Short in the sleeves

Never heard of Linda Wachner? If you live in Waterville, or if you ever worked at the Hathaway Shirt Co., you must have vivid recollections of the woman once hailed by Fortune magazine as America’s “most successful businesswoman.”

Ms. Wachner is the chief executive officer of the Warnaco Group, which bought Hathaway and closed it down in 1996, and would have put 450 employees in Waterville and 200 more in Canada out of work. A group of investors put together by former Gov. John McKernan bought the company and now operates it.

People who lived through that roller-coaster ride may get a certain grim satisfaction in learning that, while Hathaway is thriving again, with a payroll of 370 in Waterville and nearly 100 in Canada, Ms. Wachner and Warnaco have fallen on hard times.

Warnaco Group is anything but thriving. The firm, whose sales once reached $2.25 billion a year, is close to collapse, and its stock has dropped from $44.375 a share in July 1998 to 81 cents on Tuesday. The company has acknowledged that it was out of compliance on its bank loans. Its auditors, Deloitte & Touche, have said that unless the company can renegotiate the loans they have “substantial doubt” that it can continue operating.

As for Ms. Wachner, she and other company executives are accused in two class-action lawsuits of artificially inflating the stock price by issuing misleading statements about financial performance. The Securities and Exchange Commission is investigating possible violation of securities laws.

Full details appeared in The New York Times “Money & Business” section last Sunday. The juice in the piece comes from interviews with investors, former employees and retail partners who blame Ms. Wachner’s management style for hurting and perhaps even killing the company. Former employees accused her of making crude, personal comments that intimidated and humiliated them. Some were quoted as saying that they had become reluctant to warn of slowing sales or defecting customers for fear of incurring her wrath.

Ms. Wachner declined to be interviewed for the story but denied in a written statement that she was unprofessional toward employees. She said, “My management style is tough but fair. I would certainly never do anything to humiliate or embarrass anyone.” Some employees supported her, saying that she was simply a hard-driving executive who demanded high performance to meet her goals.

A specific complaint was that she dumped excess inventory to discount houses, thereby cheapening brands and offending suppliers and department stores. Warnaco denied that the sales interfered with its commitments to its regular outlets. As Warnaco struggles to stay afloat, some investors are pressing to have Ms. Wachner fired. Not likely, if only because her contract would require a severance payment greater that the company’s total cash on hand.

But if the unlikely should come to pass and she needs work, there’s a shirt factory in Waterville that might find a spot for her at one of the machines.