Wednesday, December 10, 2008

MADE IN IOWA: Did Company in Chicago Sit-In Illegally Discard Its Workers and Quietly Relocate While Liberals Forced BOA to Pay for the Shady Scheme?

[Recent update: Former Owner of Republic Windows Shutting Down Another Company, Laying Off 100 Workers!]

[Warning: Surrealism Alert!]

In a move likely designed to protect its public relations image, Bank of America has reversed course and agreed to extend a "limited amount of additional loans" to Republic Windows and Doors, according to CBS News. On Monday, the bank released an official statement explaining that it canceled the company's line of credit because its revenue had declined substantially. The company manufactures products for new home construction and renovation. The national housing market has declined sharply over the last year, and many related industries, including building suppliers, have suffered.

The additional credit will provide sufficient funds to prevent a "WARN Act" violation by the company. Under federal and state versions of that law, employers must provide advanced notice to workers of mass layoffs or a complete shutdown. If they fail to give notice, they can avoid a violation by paying workers the amount of wages and benefits they would have earned during the statutory notice period. Illinois law provides for 75-days notice. The employees' union will enforce this provision because the federal law has a shorter notice period (and it does not preempt state law). But some pretty sinister facts concerning this situation are now emerging within independent media.

Ongoing Issues and Misunderstanding

Shameful Political Football
Although I am thrilled that the workers will receive compensation and benefits to which they are legally entitled, the political circus surrounding the case troubles me. One day before his federal indictment, Governor Rod Blagojevich singlehandedly barred Bank of America from transacting business with the state. He made this decision without any public deliberation, and it remains unclear whether state law even authorizes him to penalize the bank. Furthermore, given the nature of the allegations against him and the preliminary content of the evidence, investigators should probably examine whether Blagojevich had more than political interests at stake when he acted so forcefully against Bank of America. [Editor: Make sure to read the "Juicy Part" below.]

Employer Violated the Law, Not Bank of America
A lot of commentary on this subject misstates the relevant legal issues. Employers, not their creditors, have a legal obligation to provide notice of a shutdown or layoff and to continue paying workers during the notice period. Nothing in the bailout legislation requires Bank of America (or similarly situated banks) to offer "credit on demand." Many people argued that Bank of America should extend additional credit to the company despite its declining financial status. But grotesque lending practices led to the recession; these same practices will not lead us out of it.

Bank = Bad; Factory = Good (Or So You Believe)
Most liberals despise banks, and this preexisting viewpoint informed their portrayal of Bank of America. By contrast, liberal commentary portrayed Republic Windows and Doors in extremely favorable terms. Of course, the workers received the most sympathetic commentary of all, but I expected to see more liberals scrutinize the company, given that it, not the bank, violated the statutory rights of its workers.

Interestingly, while many liberals and progressives have argued that the country should just let banks die, they ignore the reality that banks employ many working-class people. Secretaries, janitors, messengers, mail-room staff, and other low- and unskilled workers have jobs in large banks. They are invisible because liberals associate banks with wealthy professionals. By contrast, they fail to acknowledge that manufacturers, including Republic Windows and Doors, employ elite corporate and managerial staff.

The same reasons that liberals and progressives offer for demonizing banks apply to other businesses, including Republic Windows and Doors. Corporate managers run other companies. Many of them help generate enormous profits for the companies they manage, and a good number of them earn very high salaries. They will often place corporate and management interests above the concerns of labor. Just like banks, Republic Windows and Doors profited, in part, from reckless and irrational behavior in the housing market. Now that the market is strongly correcting itself, the company faces liquidity and demand problems.

"Made in Iowa" [Juicy Part]
While liberals, progressives and the media spewed endlessly about the horrors of Bank of America, Republic Windows and Doors quietly completed transactions that would keep its owners' profit stream alive, but which would cost hundreds of workers their livelihoods. If the Left had refused to follow a kneejerk anti-bank, anti-bailout narrative and instead remained open to dissent and new ideas, it could have possibly discovered some interesting and crucial information about the owner and management of the company formerly known as Republic Windows and Doors. These allegations appear in an article published by The Chi Town Daily News, a independent Chicago newspaper (kudos to the blog Caffeinated Politics for providing this source). Apparently, the company has chosen to discard its Chicago-based workers, relocate to a less-expensive state, and combine its operations with a similar company that is also experiencing a downturn in business.

Here are some juicy tidbits from the article:

* Echo Windows and Doors, an Iowa company, was incorporated just over two weeks ago. As the name suggests, it makes the same products that Republic Windows and Doors used to make

* Sharon Gillman manages Echo Windows and Doors. She is also the wife of Robert Gillman, who owns Republic Windows and Doors.

* The former marketing director of Republic Windows and Doors is now listed as the contact person for Echo Windows and Doors on the company's website.

* TRACO was the predecessor to Echo Windows and Doors. Recently, TRACO scaled down its production due to declining demand for its products. Shortly after Echo Windows and Doors purchased TRACO production at the Iowa plant returned to normal levels.

* Finally, just for kicks, the Gillmans bought $2.6 million condominium in 2007. The condominium is located in the very exclusive "Oak Street" neighborhood of Chicago, according to state records.
If the facts in this article are true, then the owners of Republic Windows and Doors decided to relocate to a cheaper location, combine their sluggish business with another company experiencing a downturn, and eliminate its Chicago workers -- without giving them the required "heads up." This is precisely the kind of corporate behavior that led to the passage of the federal WARN Act (and subsequent state versions). Accordingly, the critical public discourse should have centered upon Republic Windows and Doors, not Bank of America.

The most disturbing aspect of this situation (if this article proves accurate), is that Republic Windows and Doors can now finance its own blatant disregard of federal and state law and operate a new business with completely different workers because progressives used their political muscle to shame Bank of America into lending the company more money. The company has already purchased the Iowa business, but it probably could not afford to pay benefits and wages to its Iowa and Illinois workers simultaneously. No problem. Liberal defenders of labor lobbied and complained until the big bad bank extended additional credit to the company, which allows it to complete its relocation, sudden shutdown, and merger without incurring legal liability.

For all of their advocacy, I hope Illinois politicians got something out of this, other than a loss of tax revenue. Well, I guess I had better retract that comment, in light of recent developments concerning Governor Blagojevich. Given the allegations against him and his unusual move against Bank of America, perhaps the state should investigate whether he had the authority to make this decision and, if so, whether he abused his discretion.

Progressives Should Use This "Good Old-Fashioned Recession" to Lobby for Change
One reader of Dissenting Justice recently argued that the Chicago situation should remind us what a "good old-fashioned recession" means. That language might sound harsh, but recessions are not warm and fuzzy events. Workers suffer. Businesses fail. A good number of banks, mortgage lenders, realtors, and housing-related companies have already collapsed, merged with others, or are trying to restructure their debt. Thousands of workers in these fields have lost their jobs and benefits and have few prospects for alternative employment.

Instead of bashing the bailout for not providing enough quick relief for workers, liberals and progressives should demand direct governmental intervention for dislocated workers and struggling individuals and families. President-elect Obama has announced a plan to create 2.5 million jobs through infrastructure development and energy conservation efforts. Even assuming the accuracy of this figure, that plan remains a longterm project. Workers, like those protesting in Chicago, need immediate relief. This opens up messy debates about welfare, individual responsibility, and the role of government. But the corporate interventions can serve as precedent for expanding social welfare programs for distressed individuals.

During the campaign, most of the candidates limited their discussion of direct economic relief for the "middle-class" to mortgage assistance and tax cuts. But mortgage assistance does absolutely nothing for most of the working poor, who rent rather than own. Obama's proposal to suspend temporarily the taxation of unemployment benefits promises some relief for struggling individuals.

Nevertheless, unless the country strengthens its economic "safety net," then the conditions of poor and working class people will only deteriorate. Take the situation of the Chicago workers, for example. Once they exhaust 75-days of wages and benefits, most of them will likely remain unemployed, lack health insurance (unless they can pay the premiums without an employer subsidy), and face difficulty finding new jobs. So while liberals and progressives may have successfully smacked down Bank of America, they did nothing to ensure the longterm stability of the very people they claim to represent. Worst of all, they may have unwittingly helped a company finance what would have been an illegal decision to discard its workers without notice. Perhaps this situation will inspire progressives to start thinking critically about our world. If I have wrongfully jumped the gun on this story, then I will seek your forgiveness.
Related Readings on Dissenting Justice:

Update: On the same day that the Chi Town News released its article, the Chicago Tribune covered the apparent Iowa relocation in a broader story on the protests.


Tony the Tiger said...

Ok, now, that is totally wild professor. Thanks for bringing it to light.

Sally Hastings said...

Is it possible that the company would run both locations if Bank of America continued to fund it? I really do not want to think that all of those politicians were duped. Someone should have known about this. Someone should have asked. I am not sure. I guess I hope that there is more to the story.

FLRN said...

Great info professor. Cancel the turkey leg order from Jessie and tell him to make it crow - the same thing he and other politicians are probably looking to have to eat for a while as this mess sorts itself out. As for Windows and Doors company executives - for now I think they should have plain "Chicken".

Darren Lenard Hutchinson said...

FLRN: Too many poultry references in one post!

Brian said...

While you point out some important reasons to continue the fight against irresponsible employers, if the UE union didn't take action fast, the Chicago workers would have been screwed. Hindsight is 20/20, but Christmas is coming, and these good folks in Illinois needed their paychecks. Since Bank of America was the easiest political target, these people will be having a merry Christmas.

My question for you is, what should progressives have done to ensure that these folks got their due and that what should we do to ensure that Republic's owners get their's?

ndh said...

This is fabulous and fascinating reporting!

Heidi Li said...

Hi Darren - This entire post is excellent, but you really get to the heart of the matter when discussing the need for truly major change in response to the economic conditions in this country: truly universal healthcare (NOT something Mr. Daschle advocates or Mr. Obama advocates)is a first requirement for the type of social safety net. And this sort of universal healthcare has to concentrate on basic health provisions: childhood vaccination, nutritional education, regular checkups for prevention and management of chronic but controllable illness.

With regard to the plight of workers: whether it be in Detroit or NYC, the thousands losing their jobs without anyplace to go are pouring from the financial services industries and the manufacturing sectors. This is not to disagree with your point about who mistrusts banks but not manufacturers. I for one mistrust the folks who insulate themselves from economic disaster without doing a thing for workers and shareholders, especially pension funds.

Thanks for letting me vent! Heidi Li

Darren Lenard Hutchinson said...

Brian - I actually wrote a blog entry responding to your post. I had been thinking about the issues anyway - so thanks for pushing me.

NDH -- thanks! Hope you return.

Heidi -- thanks for visiting. We tend to agree on a lot, and I am with you on the healthcare issue. Yes, only one candidate proposed totally universal care (unless Kucinich did too).

I also agree with the implication in your argument that we need to move beyond blanket labels of good versus evil. The parties who have the power to immunize themselves from the consequences of their own wrondoing are far more interesting to me than attacking banks who receive bailout assistance. Of course, these groups are not mutually exclusive.

Jack Reylan said...

Bam-Bam Rubble complains about bank renovations when he spent so much on the hen auger hole. Just because he got Willma to rap resent him ain't gone and mean Fred won't move back in to Clitt stole he.

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