Bain Capital plans to outsource jobs at profitable Sensata plant in Illinois
The shock of losing a precious job in a town afflicted by high unemployment is always hard. A foundation for a stable family life and secure home instantly disappears, replaced with a future filled with fears over health insurance, missed mortgage payments and the potential for a slip below the breadline.
But for Bonnie Borman – and 170 other men and women in Freeport,Illinois – there is a brutal twist to the torture. Borman, 52, and the other workers of a soon-to-be-shuttered car parts plant are personally training the Chinese workers who will replace them.
It’s a surreal experience, they say. For months they have watched their plant being dismantled and shipped to China, piece by piece, as they show teams of Chinese workers how to do the jobs they have dedicated their lives to.
“It’s not easy to get up in the morning, training them to do your job so that you can be made unemployed,” said Borman, pictured, a mother of three who has worked for 23 years at the Sensata auto sensors plant.
Borman knows her eventual fate in the stricken economy that surrounds Freeport. “I am going to be competing for minimum wage jobs with my own daughter,” she said.
Such scenes have been common in America as manufacturing has fled abroad in search of cheaper wages.
But, in the midst of the 2012 presidential election, Freeport is different. For Sensata is majority-owned by Bain Capital, the private equity firm once led by Mitt Romney, that has become a hugely controversial symbol of how the modern globalised American economy works. Indeed, Romney still owns millions of dollars of shares in the Bain funds that own Sensata.
So as Sensata strips out costs by sacking American workers in favour of Chinese ones, the value of Romney’s own investments could rise, putting money into the pockets of a Republican challenger who has placed job creation in America at the heart of his bid for the White House.
The story of how Bain became involved in a car factory in a small town amid the rolling farmland of northern Illinois is emblematic of modern financial wheeling and dealing.
Bain bought the firm that was to become Sensata in 2006, when it was the Texan arm of a Dutch company. It then floated it on the stock exchange in 2010, but kept a majority stake. Sensata came to own the Freeport plant at the beginning of 2011 as part of a wider purchase of a car parts business from Honeywell.
Sensata spokesman Jacob Sayer said closing the Freeport plant to cut costs was a key element of the Honeywell deal. “If that had not been part of the strategy, then the deal would not have been so attractive,” he said.
Bain has declined to comment. But it has made a lot of money from owning Sensata, quadrupling its initial 2006 investment. In business circles that focus on the bottom line is all that matters. But, not surprisingly, it cuts less ice in Illinois.
Workers insist their operation is profitable and makes top quality auto sensors.
“I understand business needs to make a profit. But this product has always made a ton of money. It’s just that they think it is not enough money. They are greedy,” said Tom Gaulraupp, who has put in 33 years at the plant and is facing the prospect of becoming jobless at the age of 54.
Mark Shreck, a 36-year-old father-of-three, confessed he was one of the few workers not surprised at the layoffs, as this is the second time his job has moved to China. “I feel this is what companies do nowadays,” he said.
The Freeport workers have appealed to Bain and Romney to save their plant. The local town council, several Illinois politicians and the state’s Democratic governor have all rallied to their cause. “This company is competitive globally. They make a profit here. But Bain Capital decided to squeeze it a little further. That is not what capitalism is meant to be about,” said Freeport mayor George Gaulrapp, 52, pictured.
The anger towards Bain and Romney is palpable. Romney has become the target for the emotions of a community who built lives based on the idea of a steady manufacturing job: a concept out of place in the sort of fluid buy-and-sell world from which Bain prospers. “I didn’t have a clue what Bain was before this happened,” said Cheryl Randecker, 52. “Now when I hear Romney speak it makes me sick to my stomach.”
President Barack Obama’s campaign has sought to make Bain’s record of buying and selling companies – often involving job losses – a key part of its strategy of painting Romney as an out-of-touch super-rich financier. In turn, Romney, who left Bain in 1999, has defended his long career there, saying Bain ends up generating economic growth and spurring job creation. Far from profiting from layoffs, Romney has portrayed Bain as a model for the American future.
That argument stuns Illinois governor Pat Quinn. “If he thinks that is the model for American economic growth then he is barking up the wrong tree,” Quinn told The Guardian.
Of course, no one at the Romney campaign wants to be linked with the Freeport plant closure. “Governor Romney is not familiar with this issue and has not been involved in the management of Bain since 1999,” said campaign spokeswoman Amanda Henneberg.
Nor does anyone at Sensata want to discuss the social costs of their decision. “We don’t have any statement on the impact it has on Freeport,” said Sayer. Bain did not return a request for comment.
But the impact is enormous on individuals and city alike. Freeport, a city of 26,000, is struggling. Its downtown features empty store fronts and businesses barely getting by.
The loss of 170 solid well-paying jobs will ripple out into this economy, further straining city resources, hurting businesses and eventually adding to Freeport’s foreclosure problem. “There is a sense of fright. People don’t know what this means for their families, their health insurance and whether they will keep their homes,” said mayor Gaulrapp.
It is already happening.
Tom Gaulrapp – no relation to the mayor – worries he will be homeless. “It is a real possibility,” he said. Randecker’s daughter has already quit nursing college in Iowa to save money. Joanne Penniston, 35, is wondering if she will have to leave town. “I would have to uproot my whole family,” she said.
Dot Turner, who joined the firm when she was 18 and freshly married and then put in 43 years on the factory floor, has suddenly found long cherished retirement plans thrown into disarray. She is 62 and knows finding another job will be tough. “I should not be standing in an unemployment line at this stage of my life,” she said.
Turner too finds it hard to hear Romney talk of creating jobs when the post she has worked at for four decades – and which paid for three children to go to college – has just been sent overseas by a firm majority-controlled by Bain. “When Romney talks about creating jobs, it is just a big fairy tale,” she said.
There is little chance of a happy ending for Freeport. The workers collect petitions and hold demonstrations. But they know they are likely doomed. “We are not stupid. We know we are unlikely to save our jobs. But if we get the next company that tries it to think twice, then maybe we save our neighbour’s job. Or our children’s,” said Tom Gaulrapp.
Meanwhile, bit by bit, the machines inside the Freeport plant are being packed up, beginning their long journey to China. By the end of the year it will be over. “It is kind of like part of your family being shipped out – I worked with that stuff for years. Now there’s nothing left but a discoloration on the floor where the equipment used to sit,” Gaulrapp said.