We’ve all seen how…ugly…Mitt Romney is as a Presidential candidate, so it’s no surprise this same EPIC FAIL! trope is to be found in a close examination of his career as a parasite capitalist:
In the midst of that 1994 campaign, one of Romney’s companies, American Pad & Paper, bought a plant in Marion, Indiana. At the time, it was prosperous enough to be running three shifts.
Bain’s first move was to fire all 258 workers, then invite them to reapply for their jobs at lower wages and a 50 percent cut in health care benefits.
“They came in and said, ‘You’re all fired,’” employee Randy Johnson told the Los Angeles Times. “‘If you want to work for us, here’s an application.’ We had insurance until the end of the week. That was it. It was brutal.”
But instead of reapplying, the workers went on strike. They also decided the good people of Massachusetts should know what kind of man wanted to be their senator. Suddenly, Indiana accents were showing up in Kennedy TV ads, offering tales of Romney’s villainy. He was sketched as a corporate Lucifer, one who wouldn’t blink at crushing little people if it meant prettying his portfolio.
Needless to say, this wasn’t a proper leading man’s role for a labor state like Massachusetts. Taking just 41 percent of the vote, Romney was pounded in the election. Meanwhile, the Marion plant closed just six months after Bain’s purchase. The jobs were shipped to Mexico.
Curiously, Romney had been touting himself as a job creator and a savvy businessman, yet as Kotz points out, all Romney ever did was take already-profitable companies and blindly stab at making them more profitable.
In fairness to Romney, the article does point to a few successes he achieved in his tenure at Bain, but Romney created not one job at any company that he personally managed, and the firms he had been touting, like Staples, went on hiring sprees after Romney left to run the Salt Lake City Olympics in 1999.
Which, by the way, was rocked by an huge bribery scandal, but that was why Mitt was brought on board.
Mostly, the companies Bain purchased were uniformly more profitable afterwards…for Romney.
The devastation left in the wake of Bain under Romney is staggering: the Associated Press analyzed some 45 deals Romney was directly involved with in his first decade at Bain and found 4,000 workers laid off, but this figure does not take into account plant and store closings, and bankruptcies.
The Wall Street Journal did an even deeper analysis of 77 investments Bain made under Romney and discovered that one in three formerly profitable companies suffered financial troubles, and 20% ended up in bankruptcy court.
Armco Steel of Kansas City, MO, is illustrative here:
Romney purchased Armco with just $8 million down and borrowed the rest of the $75 million price tag. Then he issued bonds””basically IOUs””to borrow even more to pay himself and his investors $36 million.
Within a year, he’d already made four times his initial investment while barely lifting a finger. But he’d also run up a staggering $378 million in debt on GSI’s tab.
[...]Yet the smartest guys in the room thought they could run the plant better than the people setting production records.
It would take a few more years of bleeding, but GSI eventually fell to bankruptcy.
The Kansas City mill closed for good; 750 people lost their jobs. Worse, Romney had shorted their pension fund by $44 million. The feds were forced to cover the difference, while workers saw their benefits slashed in bankruptcy court.
So as not to risk further copyright infringement, I urge you to click through and read the entire article. It is a primer on modern American economics.
What this all points out is what is summed up in Romney’s infamous “Seamus” story: a man so obsessed with efficiency and profit that he can blindly and blitheringly ignore the human element, and will go about fixing what ain’t broke.
In effect, what Romney has done is relive the Bush administration but writ large: taking a healthy situation (we were running a large surplus at the end of the Clinton years) and run it into the ground at the expense of the backbone of the nation (or company) while rewarding his pay-grade cronies.
Is this really what we want to go back to?
If the Voice article was made into an 18 minute documentary on why Romney only cares about himself and not the average American and the damage he leaves in his wake, I believe it would be a home run.
I would think someone that was inherently against Obama would be more likely to listen and be persuaded by a well done piece showing the above, then a documentary about Obama himself which is basically preaching to the chorus.
Point this out to our own Cliff Schecter. He dabbles a bit in the film medium
This has been well-documented for years here on The Agonist. Bain Capital was one of the worst practitioners, but there were many more hedge funds and leveraged buyout firms engaged in this business. It has always been dressed up as creating efficiencies in corporate America – weeding out bad management, putting corporate cash to good use, eliminating wasteful practices, and so on. In truth, though, it was all about taking control of a company, taking it private by buying up all the public stock, hacking through the work force with layoffs and firings, shutting down plants, improving the bottom line, and then bringing the company back on to the public markets so that the private owners could cash out.
There was some element of risk to this business in the early years (1982 on – the Reagan Revolution), because the take-out was dependent on the stock market and the owners had to wait years to get any profit out. When they did, it was phenomentally lucrative in many cases, making multimillionaires of the owners. One reason it was so profitable is that so little capital was put in by the owners. The buyout was funded by debt, and in the 80s, 90s, and 00s, debt was easy to get. Often the buyers didn’t have much money in the first place, so they borrowed millions by pledging the assets of the company they were targeting as capital (talk about the piratical aspects of capitalism!).
Once they got control of the firm, the new owners started cutting expenses brutally, and raising more money by raiding the pension plan reserves (easy to do if you just improve the accounting assumptions of your returns over time – estimating e.g. your plan will earn 12% every year, rather than 8%. Voila! The plan is over-reserved so management can take some of that back into profit).
Now comes the really sick part. In the 90s, the LBO firms were too greedy to wait 3 – 5 years to bring the company back on to the stock exchange so they could cash out at a profit. They began declaring dividends as soon as they loaded up the company with huge debts. In essence, they would borrow $500 million, and take $250 million out of that loan as a dividend (profit) for themselves. The company was stuck paying back the $500 million out of future earnings, but by then the LBO guys would be long gone with their wealth, leaving behind destroyed plants, a company starved of research and investment, people out of a job, and a denuded pension plan. Not surprising, quite of few of the companies went bankrupt.
Bain Capital was one of the worst of these firms and it certainly has its shared of ruined companies and lives left behind, all because of the debt overload. It is remarkable to me that Republicans with any intellect whatever can look at Mitt Romney and see some sort of capitalist hero. His legacy is just dreadful, and no amount of propaganda about job creation and making companies efficient can mask that.