayor Art Wallace, a retired Anchor employee, argued that the FTC shouldn’t be worried about Libbey and Anchor taking over the market; it should be worried about the Mexicans and the Chinese. Wallace and others tried to enlist their state and federal representatives in a lobbying effort to turn back the FTC’s objections but were met with either silence or token letters. Wallace was dismayed by the anemic response, but he shouldn’t have been. It was the harvest of what had been sown by the Ohio state Republican party.
Clarence Miller served as Lancaster’s congressman for decades. Miller was a former municipal gas company employee, city councilman, and mayor. Since being elected to Congress from what was then Ohio’s Tenth District, he’d been an unexciting but diligent and well-respected Republican in Washington. Though conservative, Miller was no dogmatist. He advocated for coal miners in the southern part of his district, as well as for the area’s businesses. But by the 1990s, Miller was viewed as old-school. He didn’t fit with the red-tie-wearing, well-coiffed, Young Americans for Freedom Newt Gingrich ideologues who ascended to power in the wake of Reagan. So, in another blow to Lancaster’s prestige, Republicans in the legislature gerrymandered Miller out of his own district. Lancaster’s new congressman lived in Springfield, a small city between Dayton and Columbus on the I-70 corridor. He didn’t know Lancaster, certainly didn’t care about it like Miller did, and lacked the D.C. firepower to make any sort of difference. Mayor Wallace and his local colleagues were on their own.
Newell tried to appease the FTC by carving Anchor’s food service business out of the deal and lowering the price to $277 million, but the agency remained adamant. The FTC insisted that Anchor Hocking was healthy, with a strong balance sheet. And it was, despite the backlog of deferred maintenance. But Lancaster had witnessed the closing of one major manufacturing plant and the world headquarters of a Fortune 500 company, had suffered the loss of thousands of jobs and much of the city’s civic leadership, and had stood by while Newell whittled what was left of Anchor Hocking down to a matchstick. Drew Shoe had sent its workers to the unemployment line that very year. None of that looked like health.
In April 2002, a U.S. district court judge ruled in favor of the FTC. Negotiations to find a way to satisfy the agency and the court resumed, but were quickly shut down when the FTC filed a complaint in May arguing that even if Newell retained certain molds and accounts related to the food service market, there was still a substantial risk that Libbey would wind up with a monopoly. On June 10, almost exactly one year after it first offered to buy Anchor, Libbey gave up.
A few people did stop to think that Lancaster’s enthusiasm for Libbey might have been misplaced. Perhaps the FTC’s opposition was a blessing in disguise. Most just assumed Libbey would still operate Plant 1 as it was, or even expand it. But Nagle, for one, knew a little about what was happening inside Libbey’s Toledo factory. “They got thirty-some feeders up there,” he said to himself, thinking of the lines delivering molten glass from the tanks to forming machines. “They’re wantin’ machines underneath them. They’ll just move Anchor up there.”
“They woulda gutted us,” Nagle told me. Galli promised Lancaster that the factory would stay open. “If we can’t sell it, we’re going to do a good job running that business,” he said. Analysts agreed that Anchor Hocking would still make profits for whoever owned it.
Three weeks later, Newell cut forty-five salaried and clerical jobs at Anchor Hocking. Eventually, in the Newell annual report, Anchor was no longer accounted for under “Calphalon Home.” It fell into a category labeled “Other.”
Galli still wanted out of the glass business. But he couldn’t simply walk away from Anchor Hocking. For one thing, glass had been made on the site of the old Black Cat for a hundred years. During much of that time, the Hocking, and then Anchor Hocking, used toxic ingredients, as did all glassmakers. A 1916 recipe for ruby (red) glass from the old Lancaster Lens included arsenic, selenium, and cadmium, among other materials (like “bone ashes,” which was exactly what it sounded like). Newell owned not only Plant 1 but whatever had accumulated in the buildings, soil, and groundwater around it.
His only option was to sell. But the FTC had made it clear that selling to another large glassmaker would likely bring scrutiny. He could, however, sell it off to an investment group. To do that, Newell would have to make Anchor as appealing as possible.
New rumors circulated that layoffs were coming, but Newell refused to tell anyone what it was about to do. It rebuffed inquiries from the mayor, the unions, the paper, the local branch of the state’s Department of Job and Family Services. Finally, under pressure from the unions, which pleaded that workers needed to know their fate before Christmas, Newell acted. On December 3, 2002, five months after Galli reassured Lancaster, Newell fired 175 factory workers and shut down one of the plant’s three tanks and all the shops that tank supplied.
Lancaster reacted like a desperate lover. It was both furious and appeasing, wanting to mend the relationship any way it could, hoping that if it just kept appearing at the door with flowers, it would all be different next time.
On February 27, 2003, the Lancaster Board of Education voted to approve a deal brokered by the Lancaster City Council and the Fairfield County Commissioners to take money from the city schools and give it to Newell. The deal granted Newell a 100 percent tax abatement—a loss of $50,000 per year to the schools—on $30 million of new investment Newell promised to make in Anchor Hocking. Newell also promised to maintain at least nine hundred jobs there. The city and the county also lost tax dollars in the deal.
Lancaster’s schools, and the rest of the town’s finances, were already suffering. Just one year earlier, the city council president had told Lancaster that the streets weren’t being maintained, that fire protection was inadequate, that city employees would be laid off. The city was in a financial “crisis,” he said. In fiscal year 2003, Ohio’s Republican governor, Bob Taft, cut school funding after the Republican-dominated legislature refused to increase cigarette taxes. In May 2003, Lancaster’s schools cut $2.2 million. In February 2004, the district cut another $1 million out of its budget and fired twenty-one people.
A month after the schools agreed to the deal with Newell, Newell issued its annual report for 2002: net sales of $7.5 billion. In his letter to shareholders, Galli was ecstatic over the results. “These are exciting times at Newell Rubbermaid,” he said.
They were not exciting for Anchor. As he unwrapped a generous gift from the schools, the city, and Fairfield County, Galli successfully lowered Anchor’s employee count and cut its production by one-third.
* * *
Joe Boyer moved into the operators’ local in 1998. Despite his lack of enthusiasm for the union, the local made him a committeeman for his shift. Committee members who failed to show for union meetings were fined. So Boyer showed. Somebody at one of those meetings nominated him to be a vice president of the local. “I thought: Well, I’ll do that … just ’cause I don’t know anything about unions. I’ll just see what’s going on, how a union works from the inside.”
Not everything was rosy, but, like Lamb, Boyer “enjoyed being part of the Flints. It was kind of like a big family then with the Flints. They were really nice.”
Because Newell was both a hard employer and never really understood glass—its Anchor CEOs were never there long enough to pick up the nuances—the Flints became more important to each worker than the union had
been in fifty years. The Flints knew everything there was to know about making glass and operating a glass factory. An experienced operator could tell when a nut with more threads, good threads, holding up the spring cage of a press might be coming loose, because he could hear a change each time the press descended onto a mold. But even experienced workers couldn’t hear that same noise if the threads on the nuts were old and worn. If one of those old, worn nuts gave way and a spring cage let loose and fell, it could wreck a machine. The worker would take the blame. He wasn’t paying attention, management would say. But with the Flints, when the local filed a grievance on behalf of the worker in such a situation, the president of the union, usually a glassman himself, would often come down from Toledo; he wouldn’t just send a rep. Boyer watched his union save jobs.
His good opinion of the Flints was shared by the president of Lancaster Glass, where the union also represented workers. Back in 1987, as Newell was taking over Anchor, the Lancaster Glass Flints talked strike because the company was asking for wage concessions. After negotiations, the Flints agreed to a 5 percent reduction for one year, followed by increases the following two years, for a net increase of 2 percent by the third year. They gave a little and got a little.
Company president Joe Ehnot praised them. “For the nearly forty years I have been associated with the many glassworkers throughout the country and the leadership provided by the American Flint Glass Workers’ Union, my respect for the employees and the union leadership has never wavered. They are responsible people trying to make a respectable living.”
But by 2003, so few Flints remained, thanks to plant closings and cutbacks across the industry like the ones at Anchor, the union was forced to seek safety within a bigger tribe. It voted to join the United Steelworkers. There was no joy in the decision.
The local Flint leadership barely had time to learn the way to Pittsburgh, where the Steelworkers were headquartered, before Galli’s seduction paid off. On March 12, 2004, one year after the school board’s vote to give up some of its own budget, Newell signed a purchase agreement to sell Anchor Hocking, Mirro, and a picture frame operation called Burnes of Boston to Cerberus Capital Management for $310 million. Anchor Hocking and Lancaster were about to enter the world of private equity.
Joseph Galli was fired from Newell the next year. In 2016, Newell Rubbermaid merged with Jarden, a collection of old brands and products that been taken down by the same kinds of financial maneuvers that took down Anchor Hocking: Ball Corporation (the old canning jar company), Rival Crock-Pots, First Alert smoke detectors, Sunbeam. Jarden was one of Sam Solomon’s former employers. The $15 billion deal created Newell Brands, now based in Hoboken, New Jersey. As of May 2016, Newell’s stock price still hadn’t reached its 1999 high.
FIVE
Hook, Line, and Sinker
April 2007
At first, Lancaster believed it was an answer to its prayers: Finally, twenty years after the Newell buyout and a subsequent aching decline, Cerberus’s purchase of Anchor Hocking seemed to foretell a renaissance.
Lancaster was a place of strong belief. The System had made some mistakes, had not done right by Anchor Hocking. The company took it on the chin, and the town was knocked to the mat as a consequence. But if everybody just worked harder, The System would come through in the end—and now it had. Life would return to normal.
There wasn’t much choice but to believe. Nobody clamored to situate a big manufacturing business in Lancaster—or in just about any place in the United States, for that matter. In 2002, Ohio’s own economic development guru made a swing through the region and told everybody that manufacturing was dead in that part of Ohio—and was going to stay dead—which didn’t do a hell of a lot for morale. After all, people in that part of Ohio had spent the past two hundred years either growing food or making things. If they couldn’t make things anymore, what were they going to do?
Many on both coasts, and Ohio politicians, too, seemed very excited about the bright future of the “knowledge economy,” but they didn’t seem to have the slightest idea just what the term meant for a place like Lancaster, or to care much about the knowledge residing there. Glassworkers were not about to be transformed into Razor-riding keyboard whizzes in tech incubators.
If you had the right education, you could get in your car every morning at 6:30 and trek to Columbus to work at a bank or an insurance company, then arrive home at night too wrung out from work and the commute and too busy with kids’ soccer practices to know what the city council was doing or to volunteer to administer CPR to the city’s downtown. More and more people were doing just that. As far as private industry in Lancaster was concerned, Anchor Hocking and Lancaster Glass were about it.
Diamond Power’s parking lot was less than half full. Drew Shoe was now a warehouse and a few offices. Stuck Mold folded after the Newell sale. The Essex Wire building sat empty. Alten’s Foundry was gone. The hospital was the town’s biggest employer.
And so, though nobody knew exactly who or what Cerberus was, Lancaster believed. It did know that Cerberus was New York guys. Smart guys who turned distressed companies around. Anchor Hocking wasn’t distressed; it was profitable. But still, if the Cerberus guys could save distressed companies, they had to know what they were doing. Good times were coming again for Anchor, and, with any luck at all, for the whole town.
As always, the Eagle-Gazette’s editors advised the city to uphold its long pro-business tradition and forge an alliance with Cerberus. “We hope the city, state and county elected officials and civic and business leaders begin to take proactive steps to help the new owners succeed and to ensure the jobs stay in the community. Intervention is necessary on the front end, although the buyer has a reputation for turning around distressed companies. Local leaders, especially city officials, should not take a wait-and-see approach to this pending change.”
Citizens of Lancaster fantasized about ways Cerberus could help the town. “Maybe they could sponsor one of the area schools, giving incentives to kids who have good grades and attendance,” one man told the paper.
Newell failed to partner with the community, the city council president pointed out, implying that now, maybe, Lancaster would have an Anchor owner like in the old days. Mayor Dave Smith, whose mother, “Petey” Smith, served as Malcolm Forbes’s factotum when he lived in Lancaster, and who was himself a former Anchor Hocking employee, said the Cerberus purchase was “exciting.” “Anchor will be in more control of its future than it has been in the past,” Smith said. “It should be a strong benefit to the community.”
Anchor employees said they were delighted, too. “We were super-excited,” a longtime Anchor Hocking manager recalled. “We had gone through some pretty tough times with the Galli stuff, the Toledo thing, the Libbey thing.”
“There was an expectation of some renewal, some better outcome,” Mike Shook recalled. “A better tomorrow. ‘Wow,’ you know? ‘Somebody wants us.’”
To buy the three businesses from Newell, Cerberus formed a company called Global Home Products Investors, LLC—Cerberus in another guise. Global Home Products Investors, in turn, created seventeen companies, all of which amounted to Global Home Products (GHP), a company it headquartered in the Columbus suburb of Westerville. Even labor was happy when Cerberus showed up, explaining how this new entity, Global Home Products, consisting of Anchor, Mirro/WearEver, and Burnes, would be bigger and stronger than any one of the businesses alone.
“‘We got WearEver. We got this framing company. We got all these companies. We’re gonna make a corporation that’s unreal,’” union leader Chris Nagle said, recalling Cerberus’s pitch. “And we took it hook, line, and sinker.”
* * *
Cerberus, named for the three-headed dog that guards the gates of Hades in Greek mythology, was founded by Stephen Feinberg as a hybrid hedge fund/private equity manager. A Princeton grad, Feinberg, forty-four years old at the time he bought Anchor, had been weaned in the nursery of Drexel Burnham Lambert. Dre
xel achieved infamy as the Wall Street junk bond giant that helped finance much of the 1980s leveraged-buyout mania, sometimes using unethical—even illegal—means. Its biggest junk bond rainmaker, Michael Milken, wound up in federal prison. Drexel pleaded guilty to six felony counts, paying $650 million, then the largest-ever fine levied by the federal government for such crimes. The company later collapsed.
Feinberg founded Cerberus in 1992. At first, the firm focused on distressed debt. There’s a lot of money to be made in poverty, whether you operate a payday-and-car-title-loan storefront in Lancaster, Ohio, or a multi-billion-dollar fund in New York. By buying the high-risk debt of a foundering company, Cerberus could collect high interest. If the company survived, Cerberus could sell its stake for much more than it had paid for it. If the company failed, Cerberus would duke it out with other creditors in the dogfighting pit of bankruptcy court in order to walk away with the best terms. Cerberus wasn’t named Cerberus for nothing.
Cerberus had its own affiliate banking operation, called Madeleine. Madeleine would throw a lifesaving loan to a company. In return, the company would pay fees for that loan, and Madeleine would wind up owning a piece, or all, of the company. Should the company go bankrupt after all, Madeleine, as a senior lender, would be a front-of-the-line creditor.
Feinberg subsequently swerved into a more standard private equity business by buying up companies, just as he did with Global Home. These deals were aided by the presence of well-connected VIPs on the Cerberus roster. Dan Quayle, George H. W. Bush’s vice president, joined the shop in 1999. Former Canadian prime minister Brian Mulroney signed on in 2003. Donald Rumsfeld invested between $1 million and $5 million, a stake he was forced to sell when he became George W. Bush’s secretary of defense. George W. Bush’s treasury secretary, John Snow, is now the chairman of Cerberus Capital Management.
Glass House Page 10
