Sometimes It Doesn’t Always Work

During 2006, The US Worker Cooperative movement suffered a couple of losses! Interestingly, both were subjects of a 2003 documentary on US Worker Co-ops called “Beyond the Bottom Line: American Worker Cooperatives” by Headlamp Pictures. It is always disappointing to see co-ops fail, however, such failures are rarities. Paul Hazen of the National Cooperative Business Association noted in his introductory comments to the USFWC that the average capitalist business last about 5 years while the average cooperative business lasts 60 years. Each co-op has its own unique structure and culture. In the worker co-operative world, each co-op tends to operate in a different industry as well. Co-ops, despite their difference in control, must still exist within the industry and cannot get too far away from it. Instead of seeing these two changes as failures, each must be seen in its own situation. Melissa Hoover, staff member of the USFWC detailed the demise of Good Vibrations in the Fall, 2006 issue of NO BOSS . She reports that Good Vibrations released an official statement stating “to stay profitable in an increasingly crowded niche market, the company need to reach more customers.” One need in a competitive field (and for any business) is access to capital. Unfortunately, even pro-cooperative financial institutions were hesitant to risk capital on a sex toys, books and DVDs. As Good Vibrations moves forward to the world of ESOP, they vow to keep many of the values of the cooperative world which they had long ago dubbed “Good Vibration Values.” It appears that a major change in the culture of Good Vibrations was a change in management. It seems clear that the membership came to see little if any connection between cooperative values and those espoused by their company. Management became staffed with people who did not have the same history or knowledge of the cooperative movement. In a co-op with a strong hierarchy, the cooperative process became the scapegoat for slow progress. To be fair, the move to switch corporate structure was met with no opposition. In the end, the workers saw the coop as the problem and voted to end. Burley had a different situation. They ended 28 years of worker ownership. They have lost money the last three years with a 1.5 million dollar loss in 2005. While most famous for the blue and yellow bike trailers, Burley also had a line of recumbent, tandems and road bikes. Despite the mass popularity of the trailers, the bikes were for the higher end of the scale. In the documentary, they argue for keep production in house instead of following every other bike manufacterer by going overseas. They cited the need to keep their jobs in house and the quality that only their personal attention can create. True enough, but the forces of globalization were against them. I can only speculate for the cause of their demise. They never promoted themselves as a cooperative (at least as far as I can tell). They didn’t produce a mass appeal (affordable) road bike or seek the popular mountain bike or hybrid markets. They might have, but my guess is that they did not market their bikes through cooperative bike stores. I have know idea how good their racing bikes were, but I know that I never heard about them during the Tour de France or among the local bikies. It seems to me that to market a racing bike, one needs a racing team to win with them (i.e. Trek). Maybe the cheap labor and materials of the Asian Tigers would have brought them down anyway, but they clearly sought the wrong market. In the end, the economy of their industry caught up with them. 39 of the 97 members lost their jobs. The new owner promises to keep production in Eugene, Oregon, but it will likely mean wage and benefit cuts. On the plus side, after the books are balanced, the former members will divide the roughly $2 million left in retained dividends and property sales. My co-op went through a similar struggle in 2000. Union was a payroll away from failing for several months. A member of Union Cab’s Board, at this low point in the co-op’s history, commented that we can always overcome our external struggles, but it is our ability to handle our internal struggles that is the true risk. When members become disillusioned and quit caring about the cooperative, or when they fail to make the decisions necessary to survive in their industry, they create more peril for their cooperative than either the lack of capital or competition could ever do.

About John McNamara

John spent 26 years with Union Cab of Madison Cooperative and currently helps develop co-ops in the Pacific Northwest. He holds a Ph.D. in Business Administration and Masters in Management: Co-operatives and Credit Unions from Saint Mary's University.
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