ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Tuesday, December 10, 1996 TAG: 9612100085
SECTION: BUSINESS PAGE: B-6 EDITION: METRO
DATELINE: METHUEN, MASS.
SOURCE: RICHARD LORANT Associated Press
AN ENTREPRENEUR is redefining the standard of corporate compassion and says it will pay off.
As he watched Malden Mills burn, Michael Lavallee was sure the factory where he had worked for 25 years was being reduced, building by building, to a memory.
``We just kept staring at the place, saying, `It's over. It's done. It's gone,''' said Lavallee, an engineer whose fears were echoed by scores of mill workers from machine operators on up.
But one person standing nearby had other ideas.
After rushing to the fire from his 70th birthday party, mill owner Aaron Feuerstein saw that the flames hadn't reached a building that housed a key production unit. If that building stood, he told his engineering director, the mill could stay in business.
``You're always dreaming, Aaron,'' replied the executive.
The building stood. And the next morning, Feuerstein vowed to rebuild Malden Mills Industries without layoffs, embarking on a road that would lift him to national prominence as a symbol of corporate compassion in a seemingly heartless age.
The fire was a year ago Wednesday. Despite the heady progress and accolades, Feuerstein is almost as much of a lone optimist in his business strategy as he was that night outside the burning mill.
``The ordinary people are saying he's a hero. The business community is saying it remains to be seen if he's a fool,'' said Eileen Appelbaum, associate research director of the Economic Policy Institute in Washington, D.C. ``They're asking: `Can you be this good to your workers and survive?'''
At Malden Mills, Feuerstein appears to be succeeding in his effort to rebuild after the fire, which threatened 3,100 high-paying manufacturing jobs in this economically depressed region of old mill towns north of Boston.
Feuerstein, a devout Jew, has said everything about his upbringing and his 50-year history in the local business told him to rebuild.
``It was the right thing to do and there's a moral imperative to do it irrespective of the consequences,'' Feuerstein said.
The new plant is scheduled to open in February. Filled with shining machinery, it was designed to boost production of the mill's patented Polartec fabric, which has become the fleece of choice for manufacturers of name-brand winter clothes.
All Malden Mill employees received full pay and benefits for three months after the fire. Since then, 85 percent have returned to work on makeshift production lines in once and future warehouses.
About 400 workers remain idle - a shortcoming Feuerstein regards as a failure - but he pledges to restore those jobs ``come hell or high water'' within two years.
All told, Feuerstein has spent more than $300 million to build the new plant, replace lost machinery and cover business losses. Insurers have paid half that amount so far. The rest has come from bank loans and from his family's own pockets.
After falling off because of the fire, production of Polartec and Polarfleece is back to previous levels. And Feuerstein said good publicity and a dedication to maintaining the fabric's quality will boost demand to record levels in 1997.
``Unquestionably, in the long run, it will pay dividends,'' he said.
Feuerstein's argument is that American companies can remain successful only if they invest in a work force capable of producing innovative, high-quality products. The philosophy embraces technological advances that improve productivity but rejects downsizing for its own sake.
If the fire provided Feuerstein with a challenge of the magnitude few business owners face, he also had two key advantages that helped him take the high road and stand by his workers.
First, Malden Mills was a profitable company offering a patented product, Polartec, that had carved out a $3 billion market and a loyal customer base.
Second, as a privately-held company, Malden Mills Industries was free of the pressure to produce short-term profits and satisfy Wall Street analysts faced by publicly traded businesses.
A study last year by Massachusetts Institute of Technology Professor Paul Osterman found that between a one-quarter and one-third of U.S. companies are taking steps to convert to a model like Feuerstein's.
``He's still pretty lonely, but the idea has appeal,'' said Michael Useem, a professor of management at the University of Pennsylvania's Wharton School. ``The thinking is: Employees can be seen as an ultimate competitive advantage. If you treat them well, they'll pay you back in really hard work later on.''
LENGTH: Medium: 93 lines ILLUSTRATION: PHOTO: AP. 1. On Dec. 11, 1995, a fire severely damaged Maldenby CNBMills and threatened 3,000 jobs. 2. Owner Aaron Feuerstein promised
to rebuild the plant without layoffs. Other companies now are
listening to his argument that American companies can remain
successful only if they invest in a work force capable of producing
innovative, high-quality products and quit laying off for the sake
of quick profits. color.