Georgia Senate candidate David Perdue's (R) business career is a key element of his pitch to voters in Georgia, as his Web site makes abundantly clear. On Friday, Politico published a document that could help his opponent, Michelle Nunn, turn that record against him.
Nunn was already hammering Perdue for his role at a Kannapolis, N.C., textile company called Pillowtex. Perdue ran the company for a brief period between 2002 and 2003, leaving a few months before it folded. The document obtained by Politico is the transcript of a 2005 deposition of Perdue in which he was responding, in part, to allegations that he had been compensated more than what he deserved.
The entire document is fascinating — a frank description of how he was lured from a job at Reebok by a capital management firm to save Pillowtex, a major employer in Kannapolis. His strategy, embraced by Oaktree Capital, was to outsource the company's various components. Once in place, he quickly learned that profit estimates he had been given were too low and the company's pension obligations were too high for there even to be enough money to outsource. He left to lead Dollar General, the company with which he is most often associated today.
That frankness — removed from the context of the discussion and, more broadly, removed from a world in which the decision to save the profitability of a company by hiring cheap labor is par-for-course — promises to be a staple of the final month of Nunn's campaign.
And there's a reason: It works. A September 2013 Post/Miller Center poll found that four in five Americans blame outsourcing for it being harder to find good jobs in the United States. A 2013 Pew poll determined that three-quarters of Americans see companies moving overseas as "mostly hurting" the U.S. economy. Outsourcing was also a flashpoint in the 2012 presidential campaign, with Mitt Romney's campaign clashing with The Washington Post over its report that Bain Capital had invested in companies that sent jobs overseas.
And on the subject of outsourcing, Perdue was direct. Here are the 12 most pertinent examples:
"Yeah, I spent most of my career doing that." (p. 7) This is the quote that made it into Politico's headline. The "that" is his work with companies like Sara Lee to save costs by moving companies to Asia. "At Sara Lee, Sara Lee did not have a centralized sourcing operation in Asia, and we built that from the ground up, hiring the first employees to selling to some 11 divisions inside the Sara Lee complex." (p. 8)
He counts outsourcing as one of the two skills that prompted his hire in the first place. "[I]t's pretty much that, and marketing were two of my backgrounds." (p. 7) At one point, he is asked to review a document that articulates the strategy that the company hoped to put into place. "[I]t looks like three different phases there, that in '03 Kannapolis [Towel] would go out, '04 bedding would go out, and Fieldale would go out in '05." (p. 157-158) The Kannapolis Towel Corp. would cost $26 million to move, according to a January 2003 document Perdue and the depositors discuss. Pillowtex didn't have the money to do that.
When Perdue agreed to take the job, he had been provided information suggesting that outsourcing could save it. "I wanted to know the — in the plan of reorganization, what would be required to support the marketing efforts and what capital would be required to convert certain production from domestic factories to Third World — or predominantly Asia sourcing." (p. 20) But the numbers he got were flawed — as was his agreed contract with Pillowtex.
Asked whether he was taking a pay cut to move from Reebok, he replied dismissively, "No, no." (p. 34) So he was frustrated when the company was forced to renegotiate his contract after a planned compensation package was determined to be in violation of new statutes. Perdue's interest in moving jobs overseas pairs badly — outside of the context of that room — with his deliberate attention to protecting his own compensation.
"Remember, I came here to try to drive this stock to gain personally financially but only through the gain of the stock." (p. 148) When he was being wooed from the shoe company, he knew there was risk. He negotiated $2 million guaranteed from the firm backed by a letter of credit. "I had been assured that that would be protected" (p. 77) The letter of credit, though was never obtained.
He quickly grew frustrated. "From my perspective, this thing had totally blown up in my face. ... This thing was not what it had been represented to me to be." (p. 90) When a headhunter first called about Dollar General, he wasn't interested. But by the end of 2002, that changed. "I had the prospects of being unemployed with no severance protection at that point in time," due to the changing nature in which Pillowtex planned to escape doom. Plus, Pillowtex had, in his mind, flubbed its handling of his compensation. "You had to pay $93,000 in taxes?" he was asked at one point. "Right, out of my pocket," (p. 82) he replied.
Perdue got $100,000 in moving relocation expenses, and the company sold his house in Boston for him (at a $100,000 loss, Perdue's lawyers pointed out). But he never moved to Kannapolis. Even before he'd left Pillowtex, he had moved to Nashville to start at Dollar General. While working for Pillowtex and commuting from Boston, he was given corporate housing that he sometimes had to share with other employees, like traveling salesmen.
"I lived in a company-owned house called the White House," (p. 100) he told the attorneys deposing him. It's an interesting little detail — employer-provided, shared housing called the White House, which is the quiet aspiration of nearly every national political figure.
But in Perdue's case, it's a detail he probably wishes hadn't come out.