Fabled Mill Owner Works To Manufacture a Miracle

By Jeffrey Klineman

Published July 25, 2003, issue of July 25, 2003.
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LAWRENCE, Mass. — Fortune almost smiled last month on Malden Mills, a textile company that’s all too familiar with misfortune. A group of longtime accountants and administrators working for the clothing manufacturer had purchased a lottery ticket, hoping to win the $180 million jackpot, buy their bankrupt company back from its creditors and return it to its owner, 77-year-old Aaron Feuerstein.

They fell one number short.

Now, eight years after a devastating fire nearly destroyed his company, the responsibility for saving Malden Mills has, once again, fallen to Feuerstein. He needs $92 million by August 21 in order to exercise a majority buyout option from his creditors. The company, which manufactures Polartec fleece, slid into Chapter 11 bankruptcy protection in November 2001 after a rebuilding effort and two years of unmet sales goals resulted in a steep debt. If Feuerstein doesn’t raise the money in time, the price tag will go up by $30 million and in two years reach more than $150 million. The company, Lawrence’s second-largest employer, could end up out of Feuerstein’s reach — and even worse, out of

Lawrence altogether if Malden Mills’s creditors take the company’s manufacturing operations on the route that most of America’s starving textile industry has followed: out of the union shops, across the ocean, to the land of cheap Asian labor.

“Lawrence would be a ghost town without this company,” said Joseph Melo, president of the union representing Malden Mills’s factory workers.

The loss of Malden Mills and its 1,200 jobs would also bring to a close a value system, imbued from the top down with Feuerstein’s famously pious Orthodox values. The grandson of a rabbi and a third-generation owner of the company, Feuerstein invoked those values in December 1995, when, two weeks before Christmas, a fire rushed through the factory, scarring 30 employees and nearly decimating the facility. Shortly after, Feuerstein announced that not only would he keep Malden Mills in Lawrence, but that he would keep paying his workers throughout the rebuilding.

Sitting in his office in the reconstructed factory — the one he might have rebuilt too large, too fast, in his haste to fulfill a promise to his employees and the town of Lawrence that the nearly century-old business would survive — Feuerstein says he’s on the verge of his financial goal.

“I am very close,” said Feuerstein, as his son Daniel worked the phones beside him. “I can touch it, I can feel it, and as you can see, that’s what I do all day long. My hope is if we do it right, instead of being the last of the Jewish ragmen, I hope to be part of a long chain of chief executives with social responsibility.”

Malden Mills, like the city of Lawrence, has absorbed wave after wave of immigrants, and they have felt the good times and bad, both in the city and at the company. Now, approximately two-thirds of the workers who produce the soft polyester fleece are Hispanic, reflecting the majority-Hispanic population of what has long been known as the “Immigrant City.”

The company’s hard times — since 1995, it has shrunk from 1,700 to 1,200 employees through layoffs — have been paralleled by Lawrence’s own. The city has the highest unemployment rate in Massachusetts and has been the site of numerous high-profile drug busts. Three-quarters of its budget comes from the state.

But Michael Sullivan, the mayor, isn’t so sure that maintaining Malden Mills as it is would help solve the city’s long-term problems.

Sullivan is an energetic Republican who won a close race two years ago against the city’s first Latino mayoral candidate. He said he wants to see Lawrence — a city that had its heyday in the early 20th century, when the now largely empty mills lining the Merrimack River were humming with activity — move forward. He has been actively wooing entrepreneurial companies to fill the mill buildings, fearing that having a large textile manufacturer as one of the pillars of a modern city’s employment base might be regressive.

“When the mills were built, there were 5,000 people walking to work in the city every day,” Sullivan said. “When you saw the abandonment of the mills, I think that led to the drop in Lawrence. It’s taken us 30 years to come out of this. There needs to be new thinking.”

If Sullivan doesn’t believe that Malden Mills is part of the city’s future, however, he recognizes it as part of its present, filling the role it has played for years for Italians, Portuguese, and now Dominicans and Puerto Ricans: a generational stopgap for new Lawrence residents as their children receive a better education and the opportunities that it provides.

“If somebody closes the doors today, that hurts,” said Sullivan, who nevertheless helped arrange for the city to co-sign a $10 million loan to Feuerstein. “The new immigrant in this city, the one that didn’t have anyone to turn to, they found employment in their backyard. That’s why it’s so emotional. A lot of that loyalty has to do with Aaron Feuerstein himself, though.” Once the aging patriarch is gone, he said, “That will change.”

In the meantime, however, that loyalty permeates the mill.

“I would like to work here my whole life,” said fabric quality control specialist Moralina Lopez, a native of the Dominican Republic who has worked at Malden Mills for six years.

“Do you think [the creditors] care about me?” said Jim Gillette, a nine-year Malden Mills employee. “I’m nobody. But to Aaron, I’m a person, and he wants to take care of his people. The banks just want to take care of their profit.”

Sitting in an air-conditioned trailer on the Methuen side of Malden Mills — his main perk as union president — Melo insisted that the only chance for things to improve for the company’s workforce is Feuerstein’s return. Like the lottery group, he is working for that return, lobbying other uniformed unions to adopt Polartec as their cold-weather gear, thereby increasing the company’s sales and ensuring its future.

“For the last two years, I’ve been dealing with a suit with no face,” Melo said of the team that has run the company through its bankruptcy. “I need Aaron’s help to build morale.”

Melo — a forklift driver who had been president of the local union for just two weeks before the company slid into bankruptcy — and his stepfather have nearly 50 years of work at Malden Mills between them. He said the attention Feuerstein received during Malden Mills’s recovery from the fire is the only thing that has prevented creditors from closing the shop already.

“If it wasn’t for what he did in ’95,” Melo said, “the banks would have pulled the trigger on him long ago.”

But Feuerstein knows that his moral standing isn’t going to save his company, even if he does get the money together to regain control. Like Sullivan, he said he is looking to a new future for the company, one that is found in its new military contracts and in the development of special fabrics that can regulate temperatures electronically. Amazingly, a company that got its start knitting sweaters might go high-tech, producing the type of cutting-edge garments that could help it remain viable.

Feuerstein also has a less high-tech strategy. He’s got his employees’ faith, that of his community, and his own. He’s relying on the idea that the public will respond to that faith if it is more closely associated with the brand. A feature film about the fire is under discussion, as is a book about Feuerstein himself, as well as a secondary “Malden Mills” label that complements the Polartec brand. It’s a new strategy that attempts to use, as advertising, the fact that the Malden Mills name has come to represent something more than textiles and dollar signs: corporate responsibility.

“We insist the business must be profitable. Otherwise we have nothing,” Feuerstein said. “But we also insist a business must have responsibility for its workers, for the community and the environment. It has a social obligation to figure out a strategy which will be able to permit workers to make a living wage. There’s a responsibility to the work force, to this community. The only way that can be sustained is if I get control.”

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