Decline, Part II

Well I'm living here in Allentown
And it's hard to keep a good man down
But I won't be getting up today
--Billy Joel

The signs of industry deterioration that became evident early in the 1990s began to pick up late in the decade. The plight of my former company serves as a microcosm of the general conditions that unfolded.

The 1995 acquisition added a few $ hundred million in debt to an already levered balance sheet. Integration problems were a challenge. Acquisitions were not something my company was used to doing, and the restructuring hit some speed bumps.

Pricing pressures continued to build from falling demand and rising supply. By this time, foreign supply was coming not only from the Europeans but from Asia as well. Falling prices made it more difficult to service debt.

By the end of the decade, many stalwart North American players began shopping their assets in this paper sector. In late 1999 a European firm made an offer that the owners couldn't refuse (the publicly traded stock was largely concentrated in the hands of founding family members) and my former company was sold for nearly $5 billion--a hefty premium over the traded market value of the firm.

Then came restructuring. Waves of reductions in force (RIFs) commenced. Some were offered early retirement packages but most reductions were the result of layoffs--something very foreign to my former company. Over the next few years the workforce of nearly 7000 was cut by over 40%. Old machine lines were shuttered. A general rule is that, in an acquisition, administrative staff of the acquired company usually takes an outsized hit as staff functions are 'consolidated' with a preference for keeping staff of the acquirer. The corporate staff building in downtown Wisconsin Rapids began to empty out.

Local management positions were now being populated with expatriates from overseas. Managers from the old firm were making long trips across the pond for meetings at parent company headquarters in Finland.

The new owners began major investment programs to improve the productivity in the remaining machine lines. These programs affected major capacity improvements. However, the $billions in investment added more stress to the balance sheet. 

General industry conditions continued to worsen during the 2000s. Global supply continued to increase in the face of weakening demand. Capacity was retired. Acquisitions increased...as did debt and leverage.

By 2008, the Euro parent threw in the towel on making this acquisition work. Plus, it needed cash as the company was drowning in debt that home base government subsidies could no longer cover. So they sold their US assets to a subsidiary of a large private equity firm most famous for its recent acquisition of Chrysler. The price tag was about $2 billion, and reflected a multi-billion dollar loss over the original purchase price for the Europeans.

Another new sign over the door...

to be continued