Case 7.12 - $300 million was going to be covered by...

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Case 7.12: Aaron Feuerstein and Malden Mills Aaron Feuerstein is the CEO and chairman of the board of Malden Mills, which manufactures PolarTec. PolarTec is a fabric made from recycled plastic that stays dry and provides warmth. The company refuses to move production overseas and has the highest labor cost in the industry – an average of $12.50/hour. WHAT HAPPENED?? On December 11, 1995, a boiler explosion resulted in a fire at Malden Mills injuring 27 people and destroyed 3 of the buildings on the factory site. WHAT DID FEUERSTEIN DO?? Feuerstein announced that he would pay the employees their salary for at least 30 days; however, he continued the promise for 6 months. COST?? Covering the wages cost $25 million; the new plant was going to cost $430 million.
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Unformatted text preview: $300 million was going to be covered by insurance. The remainder was borrowed so Malden Mills could have a state of the art, environmentally friendly building. By the end of 2001, Malden Mills had a debt of $140 million. On September 30, 2003, Malden Mills emerged from bankruptcy, but under different management not Feuerstein. RESULT: Feuerstein is President of Malden Mills and serves on its board. Members of the U.S. House and Senate lobbied to convince the Export-Import bank to loan Feuerstein the $35 million he needed in order to buy his company back. In 2006, Malden Mills landed a multi-million-dollar contract with the U.S. Department of Defense to be a supplier of the lightweight PolarTec blanks for the U.S. military branches....
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