May 23, 2024 6:54 am
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Janesville Manufacturer That Fled to Mexico Is Selling Off Its Assets

Credit: iStock

Erik Gunn

Less than a year after Hufcor closed its plant in Janesville and moved operations to Mexico, displacing 150 workers, the company’s Mexico plans appear to be a bust and the manufacturer’s assets in its one-time home state of Wisconsin are being liquidated.

On Thursday, Dane County Circuit Judge Frank Remington authorized the court-appointed receiver for Hufcor Inc. to sell or abandon company property and inventory in the state. Another hearing is planned in September to address claims against the company brought by former employees.

Hufcor, founded in 1900 as Hough Shade Corp., evolved to become a global maker of folding room dividers for private as well as public indoor spaces. In 2017, Hufcor was sold to OpenGate Capital, a Los Angeles private equity firm.

For critics of private equity firms, the company’s subsequent Mexico relocation in 2021 made it a symbol of the role of private equity in shredding communities by disrupting once-stable, established businesses.  

Hufcor’s move south was hard to swallow for employees who once considered the company and their coworkers to be like family. 

“Everybody knew that it was a money grab,” Tom Casey, president of the union at the Janesville plant, said Thursday of the Mexico move. “We told them it’s not going to work. We’re a custom shop — you just can’t find people to do [the job].”

But the company’s dissolution has added insult to injury, and brought further harm to some former employees, Casey said — including more than two dozen who thought they had fully covered health insurance. 

The IUE-CWA, the industrial division of the Communications Workers of America union, which represented the Janesville factory workers, negotiated a plant-closing effects agreement. The agreement included a provision for Hufcor to pay health insurance premiums for employees who maintained their company coverage after losing their jobs under the federal law nicknamed COBRA, according to Richard Shorter, an IUE-CWA representative for the Hufcor union.

About 28 Janesville employees signed up for the coverage, Shorter said. But in June, when the company went into receivership, it stopped paying the premiums. “That signed agreement from Hufcor and OpenGate stopped prematurely,” Shorter said. “They went back on their deal that they had agreed to.”

Sen. Tammy Baldwin (D-Wis.) held a roundtable discussion with Hufcor employees in the summer of 2021 after the Janesville plant closing was announced.

“OpenGate Capital is an out of state, predatory private equity firm that has a history of shutting down businesses in Wisconsin and laying off workers. Now, they are taking it a step further and pulling the rug out from the hard working Wisconsinites, stripping away their health care, and failing to keep up their end of the bargain,” Baldwin told the Examiner Friday. “The Janesville workers at Hufcor put in their dues and deserve their earned benefits. It is high time to fundamentally reform the private equity industry in Congress and rip up the predatory playbook that leaves workers with nothing but pink slips and lost livelihoods.”

Receivership under Wisconsin law is an alternative to federal bankruptcy for dissolving a corporation and disposing of its assets.

After the Hufcor Inc. receivership petition was filed in Rock County June 15, Rock County Circuit Judge Derrick Grubb appointed Rebecca DeMarb, a senior managing director for Development Specialists Inc., as receiver in the case, a position analogous to a bankruptcy trustee. 

The case was temporarily assigned to Remington, the Dane County judge, to hear motions authorizing DeMarb to sell the company’s Wisconsin property and inventory. Remington held the hearing on Zoom Wednesday, the day before issuing his order. 

DeMarb did not respond to inquiries from the Wisconsin Examiner directly or through her attorney, Erin West of Godfrey & Kahn in Madison, about the details of the proceeding.

Movable room dividers such as Hufcor manufactures are used in schools, churches, hotels, convention centers and office buildings, among other spaces. The Hufcor website describes the company as having operations worldwide in Germany, Malaysia, China and Australia.

Former employees in Janesville described the company as having had a family atmosphere for decades under local ownership. 

“That’s what everybody misses the most,” said Casey, the local union president. “It is because it was a family.”

According to former workers displaced by the Mexico relocation, that atmosphere changed in the last decade, particularly after the 2017 acquisition by OpenGate Capital.

After the move to Mexico was announced in 2021, some employees were given bonuses to stay on into October of that year, and some remained into March 2022 to close up the factory.

Casey said equipment and materials at the plant started going up for auction then, months before the receivership filing in court. 

“The worst part is when they liquidated everything,” he said, because that foreclosed the chances for a buyer to acquire the operation and restart the Janesville factory. 

Former employees say they believe the Mexican plant has stopped operating and that assets connected with it are being divested. OpenGate representatives have not confirmed that. 

The Wisconsin Examiner contacted the private equity firm’s public relations agency Thursday with questions about the receivership proceeding, the Mexican operation, the company’s failure to keep paying health insurance premiums for former employees in Janesville and the company’s future prospects. After responding by asking for a list of questions and receiving them, the public relations representative offered no further comment. 

Shorter, the IUE-CWA representative, views the industry that includes Hufcor as viable. “It’s not a dying market by any means,” he said. 

He questioned the company’s motives for establishing the Mexico plant. “I think they had no intention of that being a long-term gain,” Shorter said.

“This is just another prime example of private equity firms who want to basically bleed whatever companies they suck up and make all the profit as much as they can, and they don’t necessarily care about the work, the products, and more importantly, the employees,” he added.

Shorter said the union was investigating its options for helping the employees in the receivership process. At least some former employees have already filed petitions with the court for debts from the company, such as unpaid retention bonuses.

This piece was updated to add Sen. Tammy Baldwin’s statement at 9:08 on Friday, Aug. 19

This story was written by Erik Gunn, a deputy editor at the Wisconsin Examiner, where this story first appeared.