Sunday, September 09, 2012
Posted: 09/09/2012 12:07:09 AM EDTUpdated: 09/09/2012 12:07:10 AM EDT
Rolling Stone magazine recounted the history of KB Toys in an Aug. 29, 2012 piece on Mitt Romney and Bain Capital entititled: "Greed and Debt: The True Story of Mitt Romney and Bain Capital." by Matt Taibbi.
In a nutshell, KB thrived in the late-20th-century U.S. retail boom, outgrowing the Lee, Mass., headquarters where its family owners began and constructing an anchor-commercial office building in downtown Pittsfield, 20 miles north. But eventually the competition with the likes of Toys 'r Us, Wal-Mart and others proved too much, and KB was sold. Later, it was sold again to a group headed by Bain Capital and ultimately went bankrupt.
The Eagle (circ. 25,800, daily), in Pittsfield, Mass., once won a Pulitzer Prize for editorial writing. That was when it was family owned and its newsroom was about three times the size it is today. Since the mid-1990s the paper has been owned by MediaNews Group Inc., the Denver-based chain built and once controlled by Dean Singleton.
MediaNews Group went through bankruptcy a couple of years ago because it had amassed over $900 million in debt pursuing a strategy of buying up U.S. newspapers when Wall Street judged them worth relatively fabulous sums. But now the bottom has fallen out of newspaper print advertising and those debts became unsustainable.
The Eagle was sold to MediaNews by the Miller family in part because the family amassed debt it couldn't cover by renovating and moving into a gigantic factory complex in downtown Pittsfield. Their aim was noble -- they wanted to to restore an abandoned stationery-manufacturing plant to productive use. But they couldn't find enough commercial tenants for the cavernous building sections not neede dby their newspaper operations.
Pittsfield is a once bustling factory town dominated by defense and electric-transformer divisions of General Electric Co. GE and most other industrial jobs are gone from the city now, which is clawing its way back by emphasizing tourism, arts, and service businesses by serving as the retail core of the Berkshires.
The Berkshires are the small-mountain part of Massachusetts, dotted with second-homes and culture attractions such as Tanglewood, Jacobs Pillow, the Clark Art Institute, Shakespeare & Co., the Massachusetts Museum of Contemporary Art, Hancock Shaker Village, the Norman Rockwell Museum and at least three nationally-acclaimed summer theater companies.
Understanding this scenario -- a newspaper twice bruised by over-leveraged ownership, a city abandoned by industrial jobs, and a toy company built and hung on the excesses of a consumer economy, run through a Bain Capital restart machine which failed -- provides both context and iron for The Eagle editorial's conclusion:
"In microcosm, the KB fiasco speaks to why corporate America is held in such low regard today," The Eagle stated in an editorial of January 27, 2009. The editorial was reacting to the awarding of cash bonuses to KB executives charged essentially with the task of shoveling dirt on KB’s grave but it also came in the context of the ongoing U.S. economic meltdown caused by the greedy Wall Street firms operating on the Bain philosophy of corporate profits first and ethics and fairness be damned. Mr. Romney can’t run from his record at Bain where debt was a business strategy that cost workers in Pittsfield and elsewhere their jobs. He’ll have to answer for it.