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Oreck Founder Blames VCs for Company’s Failings

22 May, 2013 By: Doug McPherson

NASHVILLE, Tenn. – Response Magazine reported in last week’s edition of Response This Week that Oreck Corp., the vacuums and cleaning products company, filed for Chapter 11 bankruptcy protection. However, Response has learned that the company’s founder, David Oreck, is unhappy with the situation and blames venture capitalists for the mess.

Oreck told the Medford (Ore.) Mail Tribune last week that those who acquired the company had different ideas than he did about running it. “I didn’t believe in doing business with the big-box Wal-Marts of the world,” Oreck said to the newspaper. “I was oriented for the consumer ... and it worked extremely well. They felt their big-box approach was the way to go. They were amazingly ignorant of the methods I used.”

Oreck said he couldn't understand why investors would buy a successful company and then go in a direction contrary to the one that provided sound financial returns for decades and hundreds of jobs to Americans.

"What they paid for was very successful and liquid," Oreck said. "Quite frankly, they were mostly concerned with getting their money back out as quickly as possible. My idea was to build something going into the future and succeed me. There are a number of these groups where they buy things and turn it around, make a buck and take a walk. That's fine, and that's their business, but that's not my idea of running a business."

Oreck has seen his former company enter bankruptcy twice since selling it. Private equity firm GSC Group took Oreck into bankruptcy in 2010. Controlling shareholder Black Diamond Commercial Finance sought court protection for Oreck earlier this month. Both companies had courted big-box retailers to the detriment of their own stores, the founder said.

"Maybe I'm naive, but if someone pays a good bit for a successful company that has a good track record and is profitable and relatively free of any debt, why would they do things differently? If you thought you had a better plan, why not just go into business for yourself?" Oreck posited.

Oreck has said he thinks bankruptcy is one way to clean the decks of poorly run companies. "Unfortunately, vendors go along doing business with the company and lose money to the extent the company owes them," he said. "In most cases, people get a pretty good indication of whether they should stop selling to, or issuing credit to, that company."

Oreck recently published his autobiography called "From Dust to Diamonds." In it he shares his dislike of venture capitalists. Oreck said the timing of the book’s release is a coincidence. 

The Chapter 11 move will allow Oreck to sell the business while continuing day-to-day operations without interruption. Oreck has about 70 employees in the corporate office in Nashville, and it employs 250 workers at its plant in Cookeville, Tenn. The company also has about 325 employees at its 96 company-owned retail stores.

Oreck founded the company in 1963 selling vacuum cleaners by mail. Oreck sells its products in hundreds of Oreck Clean Home Centers, through major retailers, and through phone and online direct sales. The company distributes products in the U.S., Canada and parts of Europe.

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