Archive for February, 2010

Sucked Into the Offshoring Whirlpool

February 26, 2010

Critics of the $787 billion Recovery Act complain it is not doing enough to revive the economy, but they rarely ask why the companies that are receiving stimulus contracts and grants are not hiring more people. Now one of those recipients is facing a growing controversy over its employment practices in a case that helps explain why jobs remain in short supply.

Appliance maker Whirlpool is under fire from organized labor for its decision to shut down a 1,100-worker refrigerator plant in Evansville, Indiana and shift nearly all the work to a company factory in Mexico. The announcement was actually made last August, but it did not get national attention until recently, when union activists realized that Whirlpool had been given a $19.3 million grant by the U.S. Department of Energy to develop “smart appliances.” The funding was part of the Recovery Act’s $4.5 billion pot of money to encourage the development of the smart transmission grid.

The grant was not directed to the Evansville plant, but unions are nonetheless indignant that a company engaged in exporting jobs to a foreign low-wage location is receiving federal aid. The company made things worse for itself by warning workers not to participate in a planned protest demonstration featuring AFL-CIO President Richard Trumka. The union at the plant, IUE-CWA Local 808, has filed an unfair labor practice charge over the warning.

This situation shows the difficulty of using stimulus funds or other incentives to generate employment at a time when so many large corporations no longer have an interest in producing things in the United States.

Consider Whirlpool. For decades its production activities were almost entirely located in the USA. In the 1980s that began to change as the company started to focus more on overseas markets. It bought large shares in the Canadian company Inglis, Mexico’s Vitromatic and then the European appliance business of the Dutch company Philips. In 1990 Forbes wrote that Whirlpool was “going global—with a vengeance.”

If Whirlpool’s foreign expansion was meant only to meet demand in foreign markets, that would be one thing. But the company began a process of reducing its manufacturing in the United States and other developed countries while increasing it in foreign low-wage havens. One of its favorite havens was Mexico. In the late 1980s the company closed numerous U.S. plants and shifted production to Mexican maquiladora plants. In 1996 the plant in Evansville lost about 265 jobs when some refrigerator production was moved to Mexico. In 2003 Whirlpool shifted some production from its facility in Fort Smith, Arkansas to a new plant south of the border.

The latter move came a decade after a bitter dispute between the company and the workers in Fort Smith represented by the Allied Industrial Workers union. In 1989 Whirlpool unilaterally imposed concessions on members of AIW’s Local 370, prompting the union to launch a national boycott of the company. In 1991 the head of the local confronted Whirlpool executives and directors at the company’s annual meeting, calling on them to abandon their “narrow-minded, shortsighted, union-busting behavior.” The dispute was not settled until 1993.

In 2006 the Evansville and Fort Smith plants lost a total of about 1,200 jobs to Mexico.  Or, in the antiseptic terms of Whirlpool’s press release: “The company also is adjusting its workforce levels at several of its North American manufacturing facilities to optimize production levels and take advantage of its expanded manufacturing footprint.”

In other words, the current shutdown plan in Evansville is just the latest in a series of “adjustments” by which Whirlpool is ridding itself of decently paid U.S. workers and replacing them with much cheaper labor abroad. The 1,100 losing their jobs are the remnant of a Whirlpool workforce in Evansville that back in the early 1970s totaled nearly 10,000 (photo). Companywide, 26 of Whirlpool’s 37 production facilities are now located outside the United States.

It did not seem to occur to Whirlpool that there was anything unseemly about accepting federal stimulus funds at a time when it was closing a domestic plant. In fact, something similar happened seven years ago. In 2003, during a period when the downsizing of the Evansville plant was already under way, the company accepted a $1.3 million grant from the U.S. Department of Energy – via the Indiana Department of Commerce – to help develop a new manufacturing process for energy-efficient refrigerators produced in Evansville (source: Associated Press, February 8, 2003 via Nexis).

Until the federal government is prepared to do something serious about offshoring, it should at least refrain from giving financial assistance to firms that engage in the practice, even if the aid is going to a different part of the company—and even if it is for a laudable purpose such as promoting energy efficiency. The federal government now has a (non-public) contractor misconduct database to help it avoid giving procurement awards to bad actors. Perhaps there should also be a list of job-exporting companies which would be ineligible for federal aid until they reaffirm their commitment to domestic production.

Reposted from the Dirt Diggers Digest.

Led by Community Groups, Newly Elected Officials Put Accountable Development in NYC on Front Burner

February 22, 2010

The rotten political culture in New York has forced ordinary New Yorkers to become increasingly savvy at making their voices heard, particularly when it comes to big development projects. And it’s making a difference. Advocates in the Northwest Bronx, for example, led by the Kingsbridge Armory Redevelopment Alliance (KARA), spent years organizing for a plan for the Armory that would bring good, permanent jobs to neighborhood residents. In a dramatic climax at the end of 2009 to their dogged efforts, they managed to defeat a proposal that fell short of these basic standards.

Blocking the city’s determination to take the low road represents remarkable progress, but what New York desperately needs is development policies that guarantee concrete benefits for local residents. Could a brand new crop of elected officials who are talking tough on accountable development provide a critical moment for advocates to finally accomplish just that?

Early signs are promising. Take the city’s new Comptroller John Liu, who spiced up February’s board meeting of the New York City Industrial Development Agency by voting ‘no’ on tax breaks for several projects, including a Western Beef grocery store proposed for the Bronx that, according to its application for benefits, would pay employees an average wage of about $19,000 a year with no benefits. Stating his concern that the current system lacks “clear processes and standards for project development and approval,” Liu pledged to “examine how scarce public resources are used to advance our City’s economic development.”

The proposed Western Beef would fulfill an urgent need for grocery retailers in this part of New York City, but Liu’s call to examine IDA’s way of doing things more closely could lead to more analysis of the consequences of subsidizing companies that pay poverty wages in order to address other legitimate problems such as food deserts.

Just over a week after his debut at the board meeting, Liu was at it again, suggesting in a bold op-ed in the Daily News that New York is behind other cities like Los Angeles and Milwaukee in embracing equitable economic development policies, a point neighborhood advocates have also fought hard to convey. He called for city developers to stop “stifling” neighborhood voices, and for remarkably high standards of transparency, accountability, and inclusiveness in Community Benefits Agreements, a promising tool that has thus far proven little more than a sham in New York City.

Other public officials appear to be hopping on the accountable development train, too. In another recent Daily News op-ed, the city’s newly-elected Public Advocate Bill de Blasio toughly proposed a citywide code of conduct for businesses that receive public subsidies, and called for requiring firms to pay a prevailing wage, and to stay neutral when workers try to form a union. These are all positive signs that some of the city’s newly elected officials may have gotten the message that voters have long been pushing. Now is a critical time for advocates to stay on alert and keep these officials on the right track.

Not to deny the handful of veteran public officials who have been pressing for policy reform, like Manhattan Borough President Scott Stringer, who has been advocating for stronger accountability at the New York City Industrial Development Agency for some time now. Stringer’s appointee to the IDA board, Kevin Doyle, stands out as one of the few board members willing to ask challenging questions about IDA’s decision-making processes.

In addition to ensuring that large development projects are a boon to local residents, creating more equitable development policies will also help exorcise the larger culture of corruption that bedevils the city and state. This was most recently played out in the indictment of Bronx City Councilman Larry B. Seabrook on charges that he stole cash from the city through a series of money laundering schemes, including one connected with the new Yankee Stadium. It’s all too easy to view such scandals as the bad behavior of stray individuals, and stop there. But by condoning a process that excludes community input and encourages wheeling and dealing behind closed doors over transparent, democratic means, our current approach to development reinforces the very culture that incubates such tainted public officials.

Ordinary New Yorkers are clearly prepared to keep fighting for a different way. Hopefully Liu and de Blasio will do them justice by continuing to show real leadership on these issues, creating momentum for other elected officials to fall in line.



ARRA as a Corporate Rescue Plan

February 19, 2010

A war of words is raging over the impact of the Obama Administration’s $787 billion stimulus program, which is now one-year old. Conservative members of Congress are mounting a relentless assault on what they see as an abject failure, even as many of them unabashedly promote and at least implicitly take credit for individual American Recovery and Reinvestment Act (ARRA) projects in their home districts.

Meanwhile, the office of Vice President Joe Biden has issued a report insisting that ARRA has created or saved 2 million jobs and has brought many states back from the brink of fiscal disaster. The stimulus effort, Biden insists, “is going well.”

The debate boils down to an age-old disagreement between those opposed to allegedly wasteful social spending and those who believe government has to reinforce the social safety net during a time of economic distress.

Both sides are ignoring the fact that ARRA, to a significant degree, is a rescue plan not just for unemployed workers and struggling state governments, but also for parts of corporate America. This goes far beyond the roughly $50 billion in business tax breaks that Republicans last year insisted be part of the plan.

The Recovery Act represents a big step in the direction of what was once called industrial policy. Billions of ARRA dollars are being used by the federal government to encourage the development of new industries in areas such as renewable energy and health information technology that are seen as the foundation of future economic growth. Billions more are being spent on traditional procurement contracts to boost private-sector activity.

Here are some examples of larger injections of ARRA funds going directly to the corporate sector:

ADVANCED ENERGY MANUFACTURING TAX CREDITS

Hemlock Semiconductor, a joint venture of Dow Corning (itself a joint venture of Dow Chemical and Corning Inc.) and two Japanese companies: $141 million for the production in Michigan of polycrystalline silicon used in solar panels.

Wacker Polysilicon North America LLC, a subsidiary of the German chemical company Wacker Chemie: $128 million for a plant in Tennessee that will produce polysilicon for solar cells.

United Technologies Corporation, the big military contractor: $110 million for new equipment at its Pratt & Whitney plants to help produce more energy-efficient jet engines.

Alstom, the big French power and transportation equipment firm: $63 million for a Tennessee facility that will produce the world’s largest steam turbines for nuclear power plants.

GRANTS FOR DEVELOPMENT OF ADVANCED BATTERIES FOR ELECTRIC VEHICLES

Johnson Controls: $299 million for work on nickel-cobalt-metal battery cells

A123 Systems Inc.: $249 million for work on nano-iron phosphate cathode powder and electrode coatings.

General Motors: $105 million for production of high-volume battery packs for the GM Volt.

“CLEAN” COAL POWER INITIATIVE

American Electric Power Company: $334 million for the development of a chilled ammonia process to capture CO2 at a power plant in West Virginia.

Southern Company Services: $295 million for the retrofitting of a CO2 capture installation at a coal-fired power plant in Alabama.

BROADBAND EXPANSION

ION HoldCo LLC, a partnership led by Sovernet Communications: a $39 million grant to expand fiber-optic broadband in rural areas of upstate New York.

Biddeford Internet Corp. (dba GWI): a $25 million grant to extend a fiber-optic network to rural and disadvantaged parts of Maine.

ENERGY LOAN GUARANTEES

Solyndra Inc.: a $535 million loan guarantee to support the construction of a commercial-scale manufacturing facility for cylindrical solar photovoltaic panels.

PROCUREMENT CONTRACTS

Lockheed Martin: $165 million to work on the crew vehicle for NASA’s Project Orion.

Clark Construction Group: $152 million to design and build a new headquarters for the U.S. Coast Guard in Washington, DC.

General Motors: $104 million to supply light trucks, station wagons and alternative fuel vehicles to the General Services Administration.

GlaxoSmithKline: $62 million from the Department of Health and Human Services to do research on the H1N1 flu vaccine.

To this list can be added the thousands of contracts that states have awarded to private companies to carry out ARRA-funded activities such as highway repair, school construction and environmental remediation.

It is surprising that there has been so little debate on the relative merits of all these projects and programs – as well as on the wisdom of providing direct subsidies to profit-making entities. Are these grants, contracts, tax credits and loan guarantees a smart investment in the future or nothing more than business boondoggles?

With a significant portion of the Recovery Act going to aid corporations, we also have a right to ask why they are not creating more jobs with the taxpayer funds they have received. It would also be helpful to know – though the limitations of ARRA data collection make this difficult – how good are the jobs that have been created (in terms of wages and benefits) and whether those jobs are being equitably distributed among different portions of the population.

If we are ever going to reach any meaningful conclusions about the whole stimulus endeavor, we’ve got to go beyond tired debates about Big Government versus the Free Market. Like the bailout of the banks and the auto companies, ARRA is changing the relationship between the public and private sectors. Now we need to know whether the new arrangement is working and who is reaping the benefits.

Reposted from the Dirt Diggers Digest

Did A Handful of States Mistakenly Depress the National ARRA Job Total?

February 3, 2010

It was expected that the job numbers in the latest round of Recovery Act recipient reporting that just came out would diverge from those of the previous quarter. That’s because the Office of Management and Budget changed the job-counting procedure that contract and grant recipients were supposed to follow.

What’s puzzling, however, is that the job totals for different states are veering in different directions. My colleagues Thomas Cafcas and Leigh McIlvaine and I looked at the numbers and found that some states have reported substantial increases in ARRA-funded employment while others have posted significant declines. Idaho and Alabama nearly doubled their job tally; New Hampshire, Washington and Illinois were down more than 50 percent. Texas and Alabama added nearly 9,000 jobs each to their number; California dropped by nearly 40,000.

Here are the biggest changes in absolute numbers, with percentage changes displayed as well:

Decreases
California: down 39,170 (-36%)
Washington: down 20,104 (-58%)
Illinois: down 13,074 (-53%)
Arizona: down 5,472 (-45%)

Increases
Alabama:  up 8,987 (+184%)
Texas: up 8,888 (+45%)
Ohio: 7,610 (+45%)
Kentucky: 6,475 (+154%)

To try to make sense of these contradictory trends, we examined the grants and contracts in each of the states that contributed the most to the job totals.

In all eight states above, the change is almost entirely attributable to downward or upward movement in the job numbers associated with one type of grant: the State Fiscal Stabilization Fund (SFSF). The $54 billion SFSF — one of the largest components of the Recovery Act — is designed to shore up state budgets by providing additional federal funds, primarily for education but also for other kinds of public services.

In California, the employment impact of the SFSF was said to have dropped from 71,619 jobs in the previous reporting period to 38,924 in the last quarter of 2009. The difference of 32,695 represents more than 80 percent of the overall decline in the state’s job numbers.

In Washington the SFSF drop was 20,498, which is more than the total state job decline (there were increases in other categories). In Illinois and Arizona the SFSF declines were also larger than the state total.

At the same time, higher SFSF job numbers account for nearly all of the increases in the state ARRA job totals in Alabama, Ohio and Kentucky. In Texas the SFSF job number went up by more than 12,000 but it was offset somewhat by declines in other categories.

So what is one to make of these disparate SFSF impacts?

In the case of California, a majority of the SFSF drop comes from the non-education portion of the fund. It appears that the state used a $1 billion grant to pay the salaries of correctional officers but after that money ran out it turned to other non-ARRA sources to pay the officers. The 18,229 correctional jobs that were previously listed as being saved by ARRA were then zeroed out.

California also reported that the education portion of the SFSF accounted for about 14,000 fewer jobs in the October-December quarter than during the previous reporting period. There were also declines in ARRA-funded education jobs amounting to about 20,500 in Washington, 8,700 in Illinois, and 5,500 in Arizona.

At the same time, there were increases of about 12,300 education jobs in Texas, 4,400 in Kentucky, 4,150 in Alabama, and 3,900 in Ohio.

The increases appear to reflect the fact that the states involved had not yet put the federal money to work in the previous quarter (or had only just begun), so there were few or no jobs to report. That makes sense, but why should some states be reporting substantial declines in ARRA-funded education jobs?

Those states are out of line with the rest of the country. If we exclude the four states with the big declines, the rest of the country saw an increase of 33,819 jobs associated with SFSF education funds.

In the case of California, the reason may have been that the data in the first reporting period were overestimated and were adjusted downward for the last quarter. The need for a revision was widely discussed in recent months and was alluded to in a press release issued by the state’s Recovery Task Force on Saturday.

We have seen no public indication that a deliberate downward revision was responsible for the other big job drops in Washington, Illinois and Arizona. Officials in those states should clarify the reasons for the declines, so we can be sure they do not stem from a misunderstanding of the new job-counting procedures.

If there are not good reasons for those decreases, then the national ARRA job numbers are actually a bit higher than the 599,000 prominently featured on Recovery.gov.

Reposted from the STAR Coalition website.

The Case of the Missing Jobs Revisited

February 1, 2010

Over the weekend the Recovery Accountability and Transparency Board posted the new ARRA recipient data for the fourth quarter of 2009. The first thing I checked was whether there was a repeat of the phenomenon I wrote about with the first round of data: projects that are well under way or even completed reporting zero jobs generated.

I found that the mystery of the missing jobs is still with us. The spreadsheets on Recovery.gov include 4,396 federal contracts and 23,719 grants with a zero in the jobs column. Some of these, however, are not yet under way or are not very far along.

If we exclude those projects whose status is designated as “not yet started” or “less than 50% completed,” we are left with 1,713 contracts and 3,316 grants, or a total of 5,029.

I then looked at the column showing how much each project has actually received in ARRA funds. Some of those 5,029 report not having received any money as yet. If we remove those 180 contracts and 426 grants, there are 4,423 remaining.

In other words, more than 4,000 ARRA projects have received funds and managed to complete a substantial amount of work but are claiming not to have generated any jobs in the process.

Keep in mind that this time around, recipients were supposed to report jobs in a different way. Rather than guessing which positions were created or retained as a result of Recovery Act funding, they were supposed to simply add up all the hours worked on ARRA-funded projects and divide the total by their definition of a full-time week.

In many cases the message seems not to have gotten through. Many recipients continue to refer to jobs created and retained in the jobs narrative column. And in many cases the narrative is inconsistent with a listing of zero jobs.

One contractor refers in the narrative to “5 full-time correctional officer positions.” Another: “Project create work for 1 month for 4 existing positions.” And yet another: “This job retained 180 jobs – it takes approx. 70 man hours to complete the piece of equipment.”

It seems evident that many contract and grant recipients still think they are supposed to be reporting jobs created and retained, and many of those are still under the misapprehension that retained jobs don’t count.

There are even cases in which recipients note the total number of hours worked-one states: “A total of 1577 hours was worked in this last quarter as a result of Recovery Act funded projects”-but still put zero in the jobs column.

Recovery.gov displays the total number of “recovery funded jobs reported by recipients” in the fourth quarter as 599,108. One can only guess how much higher the number would be if all recipients calculated their job numbers in the proper way.

Reposted from the STAR Coalition blog


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