REPORT: Wall Street Pressure Prompted GM Plant Closures

[Omaha Steve]

A view of the entrance to the West Plant at the General Motors Lordstown Complex, assembly plant in Warren, Ohio, U.S., November 26, 2018. Reuters

By Filiberto Nolasco Gomez, Workday Minnesota
March 26, 2019

WASHINGTON, D.C.
Wall Street pressure, particularly hedge funds and their managers, prompted the General Motors plant closures that will throw at least 14,000 United Auto Worker members – and countless other workers in GM’s supply chain – out of jobs, a new report (link is external) says.

The report, commissioned by the American Federation of Teachers(AFT), is from the non-profit Hedge Clippers campaign, an organization dedicated to investigating, exposing and reining in the hedge funders’ financial machinations.

It added the moneyed interests have been pressuring GM ever since 2013, after the “new GM” returned to profitability following the Democratic Obama administration’s rescue of GM and FiatChrysler from collapse, bankruptcy and closure due to the financier- and GOP-caused Great Recession. The UAW helped in the rescue by agreeing to wage cuts and a controverisal two-tier wage system.

The pressure has come in the form of financiers’ threatened takeovers accompanying demands that GM send profits to stockholders and stock buybacks, rather than investing to modernize its factories. The recent plant closures are just the latest symptom of company yielding to Wall Street, the report adds.

FULL story: https://www.workdayminnesota.org/articles/report-wall-street-pressure-prompted-gm-plant-closures

[zipplewrath]

1. I have no doubt the truth of much of this

But this is a very slanted article. I realize that the whole point of the publication is to present articles from the point of view of labor, but they are really short on detail for the assertions. It seems to be entirely based upon:

The report, commissioned by the American Federation of Teachers(AFT), is from the non-profit Hedge Clippers campaign, an organization dedicated to investigating, exposing and reining in the hedge funders’ financial machinations.

Without any attempt at independent verification.

[Wellstone ruled]

3. This confirms what I and thousands of others

suspected for several months. Ford Motor is under attack by several Hegeies as we speak. Notice how they have left several foreign countries. Chrysler-Fiat are also under the gun by the same Wall Street Raiders and thieves.

[zipplewrath]

4. Yes, as I

It was opined when the tax cuts were passed that the primary use of them would be for stock buy-backs. There were even CEO's explaining that in fact that was their exact plan. I'm not sure though that one can actually show any direct connection between these CEO's decisions, and particular hedge funds. It's as likely they are just of the same mind on the issue.

[Wellstone ruled]

6. Remember these folks,

Cerbus Capital,Goldman Sachs,JP Morgan Chase,Morgan Stanley Dean Witter,Black Rock Capital,and John Paulson Hedge Fund,all were part of the Debtor's in Possession for GM. And when the new GM emerged from Bankruptcy,all these stake holders were allowed to sell their Debt or what are known as converted to shares in the IPO that came about.

Stories emerged early on with the GM BK,about breaking up GM and selling off various Brands to Investors or other Companies.

The UAW got snookered big time due to their lack of due diligence and the not seeing the forest for the trees.

[Left-over]

9. The root of all this is an attack on labor unions

The corporate a$$hats in this country hate it when the 'peons' working for them actually have any semblance of power. If they have their way all of the worker protections will be erased.

[Wellstone ruled]

12. That was just one part of a two part

solution to sell off the parts at a greater profit than as a whole. Bottom line was,the UAW Pensions were so far from being funded and the Federal Pension Guarantee Board could not handle all the risk,that a workable bail out was the only viable option. And Wall Street was just patiently waiting for their big payday.

Seen this play out in the Trucking business. Wall Street used Debtor in Possession financing to raid Pension Funds,load up the target with debt,issue high yield bonds and run a PR campaign targeting the Rank and File about there is a pot of gold at the end of the rainbow if they go along. Mean time,the Freight Sales people are moved to the next Target and all that Equipment and Buildings are maxed out with debt and all Maintenance has long been gone.

Rinse and Repeat. Again,thousands of Teamster Families take the hit. Sad to say,watched in real time as many had no clue.

[Ohiogal]

2. Sadly .... this isn't surprising.

Whatever is good for the 1%. and f**k the worker.

[True Blue American]

5. Those of us who know

Romney bought DELPHI for pennies on the dollar when they went bankrupt. Refused to sell during the reorganization costing many white Collar workers to lose their pensions. Blue Collar workers could not be touched because they had contracts.

Ask me again why Unions are so necessary for the average worker.

[Perrenial Voter]

7. I think a lot of these short-sighted business practices go back to the

Reagan-era reform intended to allign CEO and stockholder interests, in which CEO's were given stock options. But CEOs, knowing that they may only hold the job for a short-time, engage in various activities to boost the stock price and thereby increase their income. Buy-backs artificially increase stock prices by increasing the demand for those stocks.

[alwaysinasnit]

8. K&R

[marble falls]

10. Stock holders. You know, the people who neither sow nor reap that inherited GM stock bought ...

decades ago or from mutual funds, who take tax breaks on money they never personally invested in GM and pay less tax on their income than people do who actually sow and reap and make things.

Dividends are the vig on money lent out ... er ... invested. Companies use that to keep the value of their stock high.

[LisaM]

11. Can someone explain hedge funds to me in simple terms?

I simply cannot grasp the concept, other than that they are people who are "hedging their bets" as far as investments. I don't see that they do any good to anyone except well-invested stockholders, the managers of the funds, and the ultra rich, and they seem to cost a lot of middle class jobs.

Anyway, if someone can break it down in a way that makes sense to me, I'd appreciate it (I think my stumbling block is that the whole concept seems so greedy, I can't quite wrap my brain around it).

[unblock]

13. it's basically a mutual fund, but for rich investors willing to take higher risks.

mutual funds made available to the general public can't take major risks. aside from the commercial consequences, there are laws against it so ordinary people don't put their life savings at risk.

not that they can't find ways to lose it all anyway,....


given that hedge fund investors are richer and deemed to be more sophisticated, they have license to do a lot of riskier things, which naturally means higher returns on average.


the term "hedge" is rather misleading, because it's usually used in reference to strategies that lower risks. hedge funds do sometimes hedge, but more often they trade or take bets directly. certainly that's where they make most of their money.

[LisaM]

14. That actually clears things up for me.

In particular, it explains why companies seem to value shareholders over just having a well-run company that values its employees and customers - and why once the shareholders get theirs, they have no problem just shutting venerable companies down.

[unblock]

15. wall street "pressure" usually comes in the form of just threatening to sell stock.

ceo's usually have a huge stake in making the stock price go up, so they really don't want investors selling. they're paid to put investors' interests ahead of the company's, at least if they don't think long term.

even if they were to say no and just let the stock price go down, if it gets low enough, eventually someone will threaten to take over the company and fire the ceo and make the changes the investors want. unless the company has some serious takeover defense measures already in place, the ceo is usually forced to make enough changes to make the takeover threat go away.

that usually means borrowing money in order to pay dividends or buy back stock, which makes investors happy but leaves the company in a riskier position, having increased debt and given away the money.

in decent times, the company can survive fine, and might even prosper. but go through this scenario enough and eventually any company will do it at the wrong time and business drops right after they take on all that debt, and pretty soon they're in big trouble.