W.C. Wood’s obituary was already written

November 18, 2009

Guelph Mercury, 18/11/09DSC 0465.JPG

So long, W.C. Wood.

When the bad news hit that one of Guelph’s most recognizable manufacturing dynasties was saying goodbye to the town it has called home since 1941, it prompted glowing tributes to our city’s golden days of manufacturing. You know, back when we used to make stuff that went all around the world.

Here was a once-proud appliance maker, a household name for some 80 years, folding and vanishing under the apparent pressures of a recession. The company’s demise here would leave 250 employees without work and its equipment and materials sold off for scrap.

Also gone was the company’s plant in Ohio, which employed 150 people, and another in Torreon, Mexico. At its peak, the company had 1,100 employees in North America.

This was as bad as it gets for a home-grown company. But the biggest question we should be asking—was anyone inside it really surprised?

What happened to W.C Wood was the consequence of a reckless, greedy spending spree that began on Wall Street and would eventually spread to factory towns around North America.

The tombstone was pre-ordered when the owners of W.C. Wood sold the company off to a New York-based equity firm, Red Diamond Capital. With that move, W.C. Wood became just a file in a “portfolio” of companies.

When Red Diamond bought W.C. Wood in 2007, no brand name was sold more often in Canada’s freezer market. Its revenues were in excess of $200 million. Though the company was far from stable—its sales had already been slipping—its troubles only increased under new American ownership.

Last month, the company cut 148 workers in Guelph and further slashed spending. It still wasn’t enough. When push comes to shove, private equity firms, including Red Diamond, will do anything to protect their profits. Now workers are out on the streets of Guelph.   

Private-equity firms like Red Capital are in the business of buying often struggling companies they hope to sell later at a profit. They buy the businesses with a combination of their investors’ money and ultra-cheap loans that went off the charts in the middle of this decade.

The biggest problem with these private equity firms is that they strip the companies they buy of assets and flip them for a fast buck. That loads those companies up with dangerous amounts of debt, which sucks out the money demanded by investors. This arrangement puts those investors first, and pays little attention to employees at the bottom making the products. 

Before the financial meltdown hit, this booming business of private equity buyouts often went un-scrutinized and was poorly understood by the public. When Red Capital bought W.C. Wood, firms like it were raising record billions. Those were the good old days of 2007, when it seemed that any company could be “saved” by the miracle of private equity.

Then the bubble burst. Creditors around the world started questioning the easy money offered to private-equity firms, which made their reputations by feeding off risky types of debt.

Blaming the recession is only half the story. The workers at W.C. Wood know that.

“We had a good workforce out there, and we made a good product,” Mark Siefker, a 52-year-old senior product engineer at the United States plant, told an Ohio newspaper. “Something changed with the new owners when they bought it from the Wood family a year and a half ago.” 

W.C. Wood was caught up in a risky buying binge that promised quick, easy money for investors. The bubble had to burst. It did. This week, Guelph saw what happens when it does.

Greg Mercer is a Guelph-based freelance writer. His column appears Wednesdays. He can be reached at greg_mercer@hotmail.com, and past columns can be read at gregmercer.ca

One Response to W.C. Wood’s obituary was already written

  1. Robert Burch on June 8, 2010 at 8:38 am

    Just noticed this story, and it’s a sad one. Not only did I work for a company that supplied parts to WC Wood, I bought their products because I liked them.
    “What happened to W.C Wood was the consequence of a reckless, greedy spending spree that began on Wall Street and would eventually spread to factory towns around North America.”

    What happened to WC Wood is what happened to much manufacturing in North America; they were priced out of the market by the cost of labor, benefits and business and payroll taxes. Materials cost the same everywhere in the world; what causes companies to struggle is that they can no longer compete.

Leave a Reply

Your email address will not be published. Required fields are marked *