For years now, we’ve been hearing about corporate executives who made fortunes for themselves while driving their companies into bankruptcy, costing employees their jobs and sometimes their life savings.
Not so at Malden Mills, the textile company in Lawrence, Mass., that invented the fabric Polartec.
As 60 Minutes reported last year, Malden Mills also filed for bankruptcy protection, but that’s the only thing it has in common with companies like Enron.
In fact, Malden Mills is known for going out of its way to help its employees, even when the company suffered a shattering setback. Correspondent Morley Safer reports on this story which aired last summer.
The fire that broke out at Malden Mills in the winter of 1995 was the largest fire Massachusetts had seen for a century. No one was killed. But the town was devastated. Malden Mills was one of the few large employers in a town that was already in desperate straits.
“The only thing that went through my mind was, how can I possibly recreate it,” says owner Aaron Feuerstein, the third generation of his family to run the mill.
“I was proud of the family business and I wanted to keep that alive, and I wanted that to survive. But I also felt the responsibility for all my employees, to take care of them, to give them jobs.”
He made a decision – one that others in the textile industry found hard to believe. Feuerstein decided to rebuild right there in Lawrence – not to move down South or overseas as much of the industry had done in search of cheap labor.
He also made another shocking decision. For the next 60 days, all employees would be paid their full salaries.
“I think it was a wise business decision, but that isn’t why I did it. I did it because it was the right thing to do,” says Feuerstein.
Some might have said the proper business decision was to take the $300 million in insurance and retire.
“And what would I do with it? Eat more? Buy another suit? Retire and die,” asks Feuerstein. “No, that did not go into my mind.”
He kept his promises. Workers picked up their checks for months. In all, he paid out $25 million and became known as the Mensch of Malden Mills – a businessman who seemed to care more about his workers than about his net worth.
The press loved him, and so did politicians. President Clinton invited him to the State of the Union Address as an honored guest. He also received 12 honorary degrees, including one from Boston University.
He became that rare duck – the businessman as national hero.
“I got a lot of publicity. And I don’t think that speaks well for our times,” says Feuerstein. “At the time in America of the greatest prosperity, the god of money has taken over to an extreme.”
For guidance he turns to the Torah, the book of Jewish law.
“You are not permitted to oppress the working man, because he’s poor and he’s needy, amongst your brethren and amongst the non-Jew in your community,” says Feuerstein, who spent $300 million of the insurance money and then borrowed $100 million more to build a new plant that is both environmentally friendly and worker friendly. And it’s a union shop that never had a strike.
Malden Mills is best known for Polartec, its popular lightweight synthetic fleece. And Feuerstein says he’s a fool for not patenting the process.
“They were able to come after us. But that’s OK. We just make it better,” he says.
The company has developed Polartec that resists wind, water, and fire. The company’s customers read like a catalogue of catalogues: L.L. Bean, Lands End, Eddie Bauer, the North Face, Patagonia. The Department of Defense has even ordered clothing made of Polartec, and Special Forces use it in Afghanistan for cold weather operations.
So is this the moral of the story, that good guys finish first? Sadly, not so, at least not so far. Malden Mills, the company that rose from the ashes, became so mired in debt that it had to file for Chapter 11 bankruptcy protection.
If Feuerstein is unable to satisfy the banks and other creditors, the company could be sold, or even worse, liquidated – leaving the town of Lawrence with yet another closed mill to join the dozens of other textile makers in the area that have shut down, or moved to the South or overseas.
Is the textile business in New England, or maybe even in the United States, a dead industry?
“If you look at the textile industry in the U.S. in the last year, over 100 plants have closed. Tens of thousands of workers have been laid off. So Malden Mills is far from alone. It’s definitely swimming upstream,” says Kathleen Seiders, a business professor at Massachusetts’ Babson College.
Malden Mills has a host of problems. The company lost customers while the new mill was being built, and three warm winters have hurt sales of Polartec. The company is also $140 million dollars in debt.
“Malden Mills will be transformed, I believe, when it emerges from Chapter 11,” says Seiders. But she believes that Feuerstein’s role in the company is likely to change considerably.
“My intuition is that he will remain in a leadership role, but his role will be largely symbolic. He will not be responsible for the key operating and financial decisions,” says Seiders.
Feuerstein realizes that banks may not have quite the same moral view of business that he does. “But I think that we are, at present, we are as we speak, turning the company around. And I think the banks realize it and that’s why they’re sticking with us.”
“There’s a groundswell of support from people in every state of the country who write me the most beautiful letters, sensitive letters, compassionate,” he says. “And very often, there’s a $5 check. Or a $100 dollar check or a $500 check, and I read those letters every day. These letters cheer me up.”
He’s received about $10,000 dollars. At first, the money was returned, but now it’s being put into a fund for poor children in the area.
“We’re treated fairly. I mean, you’d better produce, he doesn’t give it away,” says employee Bob Fawcett. “But he takes care of his people. But more than just in salary. If you’re hurting, you’re in trouble, you got a place to go.”
“I actually had two brain surgeries, but because of him I was able to get the doctors I needed,” adds employee Jackie Hosty.
Given the latest financial crisis, do they think this place can be saved?
“If anybody can pull it off, he can. Some people would walk away, I don’t need this aggravation,” says Fawcett. “But he just steps up to the plate, time and time again. I don’t know how he does it.”
And Feuerstein says he’s not going to give up, move to Florida or play golf. Golf to him is for the brain dead. Instead he likes to lie on his living room sofa, doing what he calls his mental exercises – reading and committing to memory his favorite poets, like Emily Dickinson and William Shakespeare.
Feuerstein and his wife, Louise, live comfortably but modestly in a five-room condominium. No chauffeurs, no private planes.
When he calls a factory pep rally, and brings in support from people like U.S. Sen. John Kerry (D-Mass.), you’ll never hear a heckler. You get the sense that everyone is in this together, from the factory hand to the CEO.
What’s going to be on his tombstone? “Hopefully it’ll be, ‘He done his damnedest,'” says Feuerstein. “You know, that I didn’t give up and I try to do the right thing.”
He’s still trying. Earnings are up at Malden Mills and the company says it expects to emerge from Chapter 11 by the end of the summer. But the new Malden Mills won’t necessarily belong to Aaron Feuerstein. His creditors will own most of the company, unless he can raise about $90 million by August.
But Feuerstein says don’t count him out. He’s confident that he’ll get the money and keep his company.