bad company takeovers

[wesdavidson]

Recently there have been a few threads about bad CEO's, too-long strikes, and extreme mismanagement.

If you have a case, it would be interesting to read about it. The reason for this is to learn from it- what not to do, and sometimes, how to survive.

The one that came to mind today, and prompted this post, was John Delorean's takover of the Thiokol snow cat plant in 1978.

The snow cat plant was our main local industry, aside from meat packing and cheese making, for nearly 30 years. If you were a machinist, you had worked there, or you worked with someone who had. The other heavy industry was Thiokol"s rocket plant or Hill Air Force Base, a 40 mile drive.

Delorean purchased the plant in 1978, it was a going concern, but Thiokol wanted to put more money toward the space shuttle motor program.

Delorean was a good to neutral owner for several years, the machines were improved, the largest were about 12 feet across the tracks, 16 feet accross the blade, 15 tons and 225 or more turbocharged diesel horsepower. Good machines, good plant, profitable. But as the Delorean empire collapsed, the cash draw from this plant got to be sevier, by the early 90's if you wanted a new machine you paid for it by paying the creditors and suppliers and sending the reciepts to the plant, they would then ship your machine. Some employees even recieved checks from customers.... some parts were shipped directly to the customer, bypassing the factory completely.

Management decided to buy the factory, they canvassed the local community and raised an ernest money down payment of a couple million dollars, Delorean accepted it, they set a date to close the transaction. A few days before closing a bank loan officer balked, they called and asked for a weeks extension, "no problem" was John's reply. At closing they were ready to sign, and John dropped a bomb "now, you are a couple million short because you defaulted on the ernest money". He stopped the sale. That little comment caused several of the investors to go bankrupt, several of the managers left town.

A different group managed to buy the plant later, by this time it was marginal, they got caught up in cost cutting, and were enticed to move the plant to another town 30 miles away, to save on taxes. The moving costs ate up the operating capitol and the plant never re-opened. The old factory was leveled a few years ago, and is now an open field.