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Pirates of Private Equity

An insanely lucrative investment strategy finally faces public scrutiny

By Adam Doster

Employees knew that Hastings Manufacturing Co., a family-owned auto-parts supplier 30 miles south of Grand Rapids, Mich., was in deep water. Facing financial pressure, 375 employees—two-thirds of whom were in the United Auto Workers’ (UAW) bargaining unit—conceded $1 million in benefits to save their company, relinquishing newly negotiated pay raises and agreeing to cover part of their own health care… return to article

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    It sounds like the Private Equity Funds are basically venture capitalists trying to make money by restructuring profitable firms who get more profitable when pay hikes, benefits and pension obligations are eliminated by restructuring. The thing that is so embittering is when the very assets of the company are leveraged by loans that make financing these arrangements possible. It’s like rubbing salt in the wound.

    Also by lowering wages and benefits, the very conditions of expanding financialization are created by lowering demand for consumer output making debt driven growth the only viable alternative. Clearly, the average worker is not benefiting from the growth of this trend and the increase in Public equity firms that are promoting more and more mergers and higher economic concentration. The bitter fruits will be more unemployment, debt, poverty and profits for the rich.

    United States Posted by cabdriverinchicago on Oct 29, 2007 at 12:35 PM

    Welcome to 1990 and beyond!

    Private Equity Funds are just the latest technique — the strategy has lost the U.S. millions of jobs, loss of benefits and generally lower job quality for years.

    Mergers and acquisitions have followed this same pattern for as long as I can remember… but with the advent of NAFTA, takeovers, employee dumping and off-shoring have accelerated the effects many times over.

    Here in Rockford, IL, I watched the process take over 10,0000 really good jobs since 1990. Most recently the Sundstrand Corporation (formerly our largest employer) which was bought by United Technologies in 1999 shipped much of their heavy equipment to Indonesia.

    Other companies here included: Amerock, Ingersol, Barber-Coleman, Elco Industries, Greenlee, and a host of smaller ones that used to supply these.

    This all happened under current regulations of public companies.

    The unions, our representatives, our national economic policies have either ignored or, even worse, have encouraged and accelerated the process. The inevitability of the move to a service economy has been cited as a knowledge based advancement for us.

    The results so far:

    • CEOs who are paid many hundreds of times what their employees receive.

    • A burgeoning billionaire class at the expense of our middle class.

    • A huge increase in people with no health care insurance.

    • An inability to support our own military with equipment.

    • An unprecedented level of debt — both individuals and at all levels of government.

    • An economy 70 % dependent on consumers who are earning less in real purchasing power.

    United States Posted by whattheheck on Nov 1, 2007 at 7:13 AM
    Page 1 of 1 pages

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