As Pacific Steel in Berkeley plans shut-down, union sues for unpaid benefits

Part of Pacific Steel Casting Company’s three plants on Berkeley’s Second Street. Photo: Frances Dinkelspiel

In the three years since Speyside Equity bought Pacific Steel Casting from the bankrupt company once owned by  the Genger and Desol families, the fund has been slowly letting long-time workers go, sourcing out operations to another plant it owns, and selling accumulated metals to a scrap dealer, according to a lawsuit brought by the union representing Pacific Steel workers’ pensions. In addition, the equity firm, run by a pair of men who met in business school in Michigan, failed for six months to make around $421,133 in health and pension payments to its workers, even though it had withheld health insurance funds from their paychecks.

Now Pacific Steel Casting has notified the 70 or so workers remaining at the West Berkeley facility that it will close as early Dec. 17, 2107. In doing so, Speyside will put an end to one of Berkeley’s longest running manufacturers, one that provided good paying jobs for more than 80 years and that lifted many immigrant workers and their descendants into the middle class.

But while it was winding down the operations of Pacific Steel in Berkeley, Speyside was putting the $130 million fund it raised in 2016 from pension plans and institutions to work. In 2017, Speyside purchased seven foundries or metal fabricating plants in the United States and Canada. And, in many instances, the partners of Speyside Equity, which has offices in Michigan and New York, pledged to infuse funds into those properties.

Speyside paid $11.3 million for Pacific Steel Casting in July 2014. Bankruptcy filings show that the company was generating $100 million in sales at the time. The company produces high-quality steel castings that “are used in bridges, wheelchair lifts, truck parts, agricultural equipment, valves for sanitary sewers, public water systems, the oil and gas industry, and landfill compactors, among other uses,” according to one of the company’s permits with the Bay Area Air Management Quality District, which regulates emissions.


“It’s a sad day,” said Ignacio De La Fuente, a former union representative for Local 164B of the Glass, Molders, Pottery, Plastics and Allied Workers, which represents the workers at the plant. “At one point, Pacific Steel Casting was the largest employer in the city of Berkeley after the university. I worked for many decades to keep the plant alive. It’s sad for those who are losing their jobs. We are becoming a nation of service people and you wonder why we have the problems we have.”

Speyside Equity has declined to respond to Berkeleyside’s repeated requests via email, phone, and Twitter to talk. The partners — Kevin Daugherty, who started the equity firm in 2005, Jeffrey A. Stone, Robert Sylvester and Oliver Maier — have never commented to news organizations about their acquisition and ownership of Pacific Steel Casting, even when buying it. Stone only was quoted in 2014 when Siena Lending Group, which lent $15 million toward the purchase, put out its own press release.

“Pacific Steel has an 80-year history of making large, high-quality castings with capabilities that are unique to the industry,” Stone said in that release. “We see this as an opportunity to leverage our previous experience in the foundry industry to improve the efficiency and competitiveness of the operations.”

Union representatives have also declined to talk to Berkeleyside, as has the chief operating officer of Pacific Steel.

Room with time cards at Pacific Steel Casting. Photo: Frances Dinkelspiel

Sources with knowledge of the company and the industry, but who asked not to be named, said Speyside had originally regarded Pacific Steel Casting as a company it could turn around. But when oil and gas markets tanked in late 2014, the company’s revenues dropped about 80%. China also started to grab a larger share of the market. The company reduced its workforce and cut back hours for the remaining employees to stem losses – and tried to renegotiate terms with the union –  but could not make up for the declining revenue, according to the source. The situation is so dire that Speyside Equity decided to close the plant.


When Speyside purchased the company in July 2014, it agreed to abide by the collective bargaining agreements worked out with the union, including paying for workers’ health benefits and paying into their pension fund. The federal government has established rules and regulations for these plans through The Employee Retirement Income Security Act of 1974 (ERISA).

Speyside stopped making those payments in January, according to a lawsuit filed Aug. 9 in federal court by the trustees overseeing the union’s pension and health plans. At that time, the trustees estimated that Speyside owned the pension plan $421,133.16 plus another $27,217.58 in interest and liquidated damages.

(Speyside did deliver a check to the trustees’ attorney for $116,414.65 on Aug. 18 for the pension plan, but has still not paid off the rest. It also paid $55,000 into the union’s health and welfare fund on Aug. 25, according to court documents.)

The trustees of the union pension and health plans are asking the federal courts to allow it to audit Pacific Steel Casting and tap a bond to recoup the payments that have not been made.

It the court allows that it will mean that Pacific Steel Casting will have to close immediately and not phase out its operations more slowly, thus allowing employees to work longer, according to a court document filed by the company. (Although the plant announced it would close by December, those involved say it will more likely close in February or March.) It might also throw Pacific Steel Casting into bankruptcy.


If the union trustees should prevail, “this may cause Defendant to close its business earlier than anticipated and to file for bankruptcy protection, and thus would not allow Plaintiffs to achieve their stated goal of maximizing the recovery of the outstanding fringe benefit contributions,” Pacific Steel Casting’s attorney, Richard Hill of Littler Mendelson in San Francisco, said in a filing.

A sign hanging in the office of Pacific Steel Casting on Second Street in West Berkeley. Photo: Max Cherny

According to court documents filed by the trustees of the union funds, Speyside has been reducing operations at Pacific Steel Casting, seemingly in violation of the collective bargaining agreements.

The company recently laid off 10 workers and has cut back the hours and pay of others.

“Some of the remaining workers have had their hours drastically cut and are working, in some cases, 3 to 4 days per week, and sometimes only 4 hours in a day,” according to a statement filed with the court by Fernando Garcia, the union representative and a trustee for both funds.

Pacific Steel has also been sending work traditionally done in Berkeley to West Coast Foundry in Huntington Park, one of the plants that Speyside Equity purchased this year, according to court documents. It is a non-union plant, which means the workers are paid less than the average of $22 an hour Pacific Steel Casting workers earn. The transfer of orders was done without the union’s approval, according to Garcia’s affidavit. Pacific Steel also sold equipment and scrap metal to a scrap dealer and the yard in which that metal once sat is now a homeless encampment, said Garcia.

Speyside also may let its workers go without any severance, according to Garcia.

“The members reported to me that the President of Pacific Steel Casting Company LLC, Krishnan Venkatesan, told them that Pacific Steel would not be paying severance pay, as required under the Collective Bargaining Agreement, to members,” according to Garcia’s statement.

The more than $1 million bond that Speyside held with the Berkley Surety Group to guarantee the fiscal health of the various plans has been canceled, according to the court documents. Speyside’s attorney Richard Hill told Concepción E. Lozano-Batista, the trustees’ attorney, that it was canceled because of “financial risk,” according to court documents. The trustees for the pension and health plans had hoped to tap into that bond to recoup the funds that have not been paid.

On Oct. 27, Lozano-Batista’s office informed Hill about the layoffs, drastic cuts to working hours and the outsourcing at Pacific Steel Casting to see if he knew what was going on.

“Mr. Hill did not respond,” according to a statement Lozano-Batista filed with the court. “On October 3, 2017, I had a telephone conference with Mr. Hill during which he stated that Pacific Steel was considering a variety of options regarding their business plan and did not know where they would be six months from today.”

The next hearing in federal court is Nov. 14.

Once the company closes, the owners of the property – the descendants of the founders, the Genger and Desol families – will have to decide what to do with the land.