After losing the contract to produce the majority of the U.S. military’s firearms to FN Manufacturing Colt was left out in the cold, trying to rely on their smaller law enforcement contracts and what little commercial sales they have to keep themselves afloat. That didn’t work and they filed for Chapter 11 bankruptcy protection in June. Six months later it looks like they are ready to emerge from court protection and they intend to do that by cutting some retirees benefits and asking for a huge government handout.
From The Courant:
Critical to the reorganization was the United Auto Workers’ agreement to cut retiree medical benefits for 372 former Colt workers and spouses. The contract had the company paying nearly all the retirees’ expenses that Medicare didn’t cover; the company’s exposure will now be limited to $1,500 per person.
The union succeeded in negotiating a more generous offer, as the company had proposed changing its retiree medical benefits to $1,350 per person.
The majority of retirees spend less than that, but 55 of the retirees have much higher health care costs.
The union also said it will cooperate with management in asking the state to lend the company $10 million, which it would use for working capital, product development and to buy the Colt factory in West Hartford. The factory is owned by a consortium of investors, including the Sciens Capital Management private equity firm that was the sole owner of Colt before it entered bankruptcy in June.
Cutting costs to get on a paying basis is critical for getting any company out of bankruptcy, but there’s a real question as to whether Colt will get the $10 million it’s seeking from the state. The paper correctly states that Colt has been given financing of this kind before, but that was nearly a decade before the Sandy Hook school shooting and well before the current wave of gun control activism swept across the northeast. Given the current political climate it will be interesting to see how receptive Connecticut is to such a request from a company that makes scary “assault rifles” and plans to sell them to the public.
Even more interesting will be the direction the company takes post-bankruptcy. The reason the Colt is where they are is they relied too heavily on government contracts and ignored the civilian business at a time of historic growth in civilian firearms ownership. The smart move would be to start feeding the beast that is the American firearms market and use that cash flow to try to take back the M4/M16 contracts. My gut tells me that given the political climate they are simply going to try the same old LEO/military contract route that got them into trouble in the first place. But time will tell.