There is a road back from bankruptcy. Consider Co/Op Optical in Detroit, which declared Chapter 11 bankruptcy in August 2012 and re-emerged two months later.
“There was a public sale of the assets — a Section 363 sale. It was a managed bankruptcy,” says Robert Evangelista, president and owner of WCE LLC, which assumed the assets of the former company. “We assumed command of all eight stores, the administration, (and) the manufacturing labs.”
Known formally as Cooperative Optical Services Inc., the eyeglass retailer was founded in 1960. Today, it has stores in Detroit, Livonia, Eastpointe, Madison Heights, Taylor, Clinton Township, Sterling Heights, and Dearborn.
Evangelista says WCE didn’t purchase Co/Op from the U.S. Bankruptcy Court, just the assets and assumed its name. “There’s plenty of brand recognition,” he says.
Upon acquiring Co/Op, Evangelista said he made five declarations:
- All employees working at the former company at the time of purchase would be hired to work for the new company. “Here’s this sinking ship (and) people bailed … But there were 50 people that never quit; they wouldn’t give up,” Evangelista says. “I love that. I love that spirit. You can’t teach that, you can’t buy that. I’ll take that any day.”
- The Communications Workers of America Local 4100 would represent the employees. “Normally, unions have to come in and organize. I said, ‘Don’t bother. I want you to represent (the employees).’ So I invited them,” he says.
- Wages wouldn’t be cut. “We’d turn it around, but not on the backs of the employees.”
- Co/Op would be headquartered in Detroit at Eight Mile and Dequindre. “We believe in Detroit,” he says.
- Co/Op would operate a large manufacturing lab. “I’m a believer that Detroit still builds things. It builds the best. Let’s show it.”
The Perfect Storm
In late 2011, Co/Op transferred the administration of its insurance benefits to Texas-based Davis Vision, ensuring 140,000 insured members would not be negatively impacted by its financial hardship. Co/Op chose Davis because it’s the third-largest insurance company in the nation, the second-largest American-owned insurance company, and the largest union employer in the optical industry.
“The State of Michigan monitors the health of insurance companies. (It) had concerns over (Co/Op’s) insurance escrow account … The state just cares that you get rid of the risk, so the former company transferred that business — the insurance risk — to Davis,” Evangelista says.
At the same time, the city of Detroit, Chrysler Group, and the Detroit Public Schools dropped Co/Op. As a result, company revenue wasn’t meeting company expenditures: Payroll was barely being made while employee cuts, product reductions, and several store closings were implemented.
“What made this happen was a perfect storm — a bad economy … three very large customers abandoning Co/Op at a time when they were struggling and it couldn’t recover … Bankruptcy was inevitable,” Evangelista says.
Nonetheless, a turnaround committee was formed in February 2012. Robert Morris, a policy adviser for Southeast Michigan Council of Governments (SEMCOG) in Detroit, was named chairman. The committee met weekly for six months, but the team couldn’t settle on a turnaround plan, especially since financial institutions were unwilling to participate.
“We came very close to closing our doors,” Morris recalls. “We came to the conclusion that our top priority was figuring out how to save the jobs of as many of our loyal employees as possible. It became clear that one means of doing this was to use bankruptcy as a tool to reorganize and, hopefully, find a buyer. Ironically, the committee felt we could build a successful model to be profitable, but had to find a way to get out of debt and we needed revenue to purchase inventory. We couldn’t find a cash infusion.”
By August 2012, Co/Op Optical went into Chapter 11.
When Evangelista, who wrote a book in 2001 — The Business of Winning: A Manager’s Guide to Building a Championship Team at Work — expressed an interest in purchasing Co/Op while it was in bankruptcy, Morris was intrigued.
“He was someone with a vision, a keen desire to succeed, who’d work with our employees and their unions, and who understood the industry,” Morris says. “We thought he could raise the kind of revenue necessary to make the company work.”
Morris is impressed by how quickly Evangelista resurrected Co/Op Optical.
“(Evangelista) has succeeded for a couple of very important reasons,” Morris says. “First, he put the necessary investments together to purchase the company’s assets from bankruptcy. He also had his own skin in the game. Second, he had a plan and stuck to its implementation. Third, he has been an on-site president making decisions and implementing change as needed. Finally, he has kept his word to employees and their unions. Of anyone who took over the company, he best represents someone who represents the philosophy of the previous board and Co/Op Optical.”