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Former Cooper execs blast Apollo deal

FINDLAY — Three retired senior executives of Cooper Tire & Rubber Co. charge "corporate greed" drove the $2.5 billion takeover deal that they say endangers the 99-year-old company, workers' jobs, pensioners' benefits, and Findlay's well-being.

President Roy Armes and the board of directors "have sold Cooper out," said Dick Stephens, former president of North American Tire Operations, who retired in 2006 after 28 years with the company.

"Essentially, this is corporate greed," he said."There doesn't appear to be a moral compass," said Dick Teeple, former vice president, general counsel and corporate secretary. He retired in 2003 after 26 years.

Cooper, as a subsidiary, will have to repay $2.1 billion of debt created by its purchase by Apollo Tyres of India, and it is uncertain whether Cooper can meet its burden, Stephens said.

Even if Cooper does, it will be short on cash needed to improve and grow, he said.Meanwhile, the executives said, the future is bright for several top Cooper executives even if the subsidiary Cooper eventually fails.

For example, when the deal closes, Armes will be in line for $22.8 million, and a total of more than $41 million if his personal shares are counted, according to a Cooper filing with the Securities and Exchange Commission on July 8.

At least four other top executives will collect $3.7 million to $5.5 million, part of $66.8 million already put into a special trust for them.

Among those getting a slice of the special trust are Armes' non-employee colleagues on the board, which voted for the company's sale.

"That deal sucks. It's a perfect example of what's wrong with this country," Stephens said.

"You've got key executives who have no tie, no concern about anything other than themselves," Stephens said, "and 'If I can walk out of there with $10 million, $20 million, $30 million or more, and screw everybody else, or potentially screw everybody else, I don't care."

Cooper's vice president for communications and public affairs, Anne L. Roman, said it appeared the former executives' statements were simply opinion.

"I do not believe we have anything to add beyond what we've already communicated that would address the opinions in the email you sent," she told The Courier.

She said Cooper has answered questions about the acquisition in interviews, open letters, and on its website. It is also communicating with individuals, including retirees, by telephone and letter, she said.

Stephens, Teeple, and Larry Schock, former vice president for manufacturing and finance, who retired in 2009 after 33 years, acknowledged that Apollo's bid for Cooper is compelling on paper.

Cooper's stock was trading just shy of $25 per share when Apollo offered to buy all of the shares for $35 each, a 40 percent premium.

"They (board members) have to give it very serious consideration," Teeple said.

But, they said, stockholders have the final say and a date for their vote has not been set. They predicted stockholders will approve the sale.

Beyond the officers, board and stockholders are thousands of others who have no say in the deal that will put the new subsidiary at risk, they said.

Cooper will face a "tremendous challenge" when it has to pay $140 million to $200 million per year on the debt financing of the deal, they said. The debt likely will have to be refinanced in seven or eight years, probably at a higher interest rate, they said.

The situation is complicated further, they said, because the parent company probably will continue to funnel profits through the tiny Indian Ocean island-country of Mauritius, making it difficult for other subsidiaries to help fund Cooper.

"You cannot cash-starve any business and expect that business to grow and be stable," Stephens said. In fact, he said, Cooper's profits in only two of the past 10 years were large enough to have any cash left over if it were making Apollo-size debt payments, Stephens said.

And this is before subtracting expenses for interest, taxes, depreciation and amortization, he said.

"The probability of success, based on the way the deal was structured, is low," he said.

The company's workers, especially, are "totally at risk" in the Apollo deal, Stephens said.

"If Cooper does not continue to generate successful operations and be able to fund the debt, and it goes bankrupt, then all of these other stakeholders (workers, pensioners and their communities) ... they've gone by the wayside," Schock said.

"They're, quite frankly, s--- out of luck."

Teeple said office jobs in Findlay could be cut.

"Many of the back-office jobs can be performed anyplace in the world," Teeple said.

"I see accounting and these kind of jobs going elsewhere."

Even without the sale to Apollo, the Findlay factory is at risk of closing eventually, Stephens said."

Unless there is a significant change in the dynamics of the North American market, I think the Findlay plant is at risk under a non-acquisition," Stephens said.

"Is that a three-year period, a five-year period, a 10-year period? I don't know. But it's at risk.

"If the number of tires sold in North America declines much, the Findlay factory is most likely of Cooper's three domestic plants to be closed, he said ...

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