The ongoing saga of Circuit City’s downward spiral continues!
Faithful readers of CtW Connect will remember that I’ve been following CC ever since its incredibly boneheaded decision in March of last year to fire 3,400 of their best-performing workers in order to cut costs.
By stripping their staff of the salespeople best able to explain complicated technology to customers just at the moment most people started to move to HDTV — a complicated technology if ever there was one — they managed to completely destroy their competitiveness, and the market noticed. By the end of 2007 the company’s stock had lost something like two-thirds of its value. In February they announced a radical comeback plan whose key strategy was to dress all their remaining workers head to toe in black; unsurprisingly, that didn’t turn things around. By June they were flailing around unsuccessfully trying to find a white knight who would buy them out.
Well, the company’s slide has continued unabated since then: on November 3 they announced they were closing 20% of their stores and laying off 7,300 people, and today they filed for bankruptcy protection. As you can see from the chart above, a share of their stock is now worth less than a copy of your local newspaper (and the newspaper at least comes with comics and a crossword puzzle).
Why have I been following this story all this time? Because it’s the clearest example I’ve ever seen of how corporate America’s mania for cost-cutting and quarterly results can lead to long-term disaster. If Circuit City had invested in its workforce rather than treating it as an expense to be trimmed, it would be in a very different position today. But they didn’t, and, well, now they are where they are.
There’s a lesson in there somewhere. It’s just too bad CC’s employees and stockholders had to suffer so that a few idiots at the top could have the chance to learn it.
Comments (2)
Comments posted to CtW Connect are the sole property of the individual posting them, and do not necessarily reflect the viewpoints of Change to Win, its affiliated unions, or its leadership.
And if you look at their filings, specifically CEO's compensation (base pay + bonuses + stock & options + expenses paid for by the company) vs. profits & employee pay, you would have known this was going to happen. Not to mention going into one of their stores and trying to get waited on! A sure sign of company in trouble is when the top execs compensation is totally out of line with the rest of the financials.
Posted by Michele Passeretti on December 4, 2008 at 4:06 PM
Posted on December 4, 2008 at 4:06 PM
I stumbled on this Blog through my IBT Local 701's website and I have to agree that CC is a bonehead outfit to deal with. As a walk in customer I happened into one of there stores and purchased a Guitar hero game for my daughter's Christmas present. I bought it in September '08 and when the sales clerk talked me into buying a service contract for $9.98 , I said sure and plunked down the cash. Well, on Christmas day of course the item didn't work. I took it back to there store and was given a piece of paper with the number 800-333-2333 written on it and was told they couldn't exchange it at the store and to call this number. So, I drove home and dialed the number and was greeted by a phone sex hotline. ( Go ahead and try it for yourselves ) After numerous calls to CC just to be able to talk to a live person ( of course outsourced to a foreign land) I went through the whole saga with there employee who is going to send me a UPS mailing label to mail it back and they will in turn send me a gift card to their bankrupt store for only the purchase amount. So , they will not fix or exchange the item as I understood a service contract to be sold for. I am out the $9.98 put forth for the service contract. I guess I'll have to try Best Buy now. And my little girl has still yet to be able to play with her Christmas present. Thanks for the opportunity to blow off a lil' steam . IBT for LIFE
Posted by Doug Schoonover on January 7, 2009 at 3:51 PM
Posted on January 7, 2009 at 3:51 PM