Bailout Fuels Bitter Race to the Bottom
Maybe I just missed Harley Davidson’s thank you note to me and other taxpayers for bailing them out during the height of the financial crisis.
Perhaps the iconic motorcycle maker didn’t think it would have to send a thank you note.
After all, they had every reason to think that the Federal Reserve’s emergency, low interest, $2.3 billion loans in the wake of the financial crisis would remain their little secret.
But the financial reform legislation spoiled all that, forcing the Fed to disclose details of trillions of dollars worth of confidential loans they made, which amounted to a giant subsidy because of the low interest charged.
Beneficiaries included not just the country’s largest banks and foreign banks, but corporate giants such as General Electric, Verizon, Toyota and Harley Davidson.
It turns out that these companies borrow millions every day to pay their expenses. When the credit market froze up in the meltdown, Harley Davidson and the others turned to the Fed, which stepped in with loans at low rates and no questions asked.
Maybe the thank you note is still on Harley Davidson’s to-do list.
The company has been awfully busy, what with opening a new plant – in India, closing plants in this country and bullying its remaining U.S. workers to give back wages and benefits or face more plant closures.
It’s not that the company is incapable of showing gratitude. In 2009, a year in which the company suffered steep sales declines and more than 2,000 workers had been laid off, they paid their CEO $6.3 million – including a $780,000 bonus. Since January, 2009, the company has laid off more than a fifth of its work force, and closed two factories. By the end of next year, another 1,400 to 1,600 face layoffs.
In 2009, the average Harley Davidson worker who still had a job was paid $32,000.
After threatening to close its York, Pa. plant and move production to Shelbyville, Ky., the company and the workers reached an agreement to keep the plant open – with 600 fewer employees and wage concessions. But not before the Pennsylvania governor, Ed Rendell, offered $15 million in tax incentives to the company.
All the cuts are paying off – at least for the company’s shareholders. In July, the company reported a $71 million profit, more than triple what it earned a year ago. . . .
Maybe sending our thank you notes slipped their minds while company officials were busy hiring lobbyists to fight financial reform last year, to the tune of $115,000 – about $100,000 less than they the year before.
Harley Davidson is using the lift it got from its bailout subsidy to join the latest trend – companies make more profit with fewer workers, and wrininging concessions from those that remain. As if the bailout wasn’t enough of a gift, the company squeezes even more from state taxpayers just for the privilege of keeping their plants open. For the company’s executives, the bailout fueled their escape from financial ruin and their race to the top. But workers and taxpayers are left standing on the sidelines.
Imagine if Harley Davidson had just split its $2.3 billion low-interest loans with its individual workers. Imagine if the taxpayers, who actually funded corporate America’s bailout, were the recipients of anywhere near that kind of generosity. Imagine if we had a government with as ferocious a commitment to shovel trillions into taxpayers and workers’ hands with no conditions of any kind.
We’ll never know what kind of creative energy, not to mention how much economic stimulus, would have been unleashed.
But that’s not the kind of bailout we got.
Harley Davidson, you’re welcome.