First in a series.
WATERLOO -- During its final days, Rath Packing Co. was treated much like a dying uncle stricken with emphysema
The signs of mortality were prevalent; the abuse and neglect had finally taken their toll. Workers, managers and community leaders knew for a while Rath's time was almost up.
"The handwriting was on the wall," said Robert McGarvey, who worked at Rath 34 years before the company laid him off a month before it closed.
As they prepared for its eventual demise, those same people held a shred of hope that a miracle cure would breathe new life in the venerable packing house, like so many previous efforts had.
Rath breathed its last on Dec. 28, 1984, at the age of 93.
"It seems like yesterday," said former Waterloo mayor Bernie McKinley, elected just before the liquidation of Rath in 1985.
People still speak fondly of Rath Packing Co., once the city's largest employer. It in its heyday it employed 8,500, providing a decent life for many families. Rath shipped veal, beef and pork all over the country, and its products were considered some of the finest in the business.
"It was the biggest plant in the world at one time under one roof," said Lyle Taylor, who started at Rath in 1954, ran the Rath union for a time and became president when the workers took over ownership. "You could walk through there all day and never be in the same place."
"For 100 years that company was one of the dominant forces in this city," said McKinley, who still recalls selling his first sow there as a 10-year-old.
That explains why so much time, effort and money was spent trying to save it, and why emotions ran so high when those efforts finally failed.
"You look at all the things done for companies nowadays, and it's too bad there wasn't more effort made to turn Rath around," said Taylor.
No one cause toppled the company. To some, its decline started with the strike of 1948, the genesis of lingering labor-management conflicts. Others believe Rath's turning point occurred in the 1950s when key vice presidents died, leaving a management void.
Others point to the company's inefficient, vertical operations. Workers had to haul hogs up elevators to reach the killing floor, and the time this took made the process more expensive. The company was unable to find the money to construct a new plant.
"The high-rise packing house was great for many, many years," said attorney Louis Beecher, who on two occasions engineered financing that saved the beleaguered packer from closing.
By the 1970s, more efficient, horizontal packing houses using cheaper labor were threatening Rath's livelihood. Consumers were buying less canned meat, a Rath specialty.
Waste was prevalent at Rath.
Taylor and his colleagues discovered after analyzing operations that Rath had signed several long-term leases for distribution facilities around the country so that it could honestly advertise "fresh bacon." What those decision-makers failed to predict was emerging technologies like vacuum packaging could allow the company to ship products from Waterloo to anywhere in the United States and still advertise it as "fresh."
"The one in Indianapolis was for a $1 million a year. That was a big bleeder there," said Taylor. "There wasn't much we could do but close them down. There was so much overhead there."
Right before Taylor took over as president, company officials had stocked up on dry meats for the holiday season. But they neglected the fact that those items are best sold to wholesalers in October, not weeks prior to Christmas.
"We had a warehouse full of that stuff that we had to discount to get rid of it," Taylor said.
Management borrowed money to update production lines and purchase new equipment, but the high interest payments -- Rath was paying 19 percent on some of its notes -- became more and more burdensome.
Workers to the rescue
What didn't contribute to Rath's demise was a lack of passion.
When word first circulated in 1979 that Rath was considering bankruptcy, a group of employees convinced its board to hold off on those plans.
On Dec. 30, 1980, Rath become an employee-owned company. Workers pledged chunks of their paychecks to provide a match to federal loan dollars. Those pledges were exchanged for company stock. Near the end, workers surrendered annual raises and diverted those funds toward saving the firm.
The employee stock plan called for contributing workers to receive a return of 50 percent of the company's pre-tax profit. Those workers never got a dividend check, as the company's last profit was in fiscal 1980 -- $1.5 million. The next two years, the company bled $16 million. In fiscal 1983, Rath lost $13 million.
"There were always those questions," said Steve Brustkern, one of the last half-dozen employees at Rath Packing Co. to be laid off . "Will Rath survive? Do you stay with it or try to find another job? There was a lot of uncertainty.
"Those latter days were kind of stressful," he added. "There were a lot of black Fridays."
Throughout the final year, headlines of mass layoffs were almost a weekly occurrence. On the Friday before Christmas, 150 workers were laid off. The week before that, 150 were also let go. At the beginning of December, about 90 workers lost their jobs.
"I had some good supervisors who would come to me and tell me they had job offers elsewhere, but they wanted to stay (at Rath)," said Taylor. "I'd have to discourage them from staying and tell them to take those other jobs. I knew there wasn't going to a job here for them."
When operations ground to a halt, the plant had 250 employees. About six remained beyond its last production day to maintain the facilities.
"Deep down, I think people believed it would close, but they thought it would start back up," said Taylor. "We had offered it to 10 companies, but none were interested."
The final straw may have been the failure of Rath and a consortium of investors to reach a deal three months before it closed. A $7 million buyout offer by a New Jersey investment firm fell through. At the time, both sides blamed a communication failure.
On Friday, Dec. 28, 1984, according to Courier reports, "small groups of workers, some of whom had more than 30 years of experience with the company, gathered in front of the plant gates Friday quietly talking to one another about the approaching end of operations."
Said one 36-year-employee when asked about the future of the company: "We're here for the funeral."
The "funeral" wouldn't happen for almost a year as leaders refused to accept Rath's fate.
In January 1985, the Employees Reorganization Committee of Rath Packing Co. was formed to raise money for a possible reorganization. Workers were asked to pony up $1,500 each and accept an equal amount in wage concessions over three years. About 700 workers signed pledges. By the end of March, the committee had raised more than $1 million from employee pledges and charitable gifts. A Houston-based investment firm was at the time trying to secure $8 million in interim financing.
By May 1985 all hope was gone.
"I can't visualize anything that could result in the reopening of the company," then-Rath chairman Robert Fulton told the Courier on May 2.
The admission came after a bankruptcy judge approved John Morrell & Co.'s successful $3 million bid for the Rath trademarks, the company's most valuable asset. Without it, Rath had little to offer potential investors or lenders.
Efforts continued to find a buyer through the summer, all the way to its final liquidation. Garage sales and bake sales were held to raise funds for a possible reorganization. But even some of its most avid supporters knew it was time to pull the plug.
"It's time we get it liquidated," then-Mayor Del Bowers said in mid-July in response to a proposal by Taylor to trade the company's assets for debt in the hope of getting a third party to start limited operations.
With $4.5 million in loans outstanding, the city of Waterloo was the company's largest creditor and was spending $35,000 a week to keep the plant operational in case the business could be restarted and to keep the property it owned from deteriorating
The 1985 bankruptcy liquidation sale of Rath was one the largest sales of its kind, involving 36 acres of land and thousands of pieces of equipment.
Bowers, a former Rath worker, bought much of the old bankrupt hog-slaughtering and processing plant at that auction for $400,000 of taxpayer money, a move he said years later, in 1989, that he regretted. The property was soon sold to Intro-Spec, a Cedar Falls agent representing another company, Waterloo Meat Pack.
Although Waterloo Meat Pack promised to open a 250-employee hog-slaughtering operation on a small portion of the Rath property, the project failed to materialize. The property went back into the hands of the city in 1988 as part of an effort to clear up disputes concerning more than $700,000 owed in back taxes.
There was talk of turning the Rath site into everything from a mushroom-growing factory to a garbage storage and recycling center.
Anger to acceptance
Because the company's assets could only pay part of its liabilities, investing workers received nothing from the liquidation. Despite the lack of return on their investments, few regretted the decision to buy into the company.
Taylor said the employee-purchase plan gave the company five more years of life. In that time, more workers qualified for pensions, and the retirement contributions to recipients was raised.
Nonetheless, the shock of being unemployed was too much for many to bear, especially when the local economy was offering few options.
"Nobody knew what was next. The economy was sliding. Deere was laying off," said Brustkern, who was forced to take a job outside Kansas City a few years after Rath's liquidation.
"It's always a difficult situation for individuals who worked for the same company for 20, 25 years to be laid off," said Galen Cox, who was manager of Iowa Workforce Development's Waterloo office during the Rath and Deere layoffs. "A lot of the Rath work force were in their 50s, and a lot of those individuals had worked for Rath all of their adult lives. Here they were, not yet old enough to retire, but being in their 50s and trying to find new jobs."
"We had friends who committed suicide. We had friends who lost their homes," said Colleen Kacher, who was let go a week before Rath closed after 33 years with the company. "A lot of them just left the area."
Those who stayed vented. They were angry at the city for what they perceived was a lack of effort to save the plant or at least find another use for it. Those feelings turned to rage when the funds from the Rath liquidation funded a greyhound racing facility on the city's south side. "Rath Went to the Dogs" bumper stickers were popular.
On his first day as mayor in 1986, McKinley encountered angry people storming his office, some to report the theft of property, including copper wiring, at the Rath site. McKinley sent the police to look into it, and even drove there himself.
"For the next two years, every Monday night, I had to listen to ex-Rath workers rail me because they felt there was more we could be doing. It caused me a lot of misery," he said.
Twenty years can heal a lot of wounds, tame a lot of emotions. The anger, sadness and disbelief felt immediately after Rath's fall has since been replaced by acceptance and even hope, as the Cedar Valley economy has more than rebounded from the dog days of the mid-1980s.
Even 20 years later, though, few have completely let go.
"In the process of trying to sell it, we had several accounting firms go through the books," said Taylor. "One guy came across a few items and said, 'Here's your problem right here. Close that gap and you've got a profitable company.' But we couldn't convince a (potential) buyer of that.
"If I'd known everything I know today, I could have helped Rath a lot more," said Taylor.
Ultimately, Bowers' oft-maligned decision for the city to buy the Rath site may have done the most to date for its re-use.
By the time he died in 1997, many of Bowers' peers - including some critics at that time of Rath's demise - said in hindsight his was a good decision because it gave the city some control over the site, and preserved the property for purchase and eventual redevelopment by the businesses of the Poe family of Cedar Falls, including Crystal Distribution Services. Also, the city eventually received funding to demolish unusable portions of the old plant, although the Rath administration building remains an empty shell.
"Just about anybody in this area either worked for Rath or had a direct relative who did," said Brustkern. "A hundred years from now, people will be talking about Rath."
Joel Palmer can be reached at (319) 291-1582 or email@example.com.
Monday: Former Rath workers share memories of working at the plant and how they coped with losing their jobs during a dismal local economy.