Many brands vanished in '08

NEW YORK — Shoppers won't be picking up ornate lamps from the Bombay Co. in the coming year. Or investing with Lehman Brothers and Bear Stearns. No flying to Hawaii on Aloha Airlines or buying ultra-cheap tickets on Skybus, either.

All those names vanished this past year, victims of the economy, the financial meltdown or other factors. Experts say 2009 could mark the end of even more well-known brands as the now-yearlong recession puts more struggling companies on life support.

"I think 2009 is going to be a bloodbath," said Scott Testa, a marketing professor at St. Joseph's University in Philadelphia. "I think it's going to be very, very ugly."

For some companies, 2008 was no beauty. The woes of the nation's retailers began before the year even started. The Bombay Co., known for its home accessories and furnishings, filed for bankruptcy last fall and shuttered the last of its stores in January because of slow sales, an ailment that hurt other companies as the economic downturn turned into a recession.

The casualties weren't limited to retail. Travelers also bid adieu to some airlines in 2008 as jet fuel prices soared and consumer spending on extras like travel plunged. Aloha, ATA, Skybus and Champion Air all grounded their planes.

And two of the biggest names that disappeared this year took the economy and consumer confidence down with them.

Bear Stearns was headed toward collapse in March, awash in massive losses from toxic securities tied to subprime loans, before the government engineered a fire sale of the 85-year-old investment bank to JPMorgan Chase & Co. And the credit crunch that paralyzed the world economy only got worse after Lehman Brothers, a 158-year-old company that helped finance America's railroads, became the biggest bankruptcy in U.S. history.

The ripple effect those two failures had on the economy was evident at malls across the nation. Consumers, already nervous about the falling value of their homes and the security of their jobs, curtailed their spending even more.

With sales and profits dropping this year and lenders leery of granting new credit, a number of retailers failed. Home goods seller Linens 'N Things began liquidating its stores after originally filing in May for Chapter 11 bankruptcy protection. Apparel chain Steve & Barry's did the same later in the year. Specialty retailer Sharper Image Corp. also vanished. KB Toys is in the midst of restructuring its business and is liquidating its more than 400 stores.

Of all the brands to disappear in 2008, Testa said, consumers may miss department store chain Mervyns the most because so many shoppers had a connection to the store.

"That's a brand that's been around for a very long time," he said.

Mervyns, which had been operating for five decades, said in October that it would have to liquidate its stores after filing for bankruptcy protection this summer.

The store's faithful shoppers probably will seek out new places that have the brands and prices they want, or may just stop spending if they don't find a replacement that resonates with them as much, said Rita Rodriguez, chief executive for the U.S. division of The Brand Union, a firm that helps companies create brand identities.

That includes 10-year-old Abhijit Ramaprasad of Milpitas, Calif.

"We got most of our clothes there," he said. "We went more times than any other store."

He said he'll now have to go someplace like Kohl's or Macy's, but wasn't looking forward to that because those stores are so much bigger.

Survivors will change

The vanishing acts weren't just in the U.S. British retailer Woolworths Group PLC collapsed late this year after it was unable to sell its 800-store business that was nearly 100 years old.

The stores are closing in stages, with the last set to close next week.

Beyond the brand names customers will no longer see, people may find many familiar businesses looking different. Retailers may operate far fewer stores or sell their goods only online. Banks may become subsidiaries of those that bought them or their names may be joined.

Circuit City Stores Inc., the nation's second-biggest electronics retailer, is closing more than 150 stores and laying off thousands of employees as it keeps operating and attempts to restructure under Chapter 11 bankruptcy protection.

After Bear Stearns' collapse, several other financial companies were able to stay alive by becoming subsidiaries of healthier banks. The names of those institutions remain, but are likely to fade away over time. Washington Mutual, for example, was bought by JPMorgan. The new owner plans to rename Washington Mutual's bank branches.

The shakeout among companies this year will give sturdier brands a chance to shine and set them apart from their less-than-prosperous counterparts, experts said.

Testa said the economic Darwinism will mean only the strongest stores survive, and they'll use the downturn to get more powerful.

Companies will have to find ways to stand out, and that includes making sure customers picky about where they spend their money have a better experience, Rodriguez said.

"The brand is going to have a bigger opportunity to stand out and to articulate a promise and to deliver the experience," she said, "and it's going to have to do that in 2009."

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Suit claims Amerigo owes $8.5M

The Nashville-based owner of Amerigo, a casual Italian restaurant chain, has been hit by a lawsuit in federal court that claims the company failed to pay back millions of dollars in loans.

Nashville-based Vivid Restaurant Concepts owes more than $8.5 million, according to the suit filed in U.S. District Court in Nashville by General Electric Capital Corp.

Vivid owns six Amerigo locations in three states and a steakhouse that goes by the name of Char in Mississippi.

The suit claims that Vivid defaulted on loan agreements dating to 2006 and 2007 that provided financing to buy those seven restaurants, including Amerigo locations on West End Avenue and in Brentwood, the lawsuit says.

The restaurant company has been hurt by declining revenues and wasn't able to meet its monthly loan payments, according to General Electric Capital Corp.'s lawsuit. It said Vivid did not respond to a demand letter asking for $154,079 in November, according to the suit.

Vivid said in a statement it is working to restructure the terms of the loan.

"This in no way affects daily operations of any of our restaurants," Vivid said, adding that no stores will be closed.

Vivid is led by the company's president and CEO, David R. Blackburn, a former O'Charley's Inc. regional vice president.

Blackburn and a New York-based private equity firm bought the restaurants from the founders of Amerigo and Char in 2007. General Electric Capital Corp.'s suit seeks more than $8.5 million along with interest, late fees and other costs plus attorneys' fees.

The company said it wants the court to appoint Kevin T. O'Halloran of Newbridge Management LLC as a receiver managing and operating the properties.

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White House uses portions of Corker bailout proposal

U.S. Sen. Bob Corker, R-Tenn., may not have been able to secure the near-compromise bailout plan he crafted between Detroit automakers and their main union in the week before Christmas, but that doesn't mean he has stopped trying to achieve the proposed changes.

The White House-brokered loan program that extended as much as $17.4 billion to General Motors and Chrysler (Ford said it does not need the money) retained Corker's provisions to cut debt at the companies by two-thirds, eliminate programs like the United Auto Workers' jobs bank, and make wages competitive with foreign automakers operating in the U.S.

In a conference call with The Tennessean editorial board on Tuesday, Corker indicated that he was pleased the White House chose to keep the provisions he worked out, but cautioned that because they are nonbinding, it will be up to the incoming Obama administration to enforce the agreement.

"It really is dependent upon Obama," said Corker, who has had two separate discussions with Timothy Geithner, the president-elect's nominee for Treasury secretary and president of the Federal Reserve Bank of New York.

"Tim (Geithner) has listened. It's been more of a monologue," he said. "I'm hoping (the Obama administration) will be very centrist in their approach, and I think there's a great possibility they're going to view this as an opportunity to show the American public that they are going to be centrist in their approach."

According to the loan terms agreed to by GM and Chrysler, the companies have until Feb. 17 to submit plans to a presidential designee for how to reach targets laid out by the Corker plan. Since the loan facility is through the U.S. Treasury, the new president would have the authority to change the agreement and eliminate the Corker provisions.

The UAW hopes the new administration does just that and is lobbying for it.

"The UAW strongly disagrees with the addition of these Corker proposals. We will be calling on President-elect Obama to indicate that he will drop these requirements," UAW legislative director Alan Reuther wrote in a letter circulated to members of Congress on Dec. 19, the day the White House deal was announced.

Corker defends role

In Tuesday's conference call, Corker defended his role as dealmaker and industry critic, both of which drew the national spotlight to him earlier this month, during the Senate Banking Committee's auto bailout hearings. Corker said portrayals that he is anti-union and a Republican senator unwilling to compromise were not accurate.

"This was never about anything other than shared sacrifice," he said. "And that's what we got."

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Bowl fizzles at cash register

Merchants and hotel operators say they aren't seeing anywhere near the levels of business they experienced last year from the annual Music City Bowl football game, which will be played this afternoon at LP Field.

Hotel occupancy is off about 20 percent downtown, and 30 percent to 35 percent in the airport area compared with the same time last year, said Walt Baker, executive director of the Greater Nashville Hotel and Lodging Association.

And many downtown Nashville businesses say they haven't seen the crowds they drew in the period leading up to last year's game between the University of Kentucky and Florida State University.

Most blame this year's choice of teams: Vanderbilt University and Boston College.

"One team is based here, and the other is not known as a traveling team," Baker said, noting that in times past when Boston College has played here, it has not drawn well. "It's just a recipe for a bad hotel performance in bowl week."

But bowl officials "really didn't have a choice which teams to pick," Baker acknowledged.

At the Nashville Outfitters store on Second Avenue downtown, manager Scott Huffman said his store has seen very few visitors here for this year's game, a huge turnaround from 2007.

"Last year, we did very well with all of the Kentucky fans in town," he said. "Their alumni group even rented the front part of our store and sold their own fan souvenirs from here."

Virtually nobody from Vanderbilt has come in, he said. "Vandy fans aren't interested in buying Nashville souvenirs."

At the nearby Charlie Daniels Museum, manager Gina Lane said some Boston College fans had been in, but some had a strange question.

"They wanted to know, 'Who is Charlie Daniels?'" she said. "I guess country music isn't all that big in Boston."

There were some Boston College fans exploring downtown attractions on Tuesday afternoon, though, and they said they were enjoying Nashville and spending money.

"We've just spent about $500 on boots," said Ron Hovsepian of Holliston, Mass., who brought his wife, Megan, and three of his four children to the event. His son John is a senior wide receiver on the Boston College team.

BC student Robert Kaplan drove down from Boston with his friend Mike Keating, an 18-hour trip that they made in a Toyota Prius "to save money on gas," Kaplan said.

Kaplan and Keating were shopping downtown Tuesday afternoon as well, and Kaplan said he was "spending money I don't really have. I'll probably have my credit cards maxed out by the time I get back."

Allotment almost sold

Vanderbilt encouraged even its local fans to stay in hotel rooms and patronize local businesses as part of their Music City Bowl experience, said Rod Williamson, the university's director of external relations.

"We completely get it that the bowl is more than just a football game," he said. "We want to be a good Nashville citizen, and we understand there are economics at play. We have gone to great lengths to sell our tickets."

As of Tuesday morning, the school had sold more than 13,000 of its allotment of 13,500 tickets, and expected to sell out by game time, Williamson said.

Boston College probably will end up having somewhere between 3,000 and 4,000 of its own fans at the game, which is something of a disappointment but was expected, said Scott Ramsey, president of the Music City Bowl.

But combined ticket sales, including those sold directly by the bowl organization, should total "about 53,000," he said.

"We consider that a success, since we had a goal of 55,000," Ramsey said.

That's down from the past two years, when the event was a sellout; the stadium seats nearly 69,000. But before 2006, the event was averaging about 50,000 a year.

"This year is a little different," he said. "We have two private schools playing, and one is not in drivable distance. And the economy is affecting everybody nationally. All things considered, we're very pleased. I just hope that everyone who bought a ticket will show up and give us a good showing on national television."

Some Vandy fans traveled to Nashville for the event and will be staying overnight in hotels and spending money in restaurants and stores.

Among them is Ed Hahnfeldt of The Villages, Fla., whose son is a kicker on the Vanderbilt team. Staying at the Gaylord Opryland Resort & Convention Center, which also houses both teams and their cheerleaders, Hahnfeldt said he "drove to Nashville for every home game all season," and wasn't about to miss the bowl.

Bob and Sandy Lindeman drove up on Tuesday from Tullahoma, just 80 miles away, and spent the night in Nashville before going to the game.

"Our daughter graduated from Vanderbilt, and I've been coming to Vandy games for 20 years," Bob Lindeman said. "I never thought they would ever be in a bowl game, but there was no way I was going to stay home and miss it."

BC fans are scarce

At McFadden's Restaurant and Saloon on Second Avenue, Barbara Raines, assistant to the marketing manager, said Tuesday afternoon she was surprised that not many Boston College fans had shown up yet, considering that the restaurant also has a location in Boston.

"We're a traditional Irish pub, what I like to call the 'Cheers' of Nashville," she said, referring to the legendary Boston pub made famous by the television sitcom.

"You'd think a lot of the Boston folks would come in."

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Economy ignites hospital layoffs

Tennessee hospitals are feeling the effects of a slumping economy, forced into cutting staff, increasing charity care and dipping into hospital reserves to pay bad debt.

In a membership survey completed this month, the Tennessee Hospital Association found that a majority of the state's hospitals that responded have reduced staff or are considering cuts. Nearly as many have also cut services or are thinking about reducing them.

A total of 88 hospitals responded to the survey. Not all hospitals responded to all questions.

Craig Becker, president of the Tennessee Hospital Association, which represents 134 hospitals across the state, said the survey revealed dramatic changes in three categories: a spike in charity care, namely because of an increase in uninsured patient visits to emergency rooms; at least a 20 percent to 25 percent decrease in hospital reserves because of losses in the stock market; and a drop in the number of elective surgeries, profits of which typically help pay a hospital's debt.

Ninety-one percent of responding hospitals said they've reduced or are considering reducing staff. And 85 percent said they've implemented or are considering hiring freezes.

"A lot of the hospitals have either laid people off or are considering laying people off, have shut services or are considering shutting services," Becker said. "We're getting down to the point where, for some hospitals at least, the concerns are what's going to happen next."

Becker said hospitals across the state are affected. Hospitals in Georgia, Alabama and Mississippi are experiencing similar situations, he said.

Vanderbilt University Medical Center, which accounts for nearly half of the uncompensated care in Davidson County, has not had to reduce staff, but has had to cut discretionary spending and anticipates more belt-tightening next year, said Joel Lee, associate vice chancellor for medical center communications.

Already, corporate investments and charitable giving has been trimmed, marketing budgets have been cut and the expansion of Monroe Carell Jr. Children's Hospital at Vanderbilt has been delayed because of the economy, Lee said.

'Recession-resistant'

"The old adage used to be health care is recession-proof, and it's not. It's still recession-resistant, but what gets deferred are the things that could lead to future problems," Lee said.

Rebecca Climer, chief communications officer for Saint Thomas Health Services, said the health system has been finding ways to respond to the economic pressure.

"(The survey) confirms what we all know," Climer said. "The downturn in the economy is affecting every hospital in Nashville," Climer said. "We are in a position to anticipate significant changes to come as we move into a time of sweeping health reform.

"We are developing nearly 30 multi-disciplinary teams across our organization to review our operations and evaluate opportunities for improvement."

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Deal would keep instruments in Hall of Fame

The Country Music Hall of Fame and Museum won't have to surrender musical instruments played by the likes of Bill Monroe and "Mother" Maybelle Carter to resolve claims on behalf of the estate of the donor accused of stealing more than $60 million from investors through a Ponzi scheme.

Under the proposed settlement filed with the local U.S. Bankruptcy Court on Tuesday, the museum has agreed to pay $750,000 and give up sharing in any money recovered for the estate.

If approved by the court, the agreement would resolve claims filed a year ago by bankruptcy trustee Bob Waldschmidt, who had sought either $1.5 million or for the museum to surrender the instruments whose purchases were funded by the late Murfreesboro stockbroker Robert W. McLean. McLean had given that amount to the museum among various charities and also spent some clients' money on himself.

He committed suicide in September 2007. Waldschmidt has continued efforts to recover money from donations McLean made and payments received by investors to help pay back those who lost money.

Creditors have until Jan. 21 to object to the museum's settlement, which requires Bankruptcy Court approval. The museum will have 30 days after the required approval to pay the $750,000.

"This gets us close at least to closing this chapter in our history and in the history of those instruments, which has been a demoralizing and taxing time for us," said Kyle Young, director of the museum. "It was important for us for those instruments to stay where they belong."

The museum has launched a campaign to raise the $750,000. It also has arranged for a loan with SunTrust Bank for any amount not yet raised at the time that the money is due.

Monroe's 1923 Gibson F-5 mandolin and Carter's 1928 Gibson L-5 guitar are on display in the museum as part of its Precious Jewel exhibit. Court records show McLean gave the museum $1 million to fund purchase of the mandolin and $269,414.48 to fund purchase of the guitar. Also, McLean bought two guitars formerly owned by Johnny Cash for $249,086.66 and donated them.

Carter's guitar was last priced at $575,000, Monroe's mandolin was once priced at $1.125 million, while each of Cash's guitars priced at about $125,000, according to previously published reports.

Waldschmidt, the bankruptcy trustee, wouldn't say how the $750,000 amount was reached after lengthy talks between the parties. "Recovering gifts made to a nonprofit organization poses a unique set of issues," he said. "This resolution is a fair compromise, and will benefit the bankruptcy estate and its creditors, while preserving the museum's collection of instruments."

Settlements sensible

James F. Blumstein, a Vanderbilt University law professor, said in such cases cash settlements are a more sensible approach than the potential recovery of an illiquid asset by the suing party. If the creditors had won possession of the instruments, they would have faced additional costs, such as hiring someone to sell them, and have no guarantee of getting more than the settlement amount, he said.

"The museum wants the instruments, and the creditors want money," he said. "It doesn't make sense to take an asset and go through the process of turning it into money because you're going to always lose some value related to the sale of that asset."

Several creditors contacted Tuesday declined to comment on the agreement, pending review of the details, though one sounded a positive note. "I would be confident that Bob Waldschmidt as trustee and the board of the (Country Music) foundation have reached an agreement in the best interest of both parties," said Lee Moss, chief executive of MidSouth Bank in Murfreesboro.

As part of the agreement, the museum waived rights to any distribution from the bankruptcy estate. Officials had claimed $870,850 in unfilled pledges that McLean had made to the museum.

If approved, the agreement with the museum would mark the latest recovery in the case by Waldschmidt. Middle Tennessee State University, which received money from McLean to buy 54 Steinway pianos and build a new baseball stadium, agreed to a $570,000 settlement with the trustee in June.

Waldschmidt seeks a total of $8 million to $9 million from individual investors who gave money to McLean and then received payments from him over the past four years. In a filing Tuesday, he asked the court to declare that what McLean ran was a Ponzi scheme and that he was insolvent at all times during the four years before the bankruptcy filing.

That declaration is key for Waldschmidt to be able to collect money from the investors.

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Spring Hill worries about idle GM plant

SPRING HILL — Another temporary closure of the General Motors plant here until at least Feb. 9 has spread anxiety among workers and nearby business owners who rely on consumer spending by GM's local workers to bring profits to their stores.

"There's a lot of concern throughout the plant and the community," said Rob "Boomer" Lazzara, who retired from the facility in 2006 after 30 years with GM. He now operates a music store in Columbia, Tenn., just a mile from the facility's south entrance.

"Spring Hill has become a very diverse area over the past few years, so we don't depend on GM as much as we once did," Lazzara said. "But even so, if this plant were to close permanently, it would devastate the merchants. For most of us, GM employees and their families are at least 50 percent of our business."

The 3,500-employee plant, which makes the new Chevrolet Traverse crossover vehicle, stopped production Dec. 23 and will remain closed until at least Feb 9, said Michael Herron, chairman of United Auto Workers Local 1853, which represents the facility's hourly workers.

Local officials and suppliers that work closely with GM say they're worried, too. Three nearby companies that supply parts and service to the GM plant employ another 1,000 or so people in addition to Spring Hill's direct payroll.

Johnson Controls Inc., based in Columbia, which makes center consoles and seats for the Traverse, has already announced 110 layoffs.

But the broader fear this time is that GM itself might not survive, as poor auto sales fueled by a weak national economy and consumer credit crunch have pushed the U.S. automaker near bankruptcy.

GM, along with rival carmaker Chrysler, was forced to turn to the federal government for an emergency loan, which President Bush approved last week.

A total of $17.4 billion could flow to the two carmakers by spring. GM received the first $4 billion installment of the money on Monday, as did Chrysler LLC.

On the assembly line, workers say they fear for their jobs and the pensions that many of them have worked decades to earn.

Norm Jenks, 49, has worked for GM almost 29 years. He was one of the original Saturn employees when the Spring Hill plant opened in 1989 to make what was then a novel four-door sedan.

"There are a lot of people scared right now, not only about their jobs but also about whether they will be able to afford to retire," Jenks said. "A lot of us are already close to retirement age, but if GM fails, where will our pensions and health-care benefits go?"

While GM ordered most of its facilities to extend their holiday closings to early February to help bring vehicle inventories in line with consumer demand, the company has said that shutdowns could be continued if sales don't pick up in January.

"My fear is that this is only the beginning if the auto market doesn't settle," Jenks said.

80 pecent of pay

The temporary shutdown won't hurt the workers in the pocketbook right away.

They will receive at least 80 percent of their regular pay during the time off, when state unemployment benefits are combined with supplemental pay guaranteed by the union's contract with GM.

But Spring Hill workers wonder whether their plant can survive the growing turmoil in the auto industry over the long haul on a single product, the Traverse crossover, whose sales have not met expectations since its launch in September.

A crossover is a SUV-like vehicle built on a car chassis to improve ride and handling and fuel economy.

"People on the floor at the plant see the writing on the wall," said Carl Grammatico, 51, a 32-year GM employee who has 18 years at the local plant. "We need another product to survive. We can't do it on the Traverse alone.

"I've never been so worried in my life," he added. "I've got all these years in, but right now I don't know whether GM will make it."

Many workers are so concerned about their futures that they, like many other American consumers, "are not going anywhere and not buying anything right now," Grammatico said. "We're all wondering if we'll have a job six months from now."

Lenny Canter, 47, who has worked at GM for 24 years and at Spring Hill since 1993, said he believes that GM "will ultimately survive. But it won't be the company we see today. It's going to be smaller and leaner."

Spring Hill's strengths

In a pared-down GM, the Spring Hill facility has a better chance than most of the car maker's plants to continue production, though, workers, union members and local officials believe.

"In terms of efficiency and flexibility, this is a good plant," said Frank Tamberrino, president of the local economic development group, The Maury Alliance. "This is obviously one of the top facilities for GM, and we're in better shape than many other GM communities. You look at where some of the other plants are, and we're very lucky."

GM spent $690 million over the past year to retool the Spring Hill plant to build the Traverse, but the work also made the plant flexible enough to build "any product that GM makes, except for the Hummer," Tamberrino said.

"It has won the chairman's top award for efficiency the past three years, and it has great relations between labor and management," he said. "But even though this plant has a lot going for it, we know that there are no guarantees in the auto industry."

For now, merchants who depend on the plant will try to survive the latest shutdown, and will hope that it's only temporary, said Dawn Kelley, owner of Snappy Pizza, near the plant on the northern edge of Columbia.

"The uncertainty has really been affecting our business, which is down 30 percent to 40 percent," she said. "People are scared, so they're just not coming in. We're all worried about what's going to happen to GM."

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