By GREG STILES
Famed vacuum-cleaner maker David Oreck didn’t pay close attention to Harry & David’s Chapter 11 bankruptcy travails, but he certainly understands how companies can slip into the abyss.
Oreck sold his company to a private equity group that drove the company into bankruptcy, much as Wasserstein & Co. purchased the Medford gift and gourmet food company and steered it into Chapter 11.
“The people who acquired it had different ideas than what I did about running a company,” Oreck said during a telephone interview on Tuesday. “I did not believe in doing business with the big-box Walmarts of the world. I was oriented for the consumer … and it worked extremely well. They felt their big-box approach was the way to go. They were amazingly ignorant of the methods I used.”
In his spare time after he sold his company a decade ago, Oreck wrote an autobiography, recently published, called “From Dust to Diamonds,” in which he takes venture capitalists to task.
“I didn’t time it to come out when they went into bankruptcy,” he said. “It just was a coincidence.”
After a 20-year career working with big-name electronics and appliance companies, Oreck began manufacturing lightweight, upright vacuum cleaners in 1963. In the beginning, Oreck sold vacuums to hotels, then later moved into the residential market.
Oreck said he couldn’t understand why investors would buy a successful company and then go in a direction contrary to the one that provided sound financial returns for decades and jobs to Americans.
“What they paid for was very successful and liquid,” Oreck said.
In Harry & David’s case, pear orchards weren’t so liquid as elements of Oreck Corp., but Harry & David had plenty of assets that were sold before the plunge to Chapter 11 in early 2011.
“Quite frankly, they were mostly concerned with getting their money back out as quickly as possible,” Oreck said of the investors who bought his company. “My idea is to build something going into the future and succeed me. There’s a number of these groups where they buy things and turn it around, make a buck and take a walk. That’s fine, and that’s their business, but that’s not my idea of running a business.”
Oreck actually has watched his former company go into bankruptcy twice since he stepped away. Private equity firm GSC Group took Oreck into bankruptcy in 2010. Controlling shareholder Black Diamond Commercial Finance sought court protection for Oreck earlier this month. Both companies had courted big-box retailers to the detriment of their own stores, the founder said.
Oreck thinks bankruptcy is one way to clean the decks of poorly run companies. While many of Harry & David’s vendors and contractors lost hundreds or thousands of dollars, he suggested that’s part of the risks and rewards of doing business.
“Unfortunately, vendors go along doing business with the company and lose money to the extent the company owes them,” he said.
“In most cases, people get a pretty good indication of whether they should stop selling to, or issuing credit, to that company.”
While Harry & David’s founders, the Holmes family, had long since exited the Rogue Valley before the company’s troubles began, Oreck’s name still means something to him.
“Maybe I’m naive, but if someone pays a good bit for a successful company that has a good track record and is profitable and relatively free of any debt, why would they do things differently? If you thought you had a better plan, why not just go into business for yourself?”
Reach reporter Greg Stiles at 541-776-4463 or firstname.lastname@example.org. Follow him on Twitter @GregMTBusiness, and read his blog at www.mailtribune.com/Economic Edge.
This story originally appeared in Medford Mail Tribune.