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| 12-09-2010, 07:21 AM | #1 |
| Jobs? Case in point: State Street
Although this article is skimpy on the financial logic of State Street (I'll go dig) it does exemplify just how this economy - and the large corporations - is stacked up. The rich rewards of cutting jobs - The Boston Globe  Quote: PROFITS ARE up, so it’s time to slash the workforce. That’s the story at State Street Corp., which recently announced the elimination of 1,400 jobs, including 400 in Massachusetts. Those jobs are gone, even though State Street last reported profits of $427 million, up about 20 percent from a year ago. Operating revenue also rose 8.4 percent . In an internal e-mail, chief executive Jay Hooley explained the strategy as necessary to “enhance service excellence and innovation’’ and drive “a stronger sense of urgency about getting things done.’’ Those scary words reflect the new normal in corporate America. Since the US economy entered into recession at the end of 2007, jobs have been shed and wages frozen or cut. But, while wage and salary payments to workers declined by $121 billion or about 2 percent since the last quarter of 2008, pre-tax corporate profits rose sharply — up by $572 billion or 57 percent over the same time period, according to Andrew Sum, a professor of economics and director for the Center for Labor Market Studies at Northeastern University. Productivity also increased, but workers got no reward — only unemployment insurance. “The extraordinary corporate profit share of income growth in the current recovery has no historical counterpart,’’ write Sum and research associate Joseph McLaughlin, in the current edition of Challenge Magazine. As a result, they note, “America’s workers might with justification claim, ‘We wuz robbed.’ ’’ Instead of getting outraged over corporations that fire people even as they reel in cash, cable TV and talk radio hosts are choosing to get outraged over the inability of those fired to find new employment. Why not get angry at the CEOs, who instead of seeing increased resources to invest in hiring, only see rising expenses to be cut by firing? They share responsibility for a recovery that lags as job growth lags. By cutting loose 1,400 workers, State Street shifts the burden of keeping them solvent from the private sector to the public. Now, it’s the taxpayers’ job to underwrite them, via unemployment benefits. And that’s only the start of the ripple effect on a still-fragile economy. How many of the newly unemployed will no longer be able to pay their mortgages, or keep up with cable and credit card bills? Without employer-backed health insurance, how many will turn to state-subsidized insurance? While workers hit the streets, management hits the jackpot. According to Forbes.com, Hooley’s 2009 compensation package totaled $13.9 million. And that was before he took over as State Street’s CEO last March. Asked if management would be taking pay cuts or forgoing bonuses, Carolyn Cichon, a State Street spokesperson, said only that 2010 compensation, including executive incentive compensation, “will be determined in the first quarter of 2011.’’ State Street was also able to tap into billions of dollars the US central bank made available in the fall of 2008 to avoid further financial chaos. The Fed can’t lend money directly to money markets. So it used 11 large banks, including State Street, as intermediaries. The banks used the Fed money to buy securities from money market funds, giving them cash to repay clients. As reported last week by The Globe, State Street bought $86 billion in investments from clients such as Eaton Vance Investment Managers, T. Rowe Price, and Columbia Funds. It held those investments until their maturity dates and earned $60 million in investment profits. All the Fed funds were repaid. Even so, that means State Street reaped the benefits of taxpayer-supplied money. “Where’s the fairness?’’ asks Lew Finfer, director of Massachusetts Community Action Network, a non-profit dedicated to the cause of social and economic justice. “If all the taxpayers helped your business continue to exist, don’t you have a responsibility back to maintain jobs, create jobs, and invest in communities? There would be an excuse if you’re losing money, but if you’re not losing money, where’s the excuse?’’ Replies State Street’s Chichon: “. . . The industry as a whole is still undergoing significant headwinds and the competitive climate is fierce.’’ That’s their excuse and they’re sticking to it. But, for the out of work, the climate is even fiercer. | |
| 12-09-2010, 07:37 AM | #2 |
Originally posted by Nesster  By cutting loose 1,400 workers, State Street shifts the burden of keeping them solvent from the private sector to the public. Now, it’s the taxpayers’ job to underwrite them, via unemployment benefits. And BTW, "keeping people solvent" is not the burden of employers. If you think it is, go to your employer and tell your manager that you need a raise and when asked why say that you need it because you can't afford your house or car note and inform them that it is their responsibility to keep you solvent. Originally posted by Nesster Those jobs are gone, even though State Street last reported profits of $427 million, up about 20 percent from a year ago. Operating revenue also rose 8.4 percent . | |
| 12-09-2010, 07:50 AM | #3 |
| 12-09-2010, 08:13 AM | #4 |
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Actually according to Zaks State Street In Restructuring Mode - Yahoo! Finance Quote: In the third quarter of 2010, State Street had reported a profit of 86 cents per share compared with 71 cents in the year-ago quarter. The year-over-year improvement in results was aided mainly by increased operating revenues (up 8.4%), which were offset partly by higher expenses (up 3.1%). Also, the acquisition of Intesa and Mourant in the second quarter further reinforced State Street’s core asset servicing business, thus supporting the top line. State Street does have its share of toxic paper, that it sold (apparently to Goldman) to meet Basel III etc, at a loss (it was carrying this as unrealized loss): State Street Sells $11 Billion in Asset-Backed Securities - Bloomberg Quote: State Street held $46 billion in structured securities within its $100 billion investment portfolio, as of Sept. 30, according to a company presentation. The overall portfolio held $281 million in after-tax, unrealized mark-to-market losses, down from $2.99 billion a year earlier. -- The sale included U.S. non-agency mortgage-backed securities worth $4.1 billion and asset-backed securities for $3.7 billion, as well as non-U.S. mortgage-backed and asset- backed securities for $3.1 billion, State Street said. The company plans to reinvest the proceeds from the sale “primarily in AAA and AA asset-backed and mortgage-backed securities as well as U.S. Treasuries and agency securities,” according to the press release. Quote: Goldman Sachs Group Inc. is offering U.S. home-loan bonds without government backing to investors after acquiring about $6 billion in a single trade this month, three people familiar with the matter said yesterday. State Street Corp. sold the notes the people said. -- During the first half of this year, Bank of America Corp. repackaged $13 billion of mortgage-linked securities into new bonds, a technique that allowed the bank to reduce its assets by $5.2 billion. | |
| 12-09-2010, 08:16 AM | #5 |
| Originally posted by mikemike It could be possible that a large share of those profits are from 1 time events like selling a business unit which employed 1400 people (or at least 1400 people who were made redundant when the unit arrived at their new owners). However, it is true that State Street has done aquisitions and thus may have some left over redundancy (and points to the rationalization of its real estate footprint). | |
| 12-09-2010, 11:01 AM | #6 |
| O/T
We just lost 360 good paying jobs right before x-mas.. ask me how I feel on the rich estate tax..........  Quote: WHITING -- NewPage Corp. will close its Whiting paper mill by the end of February because of declining demand for the coated paper produced there, the company announced Wednesday. The closing will eliminate 360 jobs from the Miamisburg, Ohio-based NewPage. It is unclear whether any employees of the Whiting mill will move to other NewPage facilities in central Wisconsin because of seniority within the unions, bumping workers at those mills into unemployment, or all 360 layoffs will come from Whiting.Demand for coated groundwood and coated freesheet paper has been declining for some time. In past years, the company had relied on temporary shutdowns of the mill, which has two paper machines and produces about 250,000 tons of paper a year, to cut costs. The company is the largest manufacturer of coated paper in North America, with $3.1 billion in net sales for 2009. But even with a recent slight recovery in the coated paper market, and a celebrated October ruling by the U.S. International Trade Commission that Chinese and Indonesian paper companies unfairly sold and subsidized coated paper in the U.S., company executives didn't see enough demand to warrant keeping the mill open. "The current view is that these markets will either be flat or decrease 1 to 2 percent in the future," said Mark Lukacs, senior vice president of operations. "We are committed to not oversupplying the market." Whiting was chosen out of the company's four mills -- including Biron, Escanaba, Mich., and Rumford, Maine -- that produce similar products because it has the highest cost per ton of paper within NewPage, Lukacs said. Without its own pulp mill, Whiting had to bring in materials from other facilities. Outside the mill Wednesday afternoon, workers said the news was shocking, and the day was quiet and somber. Many of the employees have worked there for decades. Employees declined to give their names, some saying they were told not to talk to the media. | |
| 12-09-2010, 09:35 PM | #7 |
| 12-09-2010, 10:29 PM | #8 |
| 12-10-2010, 06:28 AM | #9 |
| 12-10-2010, 07:57 AM | #10 |
| 12-10-2010, 12:11 PM | #11 |
| Originally posted by reeftool I can feel your pain. The town where I live lost the International Paper Co. mill that had operated here for over 100 years. At one time, most of the population worked there. It's fortunate that we are within commuting distance of other well paying jobs. Some small towns that have had plant closures are not. | |
| 12-10-2010, 12:33 PM | #12 |
| Originally posted by jeffkrol What gets me is the most likely fact that the mill was probably NOT losing money, only not making ENOUGH, a very morally contentious point in my mind and where our current capitalism is causing more pain than necessary... | |
| 12-10-2010, 01:38 PM | #13 |
| Originally posted by mikemike But reducing the output at all of their mills would lower the profitability and viability of the entire company and the other mills. Shutting in production or selling a fixed asset saves a lot of money and increases utilization at the remaining units. Firing people isn't an easy decision whether it is 1 or 2 people or a whole factory, but it has to be done sometimes. Again "increase productivity" at the expense of the labor force....... justify it all you want not all of this is clearly "necessary" economics...... Quote: NewPage looked at other options before deciding to close the mill, Lukacs said, but none made as much financial sense. "This is not a reflection on the high-quality workforce we have here in Whiting," Lukacs said. "Products made here in Whiting can be made at several other facilities at lower costs." Whiting's production likely will be shifted to the NewPage mills that produce the same paper. The shutdown of paper production will begin in the second half of February, and the facility will be shuttered by the end of that month. NewPage will hold bargaining meetings with local union leaders and committees to discuss the seniority structure and whether long-tenured workers at Whiting will be able to move to positions at other central Wisconsin NewPage mills in Stevens Point, Biron and Wisconsin Rapids. How that will play out will be part of local labor contracts, Lukacs said, declining to give details. Calls to union officials from the Whiting mill were not returned Wednesday. NewPage will attempt to sell the facility, tucked along the Wisconsin River at 2627 Whiting Road. But based on struggles to unload closed mills in Kimberly and Niagara, a sale is unlikely, Lukacs said. The company probably won't hold on to the property on the chance markets rebound and the facility would be reopened. "I don't believe that will happen," Lukacs said. http://www.paperage.com/foex/paper.html Quote: Mills have been more disciplined than in past downturns about taking downtime rather than chasing business with lower prices., limiting the declines to only $5 to $7 per hundredweight since last year's peak. But the issue is permanent closures, not downtime, as John Maine of RISI explains in a recent analysis: “North American coated paper producers need to shut another 1.3 million tons of capacity permanently and immediately, followed by further shuts over the course of the next five years if they want to balance supply with demand,” he wrote. The continent’s coated mills can make about 9 million tons of paper annually, split about 50-50 between groundwood (mechanical) and freesheet products. “Most of the high-cost, inefficient mills have already been closed, so the next wave of closures is going to involve larger, more efficient mills that are still generating a positive cash flow,” continues Maine. The problem is that mills are not shut down by the industry, they are closed by individual paper companies seeking to maximize their owners’ return on investment. What paper company will volunteer to shutter cash-positive mills or machines? Not AbitibiBowater (aka AbitibiUnderwater), which is trying to stave off bankruptcy. Not Verso, North America’s #2 coated producer, which is also stuck in Penny Stock Land. Maine points to the more “nimble” uncoated-freesheet market, where giants like Domtar and International Paper have implemented massive capacity cuts to prevent prices from crashing. What he doesn’t point out is that the big players in that industry tend to be low-cost producers, which means that smaller players trying to buck the oligopoly with a price war soon find themselves up Chapter 11 Creek without a paddle. In the coated-groundwood market, by contrast, size doesn’t seem to matter. The best cost position these days is to be making product in Canada with machines that coat and calender in line. Medium-sized Kruger and single-machine Catalyst Paper fit that bill. The market’s two big players, NewPage and Verso, make all of their coated groundwood in the U.S. with blade coaters and offline calenders – probably with higher costs than some single-machine companies like Domtar and Evergreen Packaging. NewPage has demonstrated its willingness to keep the market in balance by shutting high-cost mills and machines, but how much stomach does it have for shutting even more (and more efficient) machines? Recent reports of its making uncoated freesheet and an SCB-type product on coated machines suggest its capacity-rationalization plan is complete. Soooo RIGHT before christmas we close "money making" mills..................  Quote: NewPage also announced today that it expects Adjusted EBITDA (net income (loss) attributable to the company before interest, taxes, depreciation and amortization and adjusted to exclude certain items such as non-cash expenses and gains and losses on sales of assets) for the fourth quarter of 2010 to be between $125 million and $135 million and that it expects net income (loss) attributable to the company for the fourth quarter of 2010 to be between $(275) million and $(315) million compared to Adjusted EBITDA and net income (loss) attributable to the company of $88 million and $(55) million, respectively, during the fourth quarter of 2009. Net income (loss) for the fourth quarter of 2010 includes the estimated one-time effect of asset impairments (principally Whiting) of $215 million to $240 million and other closure costs estimated at $10 million to $15 million. Last edited by jeffkrol; 12-10-2010 at 01:48 PM. | |
| 12-13-2010, 07:43 AM | #14 |
| Quote: Among the number of plant closings announced in the United States this week: A printing plant in Greenburg, Ind., costing 220 jobs; a tomato processing plant in Westover, Md., with 103 people fired; an office-supply facility in Mattoon, Ill., with 129 jobs lost. None of these companies are going out of business. They are outsourcing. Generally regarded by economists as a good thing — the ability to create goods at lesser cost, passing those savings on to the consumer and allowing the economy to create ever-more sophisticated jobs and goods — outsourcing, in this recession, has highlighted America’s most intractable problem: the permanent loss of blue-collar jobs. “Economists have been talking about this for years,” says Daron Acemoglu, professor of economics at MIT. “Occupational polarization has been very visible in the data, accompanied by wage polarization.” It’s been an unstoppable 30-year trend, linked and launched by our supersonic technological progress. “There are fewer middle-skilled jobs in the US,” he says. “Autoworkers in the 1960s could have a high-school degree and good training, and make a relatively attractive salary.” No longer, and never again. It’s astonishing to realize that the most iconic American totems — such as the baseball, Levi’s jeans, the actual American flag — are no longer made in the USA, and haven’t been for a very long time. And yet, most economists will tell you that this is a good thing. “It is unqualifiedly positive,” says Aneel Karnani, assistant professor at the Ross School of Business at the University of Michigan. “We, as a country, should be doing high value-added work versus low value-added work. We don’t want to be making shoes — we’re making pharmaceuticals, software, high-tech cars. That’s how you become a rich country.” His most recent favorite example: a DVD player he bought for $40. “That is a very complicated device,” he says. “But we are outsourcing to a place that makes it cheaper. It is the case that the middle class in the US is getting squeezed, and globalization partly contributes to that. But the bigger force is technology.” Despite the crushing number of plant closings in the US over the past few years — there is even a publication called Plant Closing News, which costs $999 for a yearly subscription — manufacturing in the US is not totally gone. But automation and technology means that the factory worker of the 21st century will not find work without a college degree. He will not be making a car; he will be designing and installing computer software for Apple or Microsoft. Until, that is, a robot is doing it for him. Robots have already supplanted many of today’s unemployed, and a study released this week by UCLA’s Anderson School of Business reported that “displaced workers are likely to have a difficult time finding jobs elsewhere partly because the jobs will remain scarce and partly because of a mismatch between the skills and abilities offered and the skills and abilities needed.” The study, written by Edward Leamer, also found that companies have easily been able to grow without hiring more people: Productivity has gone up as hours worked have gone down. He predicts a 3% growth in GDP while unemployment remains high. “There are a large number of people in the labor force, the 25-30% in manufacturing, looking at their skill set becoming obsolete. And because they’re middle-aged, it’s harder to learn a new set of skills,” says Polina Vlasenko, research fellow at the non-partisan American Institue of Economic Research. So what becomes of the 45-year-old toll taker replaced by the E-ZPass? Or the 50-something cashier replaced by a self-service scanner, each worker without a college education and with a limited skill set? “You have to get more educated,” Karnani says. “That’s a little glib, I agree. We all can’t become MBAs or Ph.D.s and so on. The toll taker can’t become a software designer. We have to put a lot of emphasis on retraining and re-education — that’s where the US is doing a poor job, but that’s the long-term solution.” Education itself is both the cause of and solution to this very problem: The best higher education is available to those who qualify — who had solid K-12 — and who can afford it. “Education is very elitist, and that’s problematic,” says Karnani. “Harvard claims anybody can go there — that’s not true. Ninety percent of the student body is the upper quintile of the population. Upward mobility is decreasing. Technology is polarizing society, dividing the educated and the less educated.” The lost generation of American workers — low-educated, low-skilled, too old to be retrained, too young to retire — has led to the fear of a permanent underclass, the idea that the US will eventually become like much of Europe, subsidizing 10% of the under- or unemployed population. “I would hate for a permanent underclass,” Karnani says. “The child of a janitor should be able to go to college.” “A permanent underclass is one possibility,” Vlasenko says. “But here’s the other: Let’s imagine that four years from now, there’s 15% of the labor force that’s under- or unemployed. That’s a large pool of labor that’s available and probably quite cheap. If it becomes profitable enough to employ those people productively without needing high-level skills — whoever figures that out will make a lot of money.” Yet all these solutions offered — retraining, more affordable education, moving middle-aged blue-collar workers into a whole other sector — are completely amorphous, long-term solutions that will not in any way impact the discarded manual laborer of this decade. “This is true,” says MIT’s Acemoglu. “And any simple solution is bad. Banning outsourcing is a bad idea, and it’s only temporary. You cannot stop technology, and you don’t want to.” “Free markets are pretty cruel,” Karnani says. “Totally free markets come with income inequality, and we need to temper that. We are a society founded on the pull-yourself-up-by-your-bootstraps philosophy, but it’s not, ‘total free markets or total socialism.’ Even the Republicans don’t want a totally free market — they wanted the bailout of the banks. So as we get more fortunate as a country, we should be more compassionate. Our hypothetical toll-taker — we, as a society, have to show her more compassion, that she got caught up in this.” AMERICAN ICONS ... MADE ABROAD The American flag Like most everything else, it’s now made in China. The amount of money spent importing flags in the month after 9/11: $34.8 million. The baseball Hasn’t been made in America since 1969. Rawlings now manufactures out of Costa Rica. The Radio Flyer red wagon Invented in Chicago in 1923, the wagon is synonymous with an all-American childhood. In 2004, the company moved production to China. Mattel toys Most of these are made in China; the California-based company shut down its last US plant eight years ago. Cellphones The first cellphone call was made in New York, in 1973, by its inventor, Martin Cooper. As of 2008, not a single one of the world’s 1.2 billion were made in the USA. The incandescent light bulb Thomas Edison’s greatest invention has been outlawed by Congress — by 2014, all incandescent bulbs will be gone. The last big US factory closed three months ago; there is one small plant left in Pennsylvania. The TV American Philo Farnsworth invented the first fully functional television in 1927, transmitting his first image from his lab in San Francisco. A television hasn’t been made in America since 2004. Converse sneakers Once the shoe of choice for otherwise non-conformist American teens, Converse, founded in 1908, was bought by Nike in 2003 for $305 million. Today, the shoes are made in Indonesia. Source: BusinessInsider.com | |
| 12-16-2010, 04:19 AM | #15 |
| Originally posted by jeffkrol What gets me is the most likely fact that the mill was probably NOT losing money, only not making ENOUGH, a very morally contentious point in my mind and where our current capitalism is causing more pain than necessary... However... Like 20 years ago, huge printing jobs started getting outsourced to India, before outsourcing was all that popular. I'm curious how this affects/affected the paper and printing businesses as a whole. | |
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