The company officially known as the Great Atlantic & Pacific Tea Co. has filed for bankruptcy for the second time in five years. This time around, the storied "A&P" name may completely disappear.
Coverage at USA Today by Nathan Bomey notes that "About 93% (of its workers) are represented by one of 12 different unions, and many of them have bumping rights that the company has described as a big barrier to reducing costs." Coverage at two of the three major business wire services, the Associated Press and Reuters, failed to mention the word "union" at all.
An unbylined AP report just before 4 p.m. blamed the competitive environment:
Grocery store operator A&P is filing for Chapter 11 bankruptcy with plans to sell off stores as it faces increasingly tough competition.
This marks the second time in five years that the Montvale, New Jersey-based company has filed for bankruptcy. This time around, it said it has more than 100,000 creditors along with more than $1 billion in liabilities and over $1 billion in assets.
The company plans to sell as many of its 296 stores as possible and said in a filing with U.S. Bankruptcy Court in New York that it has bidders for 120 of those operations with expected proceeds of $600 million.
... Like many grocers, A&P has faced tougher competition from companies like Wal-Mart Stores Inc. and Target Corp. expanding their grocery options. The business has grown even more crowded and competitive with companies like Whole Foods Market Inc. and Fairway Group Holdings Corp. catering to a more health-conscious market.
Except that unlike many grocers, like union-free Meijer and Remke Inc. locally here in Cincinnati (Update: Sentence revised, in light of a commenter claiming that Meijer is unionized in other areas), A&P couldn't stay in business because of union intransigence.
The also unbylined report at Reuters was even longer, still managed to avoid mentioning the exisence of unions, and also cited competitive conditions:
Storied supermarket chain Great Atlantic & Pacific Tea Co Inc, better known as A&P, filed for Chapter 11 bankruptcy protection for the second time in five years and said it was in discussions with buyers for some of its stores.
The 156-year-old company has hired Evercore Partners, an investment bank that specializes in selling assets. A&P listed assets and liabilities each of more than $1 billion in its bankruptcy filing late Sunday.
The company said was in talks with Acme Markets Inc, owner of Safeway and Albertsons grocery stores, Stop & Shop Supermarket Co LLC and Key Food Stores Co-operative Inc to buy its assets.
A&P has lined up buyers for 120 of its 296 stores with total expected proceeds of about $600 million, the Wall Street Journal reported, citing a person familiar with the matter.
The company, which also owns Best Cellars, Pathmark and Superfresh stores, has been unable to stand up to behemoths such as Wal-Mart Stores Inc and Costco Wholesale Corp who entice customers with big discounts.
... A&P, which in its heyday in the early 20th century operated over 15,000 stores, first filed for bankruptcy protection in 2010, re-emerging two years later as a private company after obtaining financing from investors including Goldman Sachs and an affiliate of billionaire Ron Burkle.
The following points found at the contrarian blog Zero Hedge emphasize how much A&P's unions had to do with the bankruptcy:
Why America's First National Supermarket Chain Just Filed For Bankruptcy, Again (Spoiler Alert: Unions)
... less than five years after its first Chapter 11 filing (and three years after emerging from a bankruptcy in March 2012 as a privately-held company part owned by Ron Burkle's Yucaipa with a clean balance sheet including $490 million in new debt and equity financing), overnight Great Atlantic, which controls such supermarket brand names as A&P, Waldbaum’s, SuperFresh, Pathmark, Food Basics, The Food Emporium, Best Cellars, and A&P Liquors - filed for repeat bankruptcy, or as it is better known in restructuring folklore, Chapter 22.
So what happened in the intervening 5 years that caused the company which employes 28,500 workers (93% of whom are members of one of twelve local unions and who are employed by A&P under some 35 separate collective bargaining agreements) to deteriorate so badly that it burned through all of its post (first) petition cash and redefault?
In one word: unions.
... The end result of this escalation of bad management decision and intransigent labor unions: "cash burn rates averaging $14.5 million during the first four periods of Fiscal Year 2015" which gave the company no choice but "to commence these Chapter 11 Cases as the only viable alternative to avoid a fire sale liquidation of the company."
... In addition to mandating direct labor costs, the CBAs (collective bargaining agreements) contain a variety of different work rules that have functioned to hamstring the Debtors’ operations. For example, as stated above, most of the CBAs contain “bumping” provisions that require the Debtors to hire employees from a closed store location at a different nearby store and replace less senior employees at such store. Because any healthy store in close proximity to a store that is closing must take on the increased costs of retaining more senior level employees, “bumping” costs make it difficult and, in some cases, financially impractical, to close unprofitable stores ...
The excerpted text should be enough to convince anyone not determined to cover up the truth that its unions were a major factor in A&P's return to bankruptcy. Neverthless, AP and Reuters have deliberately chosen to ignore A&P's unions as a factor. I wonder if that has anything to do with the fact that most of each wire service's writers are union members? (/sarcasm)
In a press release, the United Food and Commerical Workers union, which contributed mightily to A&P's demise over a period of decades, said it expects to "hold A&P to its commitments to involve UFCW in the sales process, protect union contracts and these good jobs."
Unfortunately for the UFCW, the company doesn't see it that way and can't afford to see it that way, as USA Today Bomey reports:
"The best and only viable path to maximize the value of their business and preserve thousands of jobs is a strategic chapter 11 filing to facilitate sales free and clear of liabilities," (A&P chief restructuring officer Christopher) McGarry said in the (bankruptcy) filing.
Those "liabilities" include union pensions and other benefits. No one in their right mind would agree to take them on — with one possible exception.
But A&P isn't General Motors or Chrysler, so the government probably won't step in to preserve those benefits — and shouldn't. That said, as was the case with workers at the old Hostess Company, since revived and union-free, Uncle Sam may arbitrarily and utterly without basis (but since when does that matter any more?) decide that A&P workers who lose their jobs should get "trade adjustment assistance."
Cross-posted at BizzyBlog.com.
