Fire breaks out

 December 11, 1995

 Flock Division
 24 workers injured
 13 in critical condition
 9 barely holding onto life
 Feuerstein sent 28 employees back into the building to save the Polar Tec
Division

Background

 Rebuild the mill with new technology

 Pay all employees for 90 days with benefits for 180 days
 Insurance settlement was capped at $302 million
 Kept mill in Lawrence (even though moving the mill overseas would create
40% cost advantage)
 Keep jobs in the U.S.

Ignoring Senior Manager's Advice

Why did Feuerstein make this decision?
Feuerstein's Decision

 Malden Mills opens in 1906 by Henry Feuerstein

 Aaron Feuerstein takes over business in 1950
 Malden Mills is moved to Lawrence, Massachusetts in 1956
 With help of current employees, Feuerstein created Polar Tec in 1981

Malden Mills Case Study: Senior Management and Creditors

 Religion
 Ethics
 Good Business Decision
 Out of Guilt

Overconfidence Loses Creditors

 Moody's Investor Service negative evaluation

 Loss of local support
 General Electric takes Feuerstein to court with $92 million lawsuit

Unnecessary Production
"Snow shovels made by happy employees for ethical bosses will not make for a
sustainable business if Global Warming ends our winter snows"
-David W Gill, Ethix Magazine

Burning Bridges with Suppliers

 Spent $40 million to rebuild Jacquard Division

 Was not a profitable division
 Continued pooring money into production (in South Carolina mill) while
rebuilding division in Lawrence

Misuse of Money

 Overspent money he was never guaranteed

 Wanted to spend $180 million to rebuild
 Shot down by GE
 Ended up being $50 million over budget
 Spent on modernization at the wrong time
 Planned to build housing in Lawrence
 Couldn't once he lost lawsuit with GE

Refusing to Move the Mill

 Blamed suppliers to avoid responsibility on himself

 Suppliers include:
 DuPont, Rhone-Pulenc, Novalis Fibres, Det-Tronics
 Went on to sue suppliers for $1.5 billion
 Only received $20 million

Disregard of Safety Conditions

 Sent 28 employees back into burning building in hopes of saving the mill
 Malden Mill's Chief Engineer and Fire Co. deemed the building unsalvagable
 Ignored team of managers advice in only rebuilding Polar Tec Division
 Was the most profitable division
 Fired Patty Fitzpatrick (Chief of Polar Tec Manufacturing) for:
 Suggesting machine labor
 Moving the knitting mill to Lawrence

 Could have moved mill:

 South - closer to raw materials
 Could have outsourced internationally for 40% cost advantage
 Refused to implement cheap machine labor in place of human labor

 Safety consultants deemed that the Flock Division had explosive potential yet
Feuerstein ignored it and refused to report all the findings to OSHA
 If Feuerstein really cared about his employees why would he intentionally put
them in harms way?
 In prior 3 years, 61 incidents reported
  Estimated $500 million to rebuild mill, but could have spent much less to
prevent the fire

Feuerstein's Poor Business Decisions

Feuerstein made a combination of irresponsible business decisions that ultimately
led to the downfall of his company.

Malden Mills is a textile company that is responsible for the manufacturing the
original Polartec polar fleece and more other textile products.

1. What is your assessment of Aaron Feuerstein? Does he deserve to be hailed

as a hero?

Aaron Feuerstein deserves to be applauded as a hero because, despite the

company being destroyed by active fire, he employed strong business ethics when
he decided to pay the employees until he finished rebuilding the company. This was
a unique move since it is very rare for a company to pay employees having not
worked. However, the company incurred the double loss because during the
reconstruction period it was not productive, and the workforce received their
payment at the same time. Nevertheless, this did not hinder Aaron from constructing
a more pleasant, healthy and sunny workplace thus he is a hero.

2. What is your assessment of the decision to rebuild the mills? Was restoring a
good idea in the short-term? Was restoring a good idea in the long-term?

My assessment to the rebuilding move has both active and negative imperatives. To
start with, rebuilding the company brought a better image and better facilities as
compared to the previous ones before the fire struck the company. Additionally, this
was an excellent opportunity to improve the company’s facilities to long-term
services.  On the other hand, this was a complete loss considering that the
corporation remained unproductive in the eve of the reconstruction process. It would
be a good move if the company remained active during the restoration process.
Repairing the burnt facilities would ensure that the corporation’s activities were not
suppressed. Thus the restoration idea had both positive and negative
consequences.

3. What else could Feuerstein have done? How would stakeholders have been
impacted?

First, it was a kind move by Feuerstein to pay the employees considering that the
community around the company solely depended on it. However, I suggest that
Feuerstein was not supposed to shut down the whole business at a go. He was
expected to reconstruct the burnt facility in phases to reduce the reconstruction cost
and to keep the employees working. This way the stakeholders would incur fewer
losses in the end.
 4. What is your assessment of the public’s reaction to what Feuerstein did?
Why did the public praise Feuerstein so effusively?  Why is job outsourcing
so large a societal issue; is it “fair” to employees from your perspective?

Apparently, any community would have applauded Feuerstein of his kind decision of
paying the employees despite them not being at work. Thus the community
appreciated Aaron’s right decision. To business, this was very ethical, and it was fair
to the employees considering that they depended on the company they would
remain jobless until the enterprise was fully reconstructed. The company also
marketed their brand, and to date many people have considered Malden Hills among
the best places to work for because the company is conscious of the employee’s
needs. I agree that job outsourcing is a huge societal issue because many people
lose their jobs in which they wholly depended on. It was a fair decision for Feuerstein
to pay the employees in the company’s reconstruction session.

5. Give us an update regarding the status/results of Malden Mills.

Currently, Malden Hills is doing very well and since the reconstruction, all the
operations have been in a smooth run.

Project Infomation
In late 1995, a fire at Malden Mills put 3,000 union jobs at risk. The timing couldn’t have been
worse. The 90-year-old manufacturer in Lawrence, Mass., has seen its revenues triple and
employment double since emerging from bankruptcy in 1982. It’s popular Polartec and
Polarfleece fabrics were one reason. A loyal and productive workforce was the other.

In a time when offshore manufacturing became standard procedure in American business, Malden
Mills’ CEO Aaron Feuerstein opted to stay put and to rebuild his factory on the very site where
his family had made textiles for 90 years.

 Client :Insight Studio

 Date :20 Feb, 2018
 Skills :Project Planning

Challenge & Solution

The fire came just two weeks before Christmas, affecting employees both financially and
emotionally. So just 2 days after the blaze, Feuerstein announced plans to pay his employees their
full wages for 30 days. He would eventually extend that offer to 90 days for the paychecks, 180
days for benefits. Total cost to Malden Mills: $25 million.

A business fairy tale?

It would seem so. Unfortunately, the case doesn’t end here. Feuerstein found himself back in
bankruptcy court, saddled with $140 million in debt, much of it tied to the rebuild. The company
hired a new president in 2004 as part of the Chapter 11 reorganization. It wasn’t enough.

Did Aaron Fueurstein do the right thing in 1995?

After his decision, Feuerstein became a legend in both business and PR circles — a textbook case
in excellence theory. But in the end, he leveraged the business into bankruptcy. No one will
question Feuerstein’s good intentions, but there’s no line on the balance sheet for “loyalty” or
“ethics.”

The business of business is messy.

Always has been. But we don’t often talk about the ugly side of it in our PR casebooks. Instead,
we select cases that exemplify symmetrical communication, ethics and trust. And we celebrate
them.

Our Process
When students leave my classroom, few will work for principled managers like Aaron Feuerstein,
the man they called the “Mensch of Malden Mills.” If there’s a silver lining to this story, it’s that
Polartec remains a great product with a loyal customer base, including me. None of that may have
occurred had Feuerstein not saved the day on Dec. 13, 1995.

01
Improve sales & operations & production planning

02
Determine the right inventory level

03
Optimize the supply chain for perfect order planning

04
Improve sales & operations & production planning

Result Driven
Sadly, Malden Mills didn’t turn out as such a classic case in employee relations. To me, it’s a
depressing reality of business world that makes “maximizing shareholder value” its top priority.
(Credit: toughsledding.wordpress.com)
Reduced lead time by 43%
Decreased variability by 50%
Lowered the risk of back-order by 95%
Increased stock for finished goods by 10%