I Successfully Took My Business Through a Bankruptcy to Save My Workers’ Jobs
Here’s how businesses should navigate the pandemic’s coming ‘bankruptcy wave’
The Covid-19 pandemic has wreaked havoc on our daily lives, devastating thousands of families, hobbling our economy, and putting nearly 40 million Americans out of work. Now, businesses of all sizes are struggling to stay afloat, slashing jobs in an attempt to keep their heads above water. Many of these businesses will not make it.
I’m a business owner who has spent the last decade helping to save struggling companies and thousands of jobs through the Great Recession, the collapse — and triumphant comeback — of the American auto industry, and Donald Trump’s trade wars. Last summer, as America’s burgeoning multi-employer pension crisis threatened the survival of our business, I took my own family’s trucking company through a bankruptcy. I did it in order to save the jobs, health care, and retirement benefits of my employees — and it worked. That is, in fact, what the bankruptcy system is designed to do: enable companies to restructure their operations so they can continue to operate, grow, and thrive.
Bankruptcy is a scary word for many people — and for nearly every business owner. But bankruptcy can also be a lifeline for companies that need a bridge to survive an unexpected crisis, a tool to save jobs and protect workers.
Bankruptcy is a scary word for many people — and for nearly every business owner. But bankruptcy can also be a lifeline for companies that need a bridge to survive an unexpected crisis, a tool to save jobs and protect workers. As this crisis spreads, some businesses will have a chance to restructure, embarking on a painful process to preserve their operations under the protection of the bankruptcy code. Some businesses may be acquired or combined with similar companies in an attempt to access liquidity, or simply to survive. My family’s trucking company moves cars for manufacturers like General Motors and Ford. Throughout the turmoil in the automotive industry during the Great Recession, thousands of auto suppliers went under. Many never resurfaced.
But our business grew from 120 employees in 2008 to nearly 3,000 as we rescued struggling competitors who couldn’t access the cash they needed to survive on their own. After last summer’s bankruptcy proceedings, we erased more than $350 million in debt, reinvested millions in new equipment, and most importantly, ensured the livelihoods and health care of every one of our workers.
America is going to be talking a lot more about bankruptcies this year. Clothing company J. Crew has already filed for Chapter 11 protection. Neiman Marcus was not far behind. CNN is declaring “The Bankruptcy Wave is Here” in headlines. Low oil prices are almost certain to lead to an onslaught of energy company restructurings in the industry, similar to the wave of energy industry bankruptcies in 2016 amid low prices.
So what should business owners and employees know about how to successfully come through a bankruptcy?
Bankruptcy isn’t a dirty word.
It’s a tool, designed to prioritize giving a business the best chance of continued operation and, when possible, job preservation. While it is not a pleasant experience, restructuring a business in bankruptcy can infuse a business with the liquidity and agility it needs to survive and thrive.
Who wields the tool matters.
To be clear, plenty of bankruptcies result in brutal wipeouts of collective bargaining agreements, pension obligations, or stakeholder value ranging from job losses to securities. But it doesn’t have to be that way, and our company’s restructuring proves that. We pre-arranged our Chapter 11 restructuring in full coordination with key stakeholders: our unions, pension, lenders, customers, and team members. As a result, in less than three months we saved all 3,000 jobs without wage or healthcare cuts, saved thousands of pensions, and cut our debt by $350 million. Our partners, the Teamsters, approved our deal by an overwhelming two to one margin — on the first vote. Not a single party objected to the restructuring or its outcome when the judge gaveled our final hearing. This remarkable outcome was the result of deliberate, carefully cultivated consensus among our stakeholders. We were united in our mission to save jobs and ensure the business’ continued operation. We prioritized protecting our workers, and the outcome achieved that as a primary goal of the restructuring. Who wields the tool matters — a lot.
You can come back stronger.
Nearly every industry has a recent example of a bankruptcy “comeback:” retail (Best Buy), technology (Kodak), travel (Delta), fast food (Sbarro) and even sports (Chicago Cubs). General Motors had its most profitable years on record following its restructuring in bankruptcy in 2009. In our case, last year’s restructuring is the reason we know we can weather this year’s economic storm despite the challenges that lay ahead.
You define your own success.
Success for us was saving jobs, healthcare, and pensions, while reducing leverage. By those metrics our restructuring was successful. Success for some may be an orderly liquidation of assets. Each business and its stakeholders will have to chart their own course.
Bankruptcy is not a perfect tool. It is painful, expensive, and too often inaccessible to smaller businesses with less access to capital such as debtor-in-possession (DIP) financing. But it can be a powerful tool when wielded ethically for saving jobs and ensuring the continued operation of a business that’s arrived at an unexpected moment of crisis, like COVID-19.
The Way Forward
The pandemic will accelerate problems for America’s struggling public and multi-employer pensions, as markets churn and the global economy sputters.
Much as businesses today are dealing with the financial fallout of the pandemic — a crisis they did not create — our business was caught in America’s burgeoning multi-employer pension crisis. Our pension fund, which serves many employers across the industry and is managed by an independent board of trustees, has been in trouble for decades. We didn’t create the pension crisis, but it created a $2 billion liability for our business — a virtual sword of Damocles that threatened to close us down in 2024, when the pension is projected to become insolvent.
There are 1,400 multi-employer pensions in America, and dozens of them are facing insolvency in the next 20 years, affecting hundreds of companies and countless employees. We were fortunate that restructuring allowed us to protect our workers’ jobs and healthcare, while preserving union pensions and retirement benefits. Not every company in the pension crisis, or in the pandemic, will be so lucky.
As companies struggle to survive the devastating effects of COVID-19 on our economy, they will need every opportunity to protect their employees and continued operation. Restructuring — even in a bankruptcy — can provide the lifeline companies need to survive. We should not stigmatize the businesses that use Chapter 11 to save jobs and benefits in an ethical manner in the midst of this unprecedented moment in our nation’s history.
Sometimes we find ourselves in circumstances beyond our control. How we lead in those circumstances says far more about our capabilities than our ability to avoid tough times does.
Sometimes we find ourselves in circumstances beyond our control. How we lead in those circumstances says far more about our capabilities than our ability to avoid tough times does. How we bounce back in the face of these challenging times will speak volumes about the content of our country’s character — and how we value the workers who form its conscience.