Sparrows Point flipper lauded in New Yorker
This week's New Yorker has a piece about how employe pension funds threatened or ruined big corporations, like General Motors and Bethlehem Steel. In explaining "dependency ratio" mechanics in private company pension funds, writer Malcolm Gladwell -- a well-paid author and speaker who, I'm guessing, has spent more time in the West Village than he ever spent in a steel plant -- pretty much credits generous retirement plans, and those who designed them, with the downfall of American industry. At one point, Gladwell applauds investor Wilbur Ross for his approach to the pension legacies at Bethlehem Steel after he purchased the company and its plant at Sparrows Point. Having watched the events unfold here in the last five years, I found this salute to a cagey corporate flipper odd, even for the most pro-business neocon. So did former Sun reporter Mark Reutter, an expert on Bethlehem Steel and author of the book, Making Steel. Reutter read the Gladwell piece and wrote a succinct and right-on letter in response. It has been shipped to the New Yorker, but Reutter also shared it with us:
Malcolm Gladwell ends “The Risk Pool” (August 28th) where a good reporter would begin. Namely, what has happened since 2003 when New York-based investor Wilbur Ross purchased bankrupt Bethlehem Steel and its once premier steel plant at Sparrows Point, Md. Rather than investing in new machinery or seeking new markets for steel, Mr. Ross flipped the properties to London-based industrialist Lakshmi Mittal in April 2005, gaining a personal profit of $267 million. Together with stock earnings from the initial public offering of his company, International Steel Group (ISG), and related trades, Mr. Ross and his Wall Street allies pocketed $1.185 billion. This sum is almost identical to the $1.1 billion that steel retirees lost over the same period in health-care benefits from the sale to Ross and the sum absorbed by the federal government’s Pension Benefit Guaranty Corporation. Rather than “saving” the steel industry by ending unsustainable retiree benefits, Mr. Ross ingeniously diverted the cash flow from the working class to the investment class.
-- Mark Reutter, Urbana, Ill.
Comments
I disagree with you on most things, but I'm with you about WIlbur Ross.
Even by the standards of this ardently pro-business conservative, Ross is despicable, IMHO a 19th century robber baron in the 21st century.
Ross tends to cheaply buy companies in distressed industries such as coal or steel (and I heard he was making a move on the textile industry), consolidate them under the banner of "International _____ Group" and then take them public at a huge profit.
His International Coal Group was the owner ot the mine in WVA that exploded right after New Years, killing 12. In an interview on 20/20 a few weeks later, he seemed totally oblivious tot he fact that 12 men died due to a safety issue at one of his facilities.
The only thing that individuals such as Ross understand is money, not the nuances of the businesses that produce it or the needs and safety of the people that work there.
Guys like him give risk-and-reward free enterprise (a term I prefer to Capitalism, which was a perjortaive coined by Marx) a bad name,
Posted by: Gary Smith | August 30, 2006 10:44 AM