If any Craftsman Hand Tool ever fails to give complete satisfaction, return it to any Sears store or other Craftsman Outlet in the United States for free repair or replacement.
Imagine if a certain giant software company offered the Craftsman warranty on the latest version of their operating system. Can’t boot that dream up? Neither could their owner and for good reason. If he did offer such a warranty, he would not be worth billions. Software may be a tool but it is not a durable tool and a bad bet to warranty for unlimited satisfaction. In their case, a warning rather than a warranty might be warranted. (For any budding rhetoricians or lyricists, that last sentence contains a polyptoton with a dash of alliteration – a John Lennon favorite.)
Still, most American companies warranty their products to consumers, a practice that began in the late 1800’s. Some early warranties tricked the consumer by defining in the notorious fine print what the warranty did not cover. Other warranties conveyed a sense of value and became an integral part of the purchasing process. A few companies have offered a 100% satisfaction guaranteed since their inception. Craftsman’s unlimited warranty dates back to 1927 when Sears bought the brand.
Over the ensuing 90 years, Craftsman became one of Sears most trusted and valuable brands. Customers were understandably surprised when Sears Holdings CEO Eddie Lampert announced the sale of Craftsman to Stanley Black and Decker at the beginning of 2017. Sears will receive $775 billion in cash plus a percentage of Craftsman sales over the next 15 years. Not a bad return on investment for a brand originally purchased for $500.
Unfortunately, the money will used to erase past debt. Lampert pledged $250 million plus the future revenue stream from the Craftsman sale to shore up Sears pension plan. This latest cash infusion adds to the $2.84 billion that Sears has put into their pension plan over the last decade. Lampert has indicated that the Kenmore and Diehard brands may on the block next.
Sears froze their pension plan and closed it to new employees in 2006 when Lampert left his day job as a hedge fund manager and took over as CEO. Since then, Sears has tried to keep ahead of the accrued benefit for the 204,000 current employees and retirees who had earned a benefit prior to 2006. The replacement defined contribution plan that started in 2006 has $2.5 billion in assets and was ranked in the bottom half of their peer group by Brightscope, a leading provider of retirement plan analytics.
Brightscope cited poor participant participation, high investment fees and less than generous company contributions as reasons for the new plan’s poor ranking. For 2015, the plan received $88 million in employee contributions and had $35 million in investment losses. It seems that the bad management habits of the frozen defined benefit plan have been mirrored in the new defined-contribution plan. For employees, the major difference between the two is that they now receive little to nothing from Sears toward their retirement.
During his tenure as CEO, Lampert merged Sears and K-mart, upgraded technology, started a membership program and a delivered a host of other self-inflicted wounds that have opened a life threatening flow of red ink. Along with selling brands, Lampert has been selling Sears vast real estate holdings just to have a little money in the bank.
Like a morality play with no good choices, poor business decisions over the last decade forced Sears in 2017 to choose between honoring their promise of a retirement benefit to their old employees and offering their future customers quality products such as Craftsman. Actually, it was not much of a choice since the Pension Benefit Guaranty Corporation, the federal agency that bails out private pension plans, pressured Sears to shore up the pension plan or else.
The lesson from this morality tale speaks directly to my colleagues in the General Assembly, especially those who have been critical of the current state pension system reform bill. In the private sector, companies are required to meet the compensation obligations made to their employees. Payroll taxes must be deposited when withheld. Pension obligations must be funded annually. If these obligations are not met, somebody gets served an arrest warrant (again, that word).
The state of South Carolina has made a promise to our state employees regarding their retirement benefits. These benefits are part of each employee’s compensation package and once agreed to become a legal and ethical obligation. The General Assembly and our Governor have a responsibility to ensure that these obligations are met. The General Assembly has passed the first of several major pension system reform bills that will be required over the next 20 years. The current bill now sits on our Governor’s desk unsigned.
Though I am a member of the General Assembly, I will refrain from telling our Governor whether he should sign the bill, veto it or let it sit. The choice is his. However, the bill before him builds a solid foundation to reform the system and reinforces our ability to meet the pension obligations made to our state employees. Besides, the only brands of value that we have are our state college mascots. I just don’t see our citizens supporting that kind of asset sell-off especially coming off of a year when so many of our sports teams gave us 100% satisfaction.