OPERS concerns about Hugo Boss plans to close Cleveland Plant
03 Mar '10
2 min read
The Ohio Public Employees Retirement System (OPERS) has notified Hugo Boss' parent firm Permira Advisors that the retirement system "now has concerns about future involvement" with Permira. In total, OPERS has invested Euro 110 million in Permira, an amount equivalent to about $149 million today. In 2006, OPERS invested Euro 60 million, or $81 million, in Permira IV, the name of the particular investment fund that includes Germany-based Hugo Boss.
Workers, as well as public and labor officials, contend that Hugo Boss did not bargain in good faith in trying to keep the plant open. Nearly 400 jobs are at stake; the Brooklyn, Ohio, plant is supposed to close in April.
OPERS is now demanding that the company re-engage public officials, who have already offered financial incentives to keep the suit-making factory in business.
Workers United, the union representing the plant's workers, is approaching other public employee retirement systems – including funds in Pennsylvania, Massachusetts, New Hampshire, Texas and California – and is urging them to re-evaluate investments in Permira.
On February 25, OPERS chairman Ken Thomas and CEO Chris DeRose wrote to Permira and demanded a response by March 11. The letter reads, in part:
"The OPERS Board noted that the investment performance of Permira IV has underperformed our expectations and is inconsistent with the reputation of your institution. Due to the poor performance of the fund and representations to the Board that VFG, Italy (Hugo Boss) did not bargain in good faith with state and local community partners, the Board now has concerns about future involvement with your institution. In the interest of improving the overall performance of Permira IV, OPERS urges you to reengage both local and state officials to evaluate profitable alternatives to the closure of this facility."
Separately, U.S. Senator Sherrod Brown (D-OH) wrote to Permira urging the company to reconsider its decision. His letter reads, in part:
"I have grave concerns when hearing stories of private equity firms such as Permira loading their portfolio companies with debt, closing U.S. production facilities, and reaping high returns – all at the expense of American workers. Such behavior has played a significant role in creating the challenging economic climate our nation currently faces. It is even more troublesome to hear that public and private pension programs are entrusting funds to firms that engage in such behavior."
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