More Details Emerge on Republic Closing

December 9, 2008
Companies

Chicago-based Republic Windows & Doors closed its doors last Friday, setting off an unlikely whirlwind when factory workers staged a sit-in that attracted the attention of political leaders and the national media (see related story). On the same day, Traco reported the sale of its residential window unit based in Red Oak, Iowa, to Echo Windows LLC, a new company that was later revealed to be formed by the family of Rich Gillman, who is also chairman, president and CEO and part owner of Republic.

When Republic initially shut down operations, officials attributed the closing to deteriorating demand due to the weak housing market and a Bank of America decision not to extend its line credit. Initial statements by the company made no reference to Echo Windows and its acquisition of the Traco manufacturing plant in Iowa. 

At this point, no further statements regarding plans for the future of Republic or Echo have been announced, but protesting workers appear to be on their way to getting the severence and vacation pay they say they are due.  Over the five days of the sit-in, the window manufacturer and its creditor, Bank of America have exchanged statements each putting responsibility for the workers' claims in the other hands.  Today, however, Bank of America announcing yesterday it would loan the company additional funds to cover the employee claims. 

In staging the sit-in, Republic’s union workers directed much of their protest at Bank of America, pointing out that it was the recipient of $25 billion of government bail-out money. The attention gained by the workers as a result led Bank of America to issue a statement on Monday, which stated "by any objective measure, Republic Windows & Doors is unable to operate profitably given the challenges of the current economic climate and its industry. Public statements by management of the company have made this clear.

“When a company faces such a dire situation, its lender is not empowered to direct the company’s management how to manage its affairs and what obligations should be paid,” the statement continued. "Such decisions belong to the management and owners of the company."

Republic management issued a statement in response that said the company first presented its plan for an “orderly” wind down, including a schedule to cease manufacturing in January 2009, in mid-October. At the time, according to Republic officials, Bank of America was informed of “possible WARN Act Notice issues and vacation pay.”

According to Republic’s chronology, Bank of America rejected that plan and demanded a “shorter wind down period.” In late October, the window manufacturer responded with a new plan that would cease operations in January 2009, which was also rejected. Republic also reports it requested Bank of America’s permission to issue vacation to workers at the end of November, and that request was rejected.

"Despite inheriting a company bloated with overhead and lacking any type of manufacturing discipline and/or productivity, the company makes significant improvements only to encounter an unprecedented decline in new home construction, which led to a decline of company sales to new construction of 80 percent," Republic’s statement reads. "This placed the company in the impossible position of not having the ability to further reduce fixed costs, coupled with severe constrictions in the capital debt markets and an unwillingness of the current debt holder to continue funding the operations."

On Monday, representatives of the union, Republic and Bank of America met to address worker demands for severance and vacation day, as well as an extension of benefits. According to a report in the Chicago Tribune, the 240 union workers staging the sit-in decided to stay put at least until negotiations between their representatives, company owners and Bank of America continued Tuesday afternoon.

U.S. Rep. Luis Gutierrez (D-Ill.), who moderated the talks, told the newspaper the tone of the three-hour meeting was conciliatory and that the focus was on helping the workers have a "joyous and prosperous Christmas." Representatives for United Electrical, Radio and Machine Workers of America, the union representing Republic’s workers, raised the possibility of the plant reopening, Gutierrez also said.

That meeting was followed on December 9, with Bank of America announcing it sent a letter to Republic indicating that the bank is prepared to provide a limited amount of additional loans to Republic to help fund a comprehensive resolution of employee claims. Bank officials note that the letter "expressed concern in the letter about Republic’s failure to pay their employees" and that Bank of America is "prepared to make these additional loans despite the fact that Bank of America is not obligated to pay Republic’s employees or make additional loans to Republic." 

The letter concludes that because it has no direct relationship with Republic’s employees, "Bank of America must rely on Republic and its management to negotiate with the union and Republic’s employees regarding the employee claims."

Windowanddoor.com will provide further updates as they become available.