The Beloit Chronicles
AUTHORS COMMENTARY
They said it couldn't happen but it did. Beloit has closed it's doors forever. Some could not accept that Beloit would fail. Others looked for a miracle that would stop the process. Still others worked against long odds to purchase Beloit. The miracle nor the purchase happened and Beloit Corporation is gone! The buildings barely became dark and there was a re-awakening.
Many have high hopes that the new Paperchine LLC, created and organized by Laurie Wicks, former Beloit employee, will rise from the ashes and become the new Beloit Corporation. That's a tall order but if anyone can meet the challenge it is Wicks and the group of ex-Beloit employees that are working with him. We back him 100% and wish them good fortune.
June 1st, I received an e-mail from a friend who had not visited Beloit for over a year and quote a portion of his e-mail as follows:
Hi Luigi
Was in Beloit yesterday. Expected to see a lot of empty buildings but there
were a few people in most all of them. Stopped in and talked to ____ ____, to let him know you wanted to get a hold of him and he said you had. Good!. I talked to _____ ____ who now works for Valmet. He did not seem to be happy with Valmet. He drew me a map of where Paperchine was located. I hope Wicks is able to hire the best of the Beloit people. I heard from several sources that they are very busy and farming out work for several machine shops. God, I hope they grow into something big and some day move into the main office building that was once the heart of the Corp and even get back into the original office building that old man Neese had. Oh well dream on!Here is an excerpt from another e-mail received June 6.
I've had 4 jobs since things began falling apart last spring and my wife still curses "those idiots running the Corp into the ground." Thank God my son is almost __ and a wonderful kid. My wife and I are both working and able to maintain an income level about equal to where we were 4 years ago with the Corp. We're lucky we aren't in the financial, debt bind of a lot of my co-workers. We'll survive as soon as we adjust to the turmoil caused by this upheaval. Yes... a lot of adjusting to do here... it will take some time.
Another e-mail said, "Gee Luigi, look what they are doing to our beloved Beloit"
And one more dated May 4:
Hi there,
"This came to my mind after reviewing article #3 of The Beloit Chronicles on what I have come to think of as "The Beloit Disaster." I hope the truth comes out about Grade, and the rest of those cowboys that ran Harnischfeger and Beloit into the ground.....These e-mails are typical of the many we have received. Some less critical and more accepting of what has happened while the greater number are more critical and and a few gave off "blue" smoke. Those that followed the news closely or read the various forums online are aware of the drift and sentiment concerning the demise of Beloit Corporation.
Now the Beloit buildings are filling up with new people and companies. Less appears in the news about Harnischfeger and Beloit. One could get the impression the episode is forgotten. That is good and perhaps it means people are beginning to put this behind them. Hopefully the new occupants of the Beloit properties means new and better jobs for those displaced.
By all appearances, the Beloit closing did not have to happen. When Harnischfeger purchased Beloit in 1986 it was a strong and healthy company. A leader in the paper industry. Not only a leader but a well respected company with employees that were aware of the heritage of Beloit Corporation and worked with pride in what they were doing and accomplishing. I wish that some of the Beloit customers could have been a fly on the wall during some of the meetings that took place at Beloit and could have seen how hard many Beloit people worked to insure that customers were treated fairly and received the best products that Beloit could produce. No, Beloit wasn't a perfect company but it cared about it's employees and they in turn cared about Beloit.
It took 7 generations, 140 years, of people working together to build a strong Beloit. That was lost in 14 years under the Harnischfeger management. There were obviously good intentions back in 1986 when Beloit was purchased by Harnischfeger. It made good business sense. Unfortunately, after a few years, management changed and it became apparent the new managers had a lack of knowledge (or inattention) of the paper industry. We should however keep this in perspective. Harnischfeger had a good group of workers just like Beloit that cared about their company and their customers just as the Beloit people did. This problem didn't happen from the bottom up. There was never a lack of hard working, dedicated employees in either Harnischfeger or Beloit.
Institutions survive through hard work, dedication, pride, fairness, product and business knowledge and caring about employees and their customers. Beloit had all of that. With the new management at Harnischfeger came poor decisions. The mismanagement of the Asia Pulp & Paper machine orders and the contract guarantees were costly for Beloit. The MillPro concept was a misuse of good talent that had up until then served their company and customers in a more profitable way. Most of the employees knew this was not right for Beloit. The business emphasis was wrong for a company like Beloit. A number of high-priced acquisitions and large stock buybacks left the company without financial support. The company debt went to unmanageable levels. In the last years when management took large remuneration packages, it effected an already fading morale. Layoffs and cost cutting and the stopping of health benefits for a large portion of the retirees further eroded morale and encouraged a feeling among the employees that the management team just did not understand the paper industry and lacked an appreciation of the importance of good employee and customer relations to the success of the business. Harnischfeger was not in a financial position to handle weak paper prices, excess capacity and a mining industry that was grappling with low copper prices. The result: Harnischfeger declared chapter11 and sold off it's assets like Beloit to survive.
Its worth taking another glimpse at the Harnischfeger Industries performance curve as it related to its stock over the last few years.
Harnischfeger's paper making revenue dropped 56% and mining sales dropped 28%. As a result of diversifying into making replacement parts for its equipment and providing service, Harnischfeger's sales and administration costs increased from 15% of revenues in 1996 to 25% in 1998. During the William Goessel years, Harnischfeger dept was reduced to 35% of total capital in the 80s and early 90s. Under Jeffery Grade, this dept increased. The company dept to overall-capital-ratio climbed from 45% in 1993 to 53% by the end of 1997, to 63% in 1998 to a whopping 69% at the end of the second quarter of fiscal 1999, April 30 that year.
Failure has consequences. Hardship and lost dreams, not only in Beloit but the UK, Italy, Poland, Brazil, Australia, Spain, Pittsfield, Nashua, Charlotte, Mobile and anyplace worldwide that Beloit did business, where employees gave of themselves to build a sound Beloit with good products for their customers and to earn a good livelihood for their families. Thousands of people lost their jobs, were displaced and have put there lives on hold until some time in the future when they can get back on an even keel.
We may never know the specifics of how this came about. Looking back in history, the first traumatic paper industry bankruptcy for the City of Beloit was in1883 when the Merrill & Houston Company made a voluntary assignment of all its property for the benefit of its creditors. After almost two years of trying to save the company, efforts failed and on January 7, 1885, by order of the court, Merrill & Houston properties were sold at auction to satisfy its creditors. The consequence of that failure: Beloit Iron Works was organized and created under the laws of the State of Wisconsin on July 2, 1885.
Merrill & Houston in the 1880s, like Beloit Corporation in the1990s was Beloit's major employer. At the time of the Merrill & Houston failure their were charges of corruption and malfeasance. People ended up in the courts. It's possible the same will happen again. There may be investigations and court hearings. We know the generalities of the Harnischfeger story but there is certainly more to know.
Our capitalistic system is a good one, but sometimes goes out of whack. When things are done by managers that are not in the best interest of the company, the employees, investors and consumers pay a heavy price. The course of history can be drastically changed by the actions of a few.
Consolation? Whatever happens as a result of the Harnischfeger debacle the legacy of Beloit workers will not change or disappear for time to come. There are still remnants of paper machines running today that were produced by Beloit Iron Works in the 1800s. One salvation may be that the innovations and fine paper machines that Beloit employees designed and built for their customers worldwide, with pride, in the late 1900s will be around for the next 100 years to remind us of a Beloit Community that lived and prospered and gave so much to the paper industry and what a few misdirected people did to stop this engine of progress dead in its track.
Time and history will tell!
Luigi Bagnato - June 10, 2000
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