In greater Chicago, most owners of manufacturing companies are not only white, but also are retirement-age and lack a succession plan. Their kids don’t want to take over or they lack the skills to do so. The likeliest fate for those businesses is to be bought by private equity firms that fire the employees, sell off some assets and move on, meaning a huge loss of jobs and revenue in the region.
For Dan Swinney, founder of the 35 year-old Manufacturing Renaissance, a nonprofit aimed at reviving manufacturing in the Chicago area, this challenge also has a massive upside—especially for black, Latino and Latina entrepreneurs, who might be employees of the business or simply people interested in owning and running an existing company. With a group of like-minded partners, Swinney wants to identify thousands of healthy companies in need of buyers, while building a pipeline of viable, potential purchasers.
By matching companies with prospective buyers, Swinney aims to preserve manufacturing companies and jobs while boosting entrepreneurial opportunities for people of color. “This crisis seemed like a great opportunity,” says Swinney, who is managing director of the project. “This is a way to keep industry here and do something about the virtual exclusion of black, Latino and Latina entrepreneurs from manufacturing.”
With that in mind, he recently helped form the Ownership Conversion Project (OCP), in collaboration with a long list of partners, including Safer Foundation, the Chicago Federation of Labor, LISC Chicago, World Business Chicago, the Cook County Bureau of Economic Development and the Illinois State Treasurer’s Office.
A Concept with Legs
A little more about the numbers: In Illinois, about 99% of manufacturing companies are white-owned, according to Manufacturing Renaissance. At the same time, 73% of the manufacturing companies in the Chicagoland area have an owner over the age of 55, according to study by UIC Great Cities Institute. And 61% have not chosen a suitable successor.
Swinney first made a stab at this approach in the late 1980s. At that time, he created a for-profit subsidiary, which made “seven or eight acquisitions,” he says. Ultimately, however, it didn’t have enough capital to keep going and he closed down the project. More recently, he realized the concept still had legs—as long as he could team up with enough partners. Thus, the OCP was formed. (The name will soon be changed, according to Swinney). The focus is on smaller companies, which are in most need of help.
The so-called Silver Tsunami of Baby Boomers retiring has prompted other efforts, such as a new fund by the Evergreen Cooperatives in Cleveland, that emphasize transferring ownership to groups of employees who form worker-owned cooperatives.
For OCP, there are two parts to the puzzle. The first is identifying potential sellers. Some of that intelligence will come from union reps, who know which of the companies they represent are owned by retirement age folks with no successor in sight.
The other is finding buyers. The first avenue will be to approach employees who might be interested in purchasing the company. If no employees are interested, OCP will turn to a pool of interested buyers who are people of color, some of whom will be identified by partners with access to a broad network of contacts.
If that doesn’t provide a viable purchaser, then, “At the end of the day, we’ll work with any entrepreneur committed to keeping the company here,” says Swinney. “Each of these companies may employ 10 or 50 people. But in aggregate, they represent the lifeblood of the manufacturing sector.”
The group will also work to prepare employees to take over the business and secure funding.
The OCP is not the only Manufacturing Renaissance initiative. The Chicagoland Manufacturing Renaissance Council (CMRC) is a public-private partnership of manufacturing companies, consultants, labor unions, non-profits, government, educators and community and economic development leaders focused on the key role played by manufacturing in building a strong, sustainable society.
And there’s Manufacturing Connect (MC), which provides training in manufacturing jobs, and has three initiatives: a high school-based training program, a project for alumni and young adults who can act as mentors and a program training instructors how to be both culturally and pedagogically competent. (Photo at top: a graduate of a Manufacturing Renaissance training program)
Swinney and his partners are in the midst of a $1 million fundraising campaign that will allow them to hire full-time staff for OCP. But there is a great deal of urgency to the effort. “This opportunity will be available for the next 10 years or so,” he says. “After that, a lot of these companies will be gone.”
All photos by David Robinson.
Anne Field is a New York-based journalist who writes about social enterprise and impact investing. A version of this article originally appeared on her Not Only For Profit blog on Forbes.com.