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Rooting for Takeover-Target Echlin
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Business New Haven
3/9/1998
By: BNH
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Branford auto parts giant Echlin Inc. is greater New Haven's last remaining Fortune 500 company. It employs some 30,000 workers worldwide.
Last month a Michigan company, SPX Corp. launched $3 billion hostile takeover bid at Echlin. SPX offered $48 a share in cash and stock to Echlin shareholders.
Among other plans for Echlin, SPX has said they would trim the local company's workforce by about 3,000 workers. Because of highly restrictive European labor laws that require companies to pay laid-off workers for as long as a year following ther severance, many of those job losses would perforce come in the U.S., and Connecticut.
Meanwhile, Echlin's management has said it stands by its own plans for boosting productivity and profits, under new President Larry McCurdy.
Most recently state lawmakers have, at Echlin's behest, have begun to consider landmark legislation that would make it virtually impossible for SPX to swallow Echlin. No other state has ever passed such a law.
The proposal, which some consider quite radical, would in effect prevent a newly elected board of any Connecticut-registered public company from effecting a merger - even if that board was elected by a majority of voting shares.
In this case, only the present Echlin board would be permitted to consider the merger. This measure is known in corporate governance circles as a “dead-hand poison pill,” because it is an anti-takeover strategy - a poison pill - that empowers ousted board members (“dead hands”).
We're suspicious on principle of enacting as law measures hastily designed for address a specific situation - in the case the Echlin merger - and we urge lawmakers to act responsibly in considering this measure.
Notwithstanding those concerns, we hope that Echlin is able to maintain its independence for two simple reasons.
For one, we think it's desirable that our last remaining industrial giant remain under local management and direction. When senior management officials are our friends and neighbors, we believe the company as a whole is more likely to be a better corporate citizen. And Echlin historically has certainly been a fine citizen to New Haven and Connecticut.
Secondly, our city and region certainly don;t need another large-scale round of layoffs, just when unemployment, especially in New Haven, has been driven down to acceptable levels. As many as 1,000 jobs at Echlin's headquarters and the Branford factory may be at stake.
That's why we're rooting for Echlin to remain Echlin.
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