For about 9,000 Gemco workers in Southern California, the bad news could scarcely have come at a worse time.
Faced with a hostile takeover threat, the owner of the money-losing discount department store announced in October, 1986, that it would close the chain. By Christmastime, most workers were out of a job.
"Coming into the holidays, it really put a financial and emotional stress on people," recalled Greg Bond, a five-year Gemco veteran.
To this day, many former Gemco employees are bitter about how Lucky Stores handled the closing of its 25-year-old chain. Some older workers, in particular, have yet to find jobs or receive severance pay. Gemco retirees went to court and only recently won a settlement that will provide medical benefits for the next five to six years--far short of the lifetime coverage they had expected when they retired.
The unraveling of Gemco, a once-thriving California business, provides lessons for all workers. For one thing, it signifies the restructuring of U.S. business that is resulting from takeover mania. And it brought home a powerful message--that even seemingly secure jobs can face quick extinction.
"Gemco in its heyday through the 1970s was this gang buster kind of company," said Edward F. Comeau, an analyst with Wood Gundy Corp. in New York. "It pioneered a mini-hypermarket concept. It was, I understand, a very nice place to shop, where customers and employees had rapport. The downside was that it stayed very much behind the times."
One major problem was that the chain was a unionized competitor in a non-union industry. Gemco also failed to devise sophisticated computer systems to keep track of merchandise and to aid in scheduling workers.
To some extent, "the employees cut their own throats," analyst Comeau said. "But that's not laying everything on the unions. The problems were left unaddressed (by Lucky management) for a long period."
For a time, healthy sales increases masked the chain's woes, but it nonetheless experienced nine years of declining profits. By early 1986, it was starting to lose money at the startling rate of $1 million a week, even as Lucky was belatedly pumping millions of dollars into upgrading stores.
Then came takeover artist Asher B. Edelman, who in September, 1986, offered to buy Lucky, a diversified food retailer based in Dublin, Calif.
"The company had to scramble," recalled Richard Cox, who at the time was Gemco's director of labor relations and now holds a similar post with Lucky's Southern California division in Buena Park. "That meant making some very difficult decisions."
One of the most dramatic was to the hemorrhaging Gemco operation, in the process eliminating about 9,000 jobs in the Southland. The company provided some training and was able to place some workers at the Thrifty drug store chain and Boys Markets.
About 700 former Southern California Gemco workers have ended up at Lucky food stores, and several others have found positions with the Target discount chain, which bought the Gemco stores, remodeled them and opened them as Targets in the second half of 1987.
But most employees were on their own as they tried to pick up the pieces and start over.
Neither Lucky nor the United Food and Commercial Workers, which represented many of the Gemco employees, know how many workers found jobs. "There were so many that it's hard to keep track of everybody," said Ron Bruckner, executive assistant to the president of the union's Local 770 in Los Angeles. "It affected a lot of lives."
Reached by telephone recently at his Manhattan office, Edelman reiterated statements he made at the time of the closing. "It was mishandled," he said. "And I did feel bad for the workers."
That, of course, is easy for him to say. Then and now, Wall Street analysts applaud Lucky's decision to close Gemco and focus on its core food business. The company is thriving and producing record operating earnings. (Ironically, its performance has attracted another suitor, American Stores, owner of Alpha Beta, and the company's future is again uncertain.)
Jonathan H. Ziegler, an analyst at Sutro & Co. in New York, argues that the timing of the Gemco layoffs was actually pretty good. "There's a real shortage in retail and fast-food workers," he said. "Those people can be soaked up. . . . But it surely disrupted their lives."
To be sure, many former Gemco workers are still adapting to the changes. Here are conversations with four employees who found that there was life after Gemco, despite some struggles.
Despite being barely over 20, Greg Bond was handling all the ordering and selling of fine jewelry merchandise for the Gemco chain when the closing was announced.
Although rumors had circulated for weeks beforehand, "it was definitely a shock when it finally did come down, when we knew we were going to be out the door," he recalled. "I had a girlfriend with four kids. I felt a certain sense of pressure."