Thanks for sending this article, Steve. (NY Times article copied below,
discussing corporate bankruptcy as a strategy for cheating workers out of their
pensions, and/or, transferring the contractual obligations of those pensions to
taxpayers). This provides a good illustration of but one facet through which
the 'conservative' Corporate Party considers that the only legitimate function
of government is to act as a corporate welfare distribution system. This
brazen, 'in your face', hypocrisy is overwhelming as we watch the Corporate
Capitalists use the bankruptcy system to void union contracts, as well as
transfer their pension obligations to us, (the US taxpayers), as they have, at
the same time, slashed the bankruptcy protection available to ordinary
citizens, ('ordinary' meaning real living people rather than 'corporate
persons'). As a result of our brand new Personal Bankruptcy Law, brought to us
by our good representatives (corporate lackies) in both the Democrat and the
Republican Factions of the Corporate Party, if you are felled by a catastrophic
illness, or your job is outsourced to India, (but two misfortunes that often
befall real living people), and your bills and debts pile up as a result to a
crushing and impossible burden, the government will no longer protect you. You
will make payments on those debts, (and the government will assist the
corporations in debt collection through garnishment), for the rest of your
life, and the entire corporate system will heap shame on you at every turn,
(every time you apply for credit, or try to rent an apartment, or try to buy an
insurance policy, etc). But if 'you' are a corporation, all you have to do is
'declare bankruptcy', jettison your contractual obligations to your work force,
dump billions of dollars in pension obligation on the US taxpayers, and
'presto', the value of your stock shoots up, your profits soar, you put
truckloads of money in the bank, buy a new yacht, update your private jet, and
build yet another private palace for yourself in some exotic location. If 'you'
are a corporation, just 'declare bankruptcy', and you are off and running again
in the so-called 'free market', free of your contractual encumbrances, but
suffering no stigma of shame at all from the experience. Isn't this 'free
market' wonderful?
[Just as an interesting aside as background, (I'm an old History buff), the
basic tenets of the Bankruptcy Law that was just gutted by our vigilant
Corporate Capitalist lackies in Congress, were written by Caesar in the first
century B.C. Caesar, who was destined to be murdered by the aristocracy of
course, was a great hero of the plebeians (i.e. the People). It's a complex
story, as Caesar was also a ruthless conqueror, who captured and sold millions
of Gauls (French) and Germans into slavery, but he also wrote Land Reform Laws
that took land from 'latifundias', huge plantations run by slave labor, (and
virtually all the slaves were Caucasians from northern and eastern Europe,
btw), and gave it in small parcels to the unemployed plebeians (the People) of
Rome and the peasants of the Italian countryside. He also was a great champion
of the political rights of the Roman plebeians, (who were openly referred to as
'the mob' in the Senate), and of spreading the rights of citizenship to all the
'subjects' in the spreading Roman Empire, many of whom were, of course, Semitic
Arabs and Jews, Persians, (although Persia itself was not conquered in his
time), northern Africans, including the black Numidian tribes that controlled
the areas both south and west of Egypt, which was itself still, back then, in
the hands of Alexander's Macedonian descendents (Cleopatra was Macedonian).
Caesar rose to power in a time that was, in many ways, very similar to our
own. As naked and ruthless Imperialism became the accepted order, the excesses
of Corporate Capitalism were losing all their bounds of shame, and were preying
on the People with ever decreasing restraint.]
One thing that I think this NY Times writer, Mary Williams Walsh, has wrong, is
in reporting that,
"And bankruptcy specialists say that it is almost certain to keep happening,
because shedding pensions - and pensioners' health care obligations - is
turning into an irresistible way to make a high-risk investment pay off."
She mentions Carl Icahn, who many say provided the 'inspiration' for Oliver
Stone's Gordon Gecko character in the classic film 'Wall Street'. Among many
famous lines in this film, was one of the most hard-hitting, when Gecko tells
his young protégé, Bud, "I don't take risks, pal. I bet on sure things." It is
not through 'risk' that these 'vultures' make their money. It is through a web
of inside information, influence in government, and corrupt cronyism in
regulatory agencies, that these 'vulture investors', as Ms. Walsh calls them,
rake in obscene truckloads of wealth, while adding nothing useful,
constructive, or creative at all to the economy. This is the real 'story' here.
It would be bad enough if they were actually making "high risk investments",
but the reality is that this is a corrupt and crooked game of Three Card Monte,
and they have all the winning cards up their sleeves. The Congress and the
Courts are in their pockets, and their ole frat buddy, the 'Best Damn Liar in
the Land', is in the White House. Mere citizens are nothing but 'marks' for
them to fleece.
The Left is failing to adequately construct its own message to counteract the
power of the most basic bedrock of the 'conservative' message. 'Conservatism'
has successfully convinced the citizenry that 'government is bad'. Katrina is
giving us the opportunity now to 're-frame' and refine our message. The
government is not the useless ogre that "needs to be drowned in the bathtub",
that the Corporate Capitalists, (the bathtub quote is from Grover Norquist, a
capitalist errand boy, not actually a Capitalist himself), paint it out to be.
In the regard of the Basic Social Contract, the government is the only 'agent'
capable of guarding the interests of the commonwealth, the interests of the
Common People. Just as the government is the ONLY 'agent', the ONLY 'entity',
that is capable of providing both protection and relief from disasters like
Katrina, (which it has criminally failed to do, since it is in the unholy
clutches of the Corporate Party that cares nothing about protecting the Common
People), it is ALL that we 'the People' have to protect us from the unbridled
predatory Greed of Corporate Capitalism.
'Conservatism' has been distressingly successful in 'selling' its message that
'government is bad'. And the progressive Left has done a very poor job of
countering this with a basic and simple message that points out that when the
protection of government is gutted by the 'free market' Capitalists, the
Corporate Party immediately begins to steal the Common People, the US
taxpayers, blind, in naked, abject, and blatant 'in your face' Greed.
Bad government is bad, to be sure. And bad government is what we get when
government is in the hands of the Corporate Party. But a Government, OF the
People, BY the People, and FOR the People, is a government that will PROTECT
the People, not only from foreign enemies and natural disasters, but also from
the greater, and MUCH more immediate, threat of the ravages of unbridled
Corporate Party Greed.
They steal from us in broad daylight. They do it right out in front of
everybody. The Savings and Loan Scandal. The Enron Scandal. This Bankruptcy Law
travesty of Justice. They don't even have to hide what they do. They commit
these crimes, then sit around their opulent tables and raise their glasses in
laughter as they congratulate each other for their evil cleverness. And
reporters at the NY Times write about it all in the newspaper, (this article
Steve sent is from the NY Times), as if this is 'business', to be discussed
over our coffee, after we check to see how our own stocks are doing. You can
almost see their raised pinkies, as they lift their cups to their lips, and
talk about this naked, blatant, brazen Corporate theft of our tax dollars, that
comes out of every Friday's paycheck, in terms of 'business', rather than
brazen criminal behavior.
Of course the first thing this Corporate Party always attends to is gaining
complete control of the Means of Communication. When you control the 'flow of
information', when you own all the newspapers and TV stations, and especially
when you have the citizenry tuned in intensely (hours each day) to the most
powerful tools of propaganda and 'brainwashing' (cultural training) that has
ever existed, you can get away with this shit. You don't hire reporters and
writers who are going to call a spade a spade. You hire writers who are going
to call using bankruptcy law to brazenly rob US taxpayers, to line already
gilded Corporate coffers with yet more obscene wealth, a "powerful turnaround
tool".(Chomsky explained this with consummate thoroughness in 'Manufacturing
Consent')
The 'Free Market'. LOL. (It's not really funny, of course, but JEEZ, how did we
get this dumb?) We can all see, right out on broad daylight that this 'free
market' is a crooked game. The irony that the People have been propagandized
NOT to see, is that this 'free market' is the ENEMY of free enterprise. The
'free market is the ANTITHESIS of free enterprise. As we watch as Marx's
theories are proven out before our very eyes, as we watch the natural and
inevitable process as every 'free market' becomes dominated by oligopolies, if
not outright monopolies, we also watch and see that not more than a miniscule
percentage of the citizens understand what we are seeing. By their crooked game
of Three Card Monte, supported by the smoke and mirrors of modern media, the
Corporate Capitalists have the People believing that the 'free market' and
'free enterprise' mean the same thing. Even the poor folks who are actually
victimized in the predatory 'free market', even all the Mom and Pop enterprises
along Main Street in small town America that have been destroyed as WalMart has
ascended the so-called 'free market', do not really understand what has
happened to them. They do not really understand that in an unregulated 'free
market', the behemoths always eat the small fry, and free enterprise is
destroyed by oligopoly, if not outright monopoly.
Anyway......I'm starting to 'rant and rave' here. Sorry. Thanks again for
sending this, Steve. Good Government is the only friend the People have to
protect our interests and position in the Basic Social Contract. This Basic
Social Contract has not had a major review or revision since 1215 (the Magna
Charta). Lenin and his buddies tried but failed. A lot of folks around the
world are pressing for re-opening negotiations of this biggest and most basic
'Contract' of all. The Magna Charta grabbed the King by his throat and forced
'contractual concessions'. Time to put our own chokehold on the Corporate
Capitalists. At least once every millennia or so, we ought to re-open
'negotiations'. It's been eight centuries now since 1215. That's long enough.
Time to take government back from the clutches of the Capitalists, and make it
the guarantor of the interests of the People in the Basic Social Contract.
RZ
PS: Brother Steve Zeltzer posted the NY Times article on the Labor Action
Coalition list-serve. I am sending this reply (which includes the article being
discussed below) to other trade union lists, as well as to many folks who
attended the Take Back Our Unions Conference in Chicago this past July.
Hopefully this might initiate discussions on other lists, and of course, the
Labor Action Coalition is open for membership ( [EMAIL PROTECTED] ) if any want
to make a reply or add comments here.
----- Original Message -----
From: steve zeltzer
To: BALA1
Sent: Tuesday, September 20, 2005 8:39 AM
Subject: [laborcoalition] Corporate Looters Making Billions Ripping Off
Pension Plans
http://www.nytimes.com/2005/09/18/business/18pensions.html
------------------------------------------------------------------------
September 18, 2005
Whoops! There Goes Another Pension Plan
By MARY WILLIAMS WALSH
ROBERT S. MILLER is a turnaround artist with a Dickensian twist. He
unlocks hidden value in floundering Rust Belt companies by jettisoning
their pension plans. His approach, copied by executives at airlines and
other troubled companies, can make the people who rely on him very rich.
But it may be creating a multibillion-dollar mess for taxpayers later.
As chief executive of Bethlehem Steel
in 2002, Mr. Miller shut down the pension plan, leaving a federal
program to meet the company's $3.7 billion in unfunded obligations to
retirees. That turned the moribund company into a prime acquisition
target. Wilbur L. Ross, a so-called vulture investor, snapped it up,
combined it with four other dying steel makers he bought at about the
same time, and sold the resulting company for $4.5 billion - a return of
more than 1,000 percent in just three years on the $400 million he paid
for all five companies.
Two years later, as the chief executive of Federal-Mogul
an auto parts maker in Southfield, Mich., Mr. Miller worked on winding
up a pension plan for some 37,000 employees in England. The British
authorities balked at the idea, fearing that such a move would swamp the
pension insurance fund that Britain was creating; it began operations
only last April. But the investor Carl C. Icahn has placed a big bet
that Federal-Mogul will pay off after the pension plan is gone; he has
bought its bonds at less than 20 cents on the dollar and is offering
money to help the insurance fund. He, too, stands to make millions.
Now Mr. Miller is at Delphi
the auto parts maker that was spun off by General Motors
in 1999. If past is prologue, one of the most powerful turnaround tools
at his disposal will be his ability to ditch Delphi's pension fund. He
did not return numerous telephone calls seeking his views for this
article, but in the past he has said that his first priority at Delphi
was to "resolve" its "uncompetitive labor cost structure." That includes
the roughly $5.1 billion gap between the pensions it has promised
employees and the amount it has put aside to pay for them.
If the obligation to make good on Delphi's pensions eventually lands, in
whole or in part, at the door of a governmental guarantor, few should be
surprised. The Pension Benefit Guaranty Corporation
has become an increasingly popular option for private-capital funds and
other investors who are seeking to spin investments in near-bankrupt
industrial companies into gold. The key is to shift the responsibility
for pensions, which weigh as heavily as bank loans on a company's
balance sheet, to the pension corporation.
The same financial alchemy has been performed at Polaroid and US
Airways, at textile companies like Cone Mills and WestPoint Stevens, and
at a host of smaller companies over the last four years. And bankruptcy
specialists say that it is almost certain to keep happening, because
shedding pensions - and pensioners' health care obligations - is turning
into an irresistible way to make a high-risk investment pay off.
"It's become a kind of system to bail out companies," Thomas Conway,
vice president of the United Steel Workers of America, said of the
pension corporation, which Congress created in 1974 to protect retirees
if their employers went bust. "People have been able to use it
tactically, as a business strategy, and I don't think that's what
Congress meant."
Over the long term, the rate of defaults is clearly rising, said Lynn M.
LoPucki, a professor of law at the University of California, Los
Angeles, who has tracked the large companies that have shed their
pension plans while in bankruptcy since 1980.
Less obvious is precisely how the trend will ultimately affect retirees,
who sometimes have their pensions cut in the process. The cuts appear to
be hitting more and more workers, but the government has not calculated
how many since 1998.
Nor is it certain how the trend will affect taxpayers, who may wind up
on the hook if the rising tide of failed pension obligations overwhelms
the resources of the pension corporation. A year ago, when the agency
last reported its balance sheet, it had $39 billion in assets and $62.3
billion in liabilities, leaving a shortfall of $23 billion. The
Congressional Budget Office on Friday estimated that the deficit will
widen to $86.7 billion by 2015 and $141.9 billion by 2025.
Mr. Ross, the investor who picked up the five dying steel companies,
said he also thought that the current practice of sending failed pension
plans to the federal guarantor "needs some reforming."
But, he added, the private sector was not to blame. "If we're going to
continue defined-benefit pension plans at all," he said, "I really think
we need to look at who enforces the rules, what the rules should be, and
why there isn't a meaningful, risk-based system."
In a risk-based pension insurance system, companies that run
failure-prone pension funds would pay higher premiums than the companies
that manage their pension plans more conservatively. But instead of
charging more, the government has been waiving the pension rules, he
said. "When you start giving people waivers," he said, "you're creating
a time bomb."
Like defaulting on a loan, terminating a pension plan significantly
lightens a company's balance sheet: the business instantly becomes more
valuable because it does not have to use its cash flow to pay for past
mistakes.
But defaulting on a loan affects the lender, who presumably vetted the
borrower and charged interest commensurate with the risk. Defaulting on
a pension, on the other hand, affects the pension corporation, which is
required by law to accept a low premium unrelated to the risks it takes.
James A. Wooten, a pension-law historian who is a professor at the
University at Buffalo Law School, said that Congress knew it was
creating an imperfect system when it established the pension corporation
in 1974, and that it expected to make improvements later. The bill was
highly contentious, and Congressional leaders struggled mightily to
achieve compromise in the last chaotic months of the Nixon presidency,
with the Watergate scandal roaring around them.
In the beginning, they set pension insurance premiums at a token $1 per
employee. Today, the basic premium is up to $19 a head, but Congress has
found it hard to raise the rates even remotely enough to cover growing
claims. Some companies have warned that if they have to pay more for
their pension insurance, they will stop offering pensions.
"They took cautious steps, and those cautious steps weren't enough to
prevent the abuse of the insurance program," Mr. Wooten said. "Once
there's insurance, you have an incentive to run up liabilities to get
more out of the insurance."
MR. MILLER'S arrival at Delphi in July, and the intense labor
negotiations that have followed, are signals that the auto parts
industry may be in for a long cycle of bankruptcies and restructurings,
like those that reshaped steelmakers and are beginning to transform
airlines.
"Something has to happen to all of these liabilities and cost
structures," said Mr. Ross, who has said that he may invest in Delphi,
the world's largest auto parts supplier, after those changes are made.
"Delphi needs to sort out these complicated relationships before anybody
will buy it. Something has to change."
Delphi isn't the only troubled automotive company to catch Mr. Ross's
eye. He has also expressed an interest in Collins & Aikman, a
manufacturer of automotive interiors that is already in bankruptcy, and
he recently invested $30 million in a French auto parts maker, Oxford
Automotive. But because of Delphi's size and its relationship with G.M.,
its former parent, any big cuts in its so-called legacy costs - mainly
pensions and retiree health care - would send reverberations through the
auto industry.
No one says it will be easy for Mr. Miller to cast off Delphi's pension
plan - it never is - but he was dealt a good hand when he came to the
company. Not only would the federal pension guarantor end up with at
least part of Delphi's plan if the company went bankrupt, but the
company could also rely on an unusual promise that G.M. made to the
United Automobile Workers seven years ago - in far better times - that
it would take over any part of the Delphi pension plan that the pension
agency refused. Generally, the agency caps pension payouts at about
$45,000 a year, to workers who are 65 when the plan fails. For younger
workers, the limits are a good deal lower.
G.M.'s involvement means that Delphi workers - unlike many unlucky
employees of Bethlehem, United Airlines and Polaroid - might not lose
any benefits if their plan were taken over by the government.
(G.M. also promised to assume all medical costs for retirees if Delphi
faltered, an obligation estimated at $9.6 billion. Securities analysts
have been parsing the language of the promise, trying to determine if
G.M. must really shoulder this entire amount, and the extent to which
Delphi would have to pay G.M. if it rebounded later. G.M. has its own
heavy obligations to retirees and can ill afford to take on more.)
Savvy investors know that the existence of these two guarantees gives
Mr. Miller great power - the right, if he needs it, to make someone else
pay Delphi's large and growing debt to its work force. If he plays his
hand skillfully, Delphi could end up shedding billions of dollars of
debt without depriving unionized employees of any promised benefits.
To unload the pension fund, however, Delphi would have to declare
bankruptcy; a company cannot send an unwanted pension plan to the
government without first persuading a bankruptcy judge that it cannot
otherwise survive. And if Delphi is to file bankruptcy, it may have to
decide quickly. New, stricter bankruptcy laws take effect on Oct. 17,
and companies that declare bankruptcy after that date will face a range
of restrictions on how much they can pay in executive bonuses and on how
long they can take to work on their reorganization plans.
Mr. Ross said that he was not privy to the negotiations at Delphi but
that he thought it likely that Mr. Miller would declare bankruptcy
before the law tightened. "Delphi's a big company," Mr. Ross said. "I
think he'd be very concerned about his ability to retain a whole
management team there" if he could not pay bonuses. And controlling the
schedule for reorganization is an important tool for debtors negotiating
with creditors. "I would be shocked if he would give up the leverage
that that tool gives him," Mr. Ross said.
But other analysts speculated that Mr. Miller might well delay a
bankruptcy filing past Oct. 17 because he could win wage concessions
from the union if he kept the pension plan going. "The carrot that he
has to offer is, 'If you keep working for an extra year, you get more
benefits, and those benefits are more valuable to you because those
benefits are guaranteed not by us, but by G.M. and the P.B.G.C.,' " said
Jeremy I. Bulow, a economics professor at Stanford. "That's something
Delphi can use as a negotiating tool."
While that may be good news for Delphi, its workers and its
shareholders, it could be very bad news for G.M., the pension agency -
and perhaps, ultimately, taxpayers. "The policy problem is that we let
companies get this deeply in hock to the federal government," Professor
Bulow said. "It's kind of a rolling the dice, a
heads-I-win-tails-you-lose kind of thing."
COMPARED with Delphi, Bethlehem Steel looked grim when Mr. Miller
arrived in September 2001. Like other big integrated steel makers in the
United States, Bethlehem had been fighting a losing 20-year battle with
foreign competition and low-cost domestic mini-mills. "I came here to
find a way not to file for Chapter 11," Mr. Miller said upon his
arrival. But by mid-October, Bethlehem was in bankruptcy.
The company was being killed by its legacy costs - the accumulated
promises to retirees it had been making for decades. Bethlehem had
whittled down its work force over the years in an effort to cut costs,
but by doing so it simply created more retirees to whom it owed pensions
and health benefits.
By the time Mr. Miller took over, the company had some 95,000 retirees
and just 12,000 active workers to generate enough revenue to pay their
benefits - a hopeless proposition. Retiree health care alone was costing
Bethlehem about $125 million a year. In the 1990's, the stock market
boom made its pension fund look healthy, but when the boom ended and the
pension funds' assets fell, the company had to make up the difference.
By November 2002, Bethlehem faced liquidation.
That is when Mr. Ross stepped in. A big concern then - as it is now at
Delphi, the airlines and elsewhere - was the pension plan. When the time
came to turn it over to the pension agency, officials there realized
that Mr. Ross was poised to set off as much as $550 million in extra
"shutdown" benefits - available only to workers idled by a plant closing
- by briefly shutting some operations before taking over. The government
would have to pay the workers' basic pensions in any case; federal
officials thought that if the workers were to get any additional money,
it should come from Mr. Ross. (Shutdown benefits are an option that is
also available to Delphi.)
Steelworkers applauded these arrangements, but the pension corporation
seized Bethlehem's pension plan before Mr. Miller had the chance to shut
down operations and activate the extra benefits. The union, Mr. Miller
and Mr. Ross all complained, but Mr. Ross nonetheless found enough
additional money to offer retiring employees $50,000 buyouts and to set
up a trust fund to pay for LTV and Bethlehem retirees' health insurance.
"We felt a moral obligation to those workers, even though we had no
legal obligation," Mr. Ross said.
In the end, what bothered Mr. Conway, the union leader, was not so much
Mr. Ross's inability to wring more money out of the pension system or
his remarkable profit on the deal. What troubled him, he said, was that
the country seemed unable to take any lessons away from the demise of
the steel companies and how it affected so many working people. "It just
staggers us that America's not caught on to what's happening to it," he
said.
"Here's Ford
and General Motors, now competing against a lot of U.S.-based transplant
companies that have no obligations to any work force," Mr. Conway added,
referring to the nonunion factories that Toyota
BMW and other foreign-owned car companies have built in the United
States. "That's a tremendous advantage. How does a mature American
industry that has obligations to its work force compete with that?"
Because global competition is driving the trend, Mr. Ross said the
country should look for a new way - maybe a value-added tax on imports -
to bolster the pension-insurance program or to provide health care to
retirees. He said he had suggested this approach to some members of
Congress, but in vain. "So far, they've really seemed more interested in
lashing out at China," he said.
For now, people approaching retirement are left to hang on and hope.
"What happens is, typically, you've got a boat that holds 40 and you
need seats for 50 and people are all trying to hold on till the end of
their career and get their promise," Mr. Conway said. "We frankly don't
know how to do it, if there's no other assistance out there to help you
do it. The P.B.G.C. isn't the solution."
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