When Job Cuts are Good.

During the Michigan primaries, Presidential hopeful Mike Huckabee started his attack on fellow hopeful Mitt Romney by saying that he (Huckabee) wanted to be the "president who looks like the guy you work with and not the guy who laid you off." Since then he has used that in stump speeches as tag line for his populism. Today Chris Wallace of Fox News Sunday took that stump speech rhetoric a step further by asking Governor Romney the following.

WALLACE: Governor, we have less than two minutes left. You also talk about your experience in private business. You were an enormously successful businessman in the '90s as the head of Bain Capital, a private equity firm. Your critics point out that you took over a company called American Pad & Paper. That company ended up closing two plants and laying off 385 workers. Bain also bought a company called Dade International, which ended up laying off some 1,900 workers. You didn't save those jobs, Governor.
ROMNEY: No, there's no question that if you're in the business world and you're trying to save a business that's in trouble, that you're not going to be successful 100 percent of the time.
And I'm very proud of the fact that we were successful many, many times. We grew jobs quite dramatically in many settings. But oftentimes, when an enterprise is in real trouble, you have to try and cut back to save it.

Emphasis mine. Let's start with American Pad and Paper. AmPad was formed in 1888 and 100 years later found itself the subject of a buy out (Mead Corporation) due to financial woes. American Pad and Paper Holdings was formed in order to take AmPad back to private ownership. It went from laying people off in 1992 to growing to the point that now it employes over 4100 people! A large portion of those 4100 jobs would have never been created had it not been for Bain and American Pad and Paper Holdings buying AmPad from Mead.

Now on to Dade International aka Dade Behring. Dade Behring was drowning in debt and Bain Capital came in. As part of the bankruptcy filings 1900 people were laid off, but there were thousands of other jobs who were saved so that when Dade came out of bankruptcy, it was a strong enough company to keep the remaining jobs intact.

Here is an unrelated story. While Bain Capital was not involved, they certainly could have been. Back in 2000 a company named McLeodUSA was burning up the telecom industry. McLeod employed approximately 3000 people in 25 different states. McLeodUSA was formed by the former darling of MCI - Clark McLeod. McLeod, after 4 years of rapid growth based almost exclusively on borrowing, entered into an agreement with Forstmann Little Company - another private equity firm along the lines of Bain Capital. Forstmann Little replaced McLeod with aviation turn-around artist Chris Davis. Under Ms. Davis' tenur, McLeodUSA went from having offices in all 25 states and 3000 employees to only 3 offices and 1500 employees. I was one of the 1500 that was laid off. However, if the 22 offices had not closed, if 1500 of us had not been laid off, McLeod would have closed it's doors and all of us would have lost our jobs. Given the state of the telecom industry right now, having all 3000 of us on the job market would have had serious repurcussions within the industry. Today, McLeod has rebuilt to the point that their new owners are taking a good look at the possibility of growth again!

What I am trying to get at here is that as hard as it is for jobs to be lost, as rough as it is for the people laid off there is still some good that can come out of layoffs such as we saw with Ampad, Dade Behring AND McLeodUSA. There are times when, in order for a company to survive, some jobs must be lost. It hurts like heck, for those who are laid off and for those that remain, but in the long run it is often better for the economy, the employees and the company for those cuts to be made.