AP, Reuters Fail to Connect Latest A&P Bankruptcy to Its Unions
The company officially known as the Great Atlantic & Pacific Tea Co. has filed for bankruptcy for the second time in five years. This time around, the storied “A&P” name may completely disappear.
Coverage at USA Today by Nathan Bomey notes that “About 93% (of its workers) are represented by one of 12 different unions, and many of them have bumping rights that the company has described as a big barrier to reducing costs.” Coverage at two of the three major business wire services, the Associated Press and Reuters, failed to mention the word “union” at all.
An unbylined AP report just before 4 p.m. blamed the competitive environment:
Grocery store operator A&P is filing for Chapter 11 bankruptcy with plans to sell off stores as it faces increasingly tough competition.
This marks the second time in five years that the Montvale, New Jersey-based company has filed for bankruptcy. This time around, it said it has more than 100,000 creditors along with more than $1 billion in liabilities and over $1 billion in assets.
The company plans to sell as many of its 296 stores as possible and said in a filing with U.S. Bankruptcy Court in New York that it has bidders for 120 of those operations with expected proceeds of $600 million.
… Like many grocers, A&P has faced tougher competition from companies like Wal-Mart Stores Inc. and Target Corp. expanding their grocery options. The business has grown even more crowded and competitive with companies like Whole Foods Market Inc. and Fairway Group Holdings Corp. catering to a more health-conscious market.
Except that unlike many grocers, like union-free Meijer and Remke Inc. locally here in Cincinnati (Update: Sentence revised, in light of a commenter claiming that Meijer is unionized in other areas), A&P couldn’t stay in business because of union intransigence.
The also unbylined report at Reuters was even longer, still managed to avoid mentioning the exisence of unions, and also cited competitive conditions:
Storied supermarket chain Great Atlantic & Pacific Tea Co Inc, better known as A&P, filed for Chapter 11 bankruptcy protection for the second time in five years and said it was in discussions with buyers for some of its stores.
The 156-year-old company has hired Evercore Partners, an investment bank that specializes in selling assets. A&P listed assets and liabilities each of more than $1 billion in its bankruptcy filing late Sunday.
The company said was in talks with Acme Markets Inc, owner of Safeway and Albertsons grocery stores, Stop & Shop Supermarket Co LLC and Key Food Stores Co-operative Inc to buy its assets.
A&P has lined up buyers for 120 of its 296 stores with total expected proceeds of about $600 million, the Wall Street Journal reported, citing a person familiar with the matter.
The company, which also owns Best Cellars, Pathmark and Superfresh stores, has been unable to stand up to behemoths such as Wal-Mart Stores Inc and Costco Wholesale Corp who entice customers with big discounts.
… A&P, which in its heyday in the early 20th century operated over 15,000 stores, first filed for bankruptcy protection in 2010, re-emerging two years later as a private company after obtaining financing from investors including Goldman Sachs and an affiliate of billionaire Ron Burkle.
The following points found at the contrarian blog Zero Hedge emphasize how much A&P’s unions had to do with the bankruptcy:
Why America’s First National Supermarket Chain Just Filed For Bankruptcy, Again (Spoiler Alert: Unions)
… less than five years after its first Chapter 11 filing (and three years after emerging from a bankruptcy in March 2012 as a privately-held company part owned by Ron Burkle’s Yucaipa with a clean balance sheet including $490 million in new debt and equity financing), overnight Great Atlantic, which controls such supermarket brand names as A&P, Waldbaum’s, SuperFresh, Pathmark, Food Basics, The Food Emporium, Best Cellars, and A&P Liquors – filed for repeat bankruptcy, or as it is better known in restructuring folklore, Chapter 22.
So what happened in the intervening 5 years that caused the company which employes 28,500 workers (93% of whom are members of one of twelve local unions and who are employed by A&P under some 35 separate collective bargaining agreements) to deteriorate so badly that it burned through all of its post (first) petition cash and redefault?
In one word: unions.
… The end result of this escalation of bad management decision and intransigent labor unions: “cash burn rates averaging $14.5 million during the first four periods of Fiscal Year 2015″ which gave the company no choice but “to commence these Chapter 11 Cases as the only viable alternative to avoid a fire sale liquidation of the company.”
… In addition to mandating direct labor costs, the CBAs (collective bargaining agreements) contain a variety of different work rules that have functioned to hamstring the Debtors’ operations. For example, as stated above, most of the CBAs contain “bumping” provisions that require the Debtors to hire employees from a closed store location at a different nearby store and replace less senior employees at such store. Because any healthy store in close proximity to a store that is closing must take on the increased costs of retaining more senior level employees, “bumping” costs make it difficult and, in some cases, financially impractical, to close unprofitable stores …
The excerpted text should be enough to convince anyone not determined to cover up the truth that its unions were a major factor in A&P’s return to bankruptcy. Neverthless, AP and Reuters have deliberately chosen to ignore A&P’s unions as a factor. I wonder if that has anythingt do with the fact that most of each wire service’s writers are union members? (/sarcasm)
In a press release, the United Food and Commerical Workers union, which contributed mightily to A&P’s demise over a period of decades, said it expects to “hold A&P to its commitments to involve UFCW in the sales process, protect union contracts and these good jobs.”
Unfortunately for the UFCW, the company doesn’t see it that way and can’t afford to see it that way, as USA Today Bomey reports:
“The best and only viable path to maximize the value of their business and preserve thousands of jobs is a strategic chapter 11 filing to facilitate sales free and clear of liabilities,” (A&P chief restructuring officer Christopher) McGarry said in the (bankruptcy) filing.
Those “liabilities” include union pensions and other benefits. No one in their right mind would agree to take them on — with one possible exception.
But A&P isn’t General Motors or Chrysler, so the government probably won’t step in to preserve those benefits — and shouldn’t. That said, as was the case with workers at the old Hostess Company, since revived and union-free, Uncle Sam may arbitrarily and utterly without basis (but since when does that matter any more?) decide that A&P workers who lose their jobs should get “trade adjustment assistance.”
Cross-posted at NewsBusters.org.
Yeah, but …
Blaming the unions is easy, however at the end of the day management failed in it’s fiduciary obligations to it’s share holders. The failure of management to adjust to the circumstances and minimize expense in the face of competition even from different business models like discounters is management’s failure, not the unions. Buggy whip makers went out of business for a reason. Blame Samuel Gompers (cigar workers) all you want but when the competition changes tactics, it’s not the employees responsibility to adjust, it’s management’s responsibility. Labor is a component expense like any other and it’s management’s responsibility to direct the workforce with the appropriate number, skill level mix of workers, automation and methods that minimize the cost to produce a product or service. At the end of the day, labor is but one expense against the bottom line like fuel, electricity, property taxes, insurance, etc. As Capitalists we all complain about the inconvenient rise of any item in the cost of production and so we adjust in our annoyance of having to yet again finely tune our machine.
The fact that A&P owned other store brands like PathMark demonstrated that the management of A&P had the option of opening a “non union” store brand like many companies do. I think we need to face the fact that individuals make decisions that are best for them and we can’t somehow say the individual workers are to blame for engaging in a collective bargaining agreement with an employer when the employer does exactly the same thing on the flip side. Every entity has a bottom line, that goes for people just like businesses. The reality is that as an individual I must match my skill set and working conditions to achieve my goals in life and it is affected by the supply and demand of the market place. As a personal entity, IF my bottom line means I need $15/hr, then I must relocate to a place and industry that meets it. On the other hand, as a business entity if the Laws of Supply and Demand indicate I can only get labor for $15/hr and not $10/hr then I must relocate and/or find ways to make due with less workers by creatively doing something else.
The act of commerce is NOT a one way street, every component that affects the bottom line must be adjusted for and sometimes the business model like buggy whip manufacturers just ceases to be viable, nostalgia notwithstanding. I remember A&P when I was growing up in the 1960s and 70s in my area of the country and then they died out. It’s sad to see a memory die, a fixture disappear but business is not a sentimental journey, it’s a cold hard calculated enterprise. Capitalism is a Darwinian process and as you see in all those nature programs with lions and zebras, nature is cruel in it’s efficiency in regards to individuals but it’s efficacy to maintain life as a whole is indisputable. And you will note that Samuel Gompers’ union no longer exists.
BTW- PanAm was put out of business by an economic act of the Courts holding them responsible for the safety of the passengers even though this type of terrorism (a criminal act which usually absolves a business from liability) in my opinion was not foreseeable. I am nostalgic for PanAm but that doesn’t change the fact that other airlines took their place. The public still gets to fly, and the public will still get to buy food, just as they still get to buy their Twinkies even though Hostess is gone and yes over 18,000 people lost their jobs in the process. Other store brands OR business models will take the place of A&P. A&P’s weakness causing their death makes room for a stronger competitor and ensures it’s survival … for the moment until a new competitor arrives on the scene. It’s the cycle of life.
Comment by dscott — July 21, 2015 @ 8:05 am
All fair points. Not sure, given union contracts, that A&P could have gone double-breasted, so to speak. Kroger has a similar plethora of unions, and I don’t think having a non-union brand, at least in the same locale, is an option.
Comment by Tom — July 21, 2015 @ 10:08 am
Widespread touchscreen ordering to come to NYC fast food restaurants by next year?
http://moelane.com/2015/07/21/widespread-touchscreen-ordering-to-come-to-nyc-fast-food-restaurants-by-next-year/
It’s the cycle of life! When fast food wages rise in NYC, automation will step in and cull the numbers of workers needed to serve the customer. In the end, management will adjust and sidestep the meddling incompetence of politicians seeking to ingratiate themselves to liberal minded people. Both will declare victory, a fast food worker will get $15/hr, double they are paid now and management will slice the number of workers by 50% to level the costs.
Sucks to be a fast food worker IF you just lost your job to a touch screen. But then self promoting self righteous politicians really don’t care about the little people, they only care for themselves.
And now for those who think a double of salary won’t affect the fast food cooks:
ROBOT CHEF THAT CAN COOK ANY OF 2,000 MEALS AT TAP OF A BUTTON TO GO ON SALE IN 2017
http://factor-tech.com/robotics/17437-robot-chef-that-can-cook-any-of-2000-meals-at-tap-of-a-button-to-go-on-sale-in-2017/
Stirring, adjusting the temperature, pouring and adding ingredients are all basic skills for a chef but they’re slightly harder to achieve for a robot.
However, that’s not the case for this pair of robotic hands, which could be set to revolutionise cooking and kitchen operations.
At present it’s able to knock up a crab bisque, which it creates by replicating the exact movements of a professional chef.
Creator Moley Robotics says that when the commercial version launches in 2017 users will be able to select one of 2,000 dishes from their phone and the robotic hands in the automated kitchen will make it.
So, how many jobs will NYC and other blue modeled cities loose in their self righteous indignation for low pay? Probably all of them. Hey, upside is you won’t have to worry about some jerk spitting in your food or giving you hepatitis. Between those two innovations, I see McDonalds being a survivor serving niche/micro markets cost effectively.
Comment by dscott — July 22, 2015 @ 2:54 pm
I want a robot chef for home use. :—>
Comment by Tom — July 22, 2015 @ 3:10 pm