December 16, 2008

Republic Windows & Doors Files for Bankruptcy

The Chicago company that was the site of a six-day worker sit-in has filed for bankruptcy. Though this appears to have been expected, it seems that many aspects of this story went under-reported or unreported.

The Chicago Sun Times story written by Francine Knowles and Sandra Guy makes it appear that Bank of America, the lender whose refusal to extend a credit line allegedly caused the company’s failure, ended up “lending” over $1 million to fired workers (bolds are mine):

Republic Windows and Doors filed for Chapter 7 bankruptcy Monday, the company said.

The bankruptcy filing for liquidation was a requirement of Bank of America in the negotiated settlement with the United Electrical, Radio and Machine Workers of America, Republic said.

….. Republic made headlines last week after the plant closed when Bank of America, concerned about the company’s financial viability, refused to extend it additional credit. That left 240 workers without a job — workers who were not given the legally required 60 days’ notice of a layoff.

The workers successfully staged a protest against Bank of America to demand severance and vacation pay and challenge the lack of proper notice. Politicians and union leaders blasted Bank of America’s action, given that it took $15 billion in the federal bank bailout package. Bank of America ultimately agreed to provide $1.35 million in lending for Republic’s layoff package.

(Bank of America spokesperson Julie) Westermann said Monday that while the bank recognized it wasn’t its responsibility to pay Republic’s workers, it provided the loan to enable Gillman “to do what was right.”

….. Westermann said all of Gillman’s proposals “involved a second line of credit, which we could not responsibly give him considering the state of his company.”

Gillman has no plans to reopen the Goose Island plant, he said last week. But his family does plan to focus on its nonunion, Iowa-based Echo Windows.

This Associated Press item from December 11 notes that JPMorgan Chase paid in another $400,000, and that the total of $1.75 million “will go into an escrow account for the workers,” from which payments averaging about $7,000 per worker will be made.

Though the agreements involved “loans,” it is clear that Chase and B of A aren’t going to be receiving any repayments. Thus, it seems that the following words or terms might be better fits for accurately describing the funds disbursed: gifts, blackmail, shakedown payments.

I’m no labor lawyer, but this Worker Adjustement and Retraining Notification (WARN) Act exception found on Page 11 of the Department of Labor’s “Worker’s Guide to Advance Notice of Closings and Layoffs” seems to indicate that the two Sun-Times writers’ blithe, automatic assumption that Republic acted illegally is suspect:

A “faltering company” is not required to give notice of a layoff or plant closing when, before the plant closing, it is actively seeking capital or business, which if obtained would avoid or postpone the layoff or closure, and if it reasonably believes that advance notice would hurt its ability to find the capital or business it needs to continue operating.

The material on Page 21 of the same guide relating to companies filing for bankruptcy does not seem to make any exception to the excerpted paragraph.

This makes sense. But if the results at Republic somehow serve as a precedent, it would appear that any failing company could absurdly but “successfully” threaten its lender into coughing up funds by saying, “We haven’t given our workers the required legal notice. If you don’t lend us the money we’ve requested, you’re just going to have to pay their accrued wages and benefits. So if you know what’s good for you, you’ll cut the check.”

The union plant has closed, with fired workers talking nobly about reopening it. The non-union plant remains active. Yet somehow all of this is being seen as a worker “victory.” The only “victory” I see is in Iowa. The results in Chicago represent yet another in a long line of reasons not to start up a business, especially in Illinois.

Cross-posted at NewsBusters.org.

You’re Hot When I’m Not: EU and US Switch Climate Positions

Filed under: Economy,Environment,Taxes & Government — Tom @ 9:33 am

Benny Peiser, editor of the international science policy network CCNet, has a read-the-whole-thing piece in the Wall Street Journal (bolds are mine):

Cooling on Global Warming
Germany and the rest of Europe are getting more rational on climate change.

Participants at last week’s United Nations climate conference in Poznan, Poland, were taken aback by a world seemingly turned upside-down. The traditional villains and heroes of the international climate narrative, the wicked U.S. and the noble European Union, had unexpectedly swapped roles. For once, it was the EU that was criticized for backpedalling on its CO2 targets while Europe’s climate nemesis, the U.S., found itself commended for electing an environmental champion as president.

The wrangle over the EU’s controversial climate package at a separate summit in Brussels wrong-footed the world’s green bureaucracy. The EU climate deal was diluted beyond recognition. Instead of standing by plans to cut CO2 emissions by 20% below 1990 levels by 2020, the actual reductions might be as trivial as 4% if all exemptions are factored in.

The Brussels summit symbolizes a turning point. The watered-down climate deal epitomizes the onset of a cooling period in Europe’s hitherto overheated climate debate. It may lead eventually to the complete abandonment of the unilateral climate agenda that has shaped Europe’s green philosophy for nearly 20 years.

….. Perhaps even more important is the growing realization that the warming trend of the late 20th century has, for the last 10 years or so, essentially come to a temporary halt. The data collected by international meteorological offices confirm this. This most peculiar fact is rarely mentioned in policy debates, but it certainly provides decision makers with a vital respite to reconsider their climate policy options.

Above all, Europe’s politicians have recognized that green taxes have turned into liabilities that may undermine economic stability and their chances of re-election.

It’s about freaking time.

Now all President-elect Obama needs to do is utter that infamous left-wing mantra, “We should be just like the Europeans,” and get in line.

Fat chance.

Couldn’t Help But Comment (121608, Morning)

SOX First has a timely post about Bernard Madoff that makes a few good and/or under-reported points, but may have missed several others:

  1. Madoff registered his investment advisory unit in 2006. Okay, but in the absence of prior improprieties in his other companies, it’s possible that Madoff’s hidden losses piled up only in the past couple of years. It’s even conceivable, given the markets’ recent steep declines, that the vast majority of his losses only occurred in the last 3-6 months (in an out-of-whack hedge fund, things can go downhill at an exponential rate). But if Madoff should have been registered earlier and wasn’t, that’s a whole ‘nother ballgame.
  2. Madoff had a very small outside CPA firm as auditor. If my guess in Point 1 about the losses only being very recent is correct, the CPA firm could actually be off the hook. Otherwise, they’re in fatally serious trouble.
  3. The SOX First post says that the SEC’s failure to inspect Madoff’s new investment advisory business is “scary.” Maybe. But if, as I suspect, the losses are predominantly recent, that ain’t so. I suspect the SEC gets thousands of these registrations a year. If my guess about the recency of the losses is right, any 2006 or 2007 “inspection” would have been routine.
  4. Following up on Point 3 — If this is a government failure, it is NOT of too little regulation, it’s of too little oversight, as is all too typically the case. There’s a big, big difference. If the regs are adequate but the oversight isn’t, you improve the oversight. All too often, oversight failures instead lead to even more convoluted regulations, accompanied by no improvement in oversight. The problem is that improving oversight is boring, while imposing new regs, no matter how redundant, costly, or useless, leads to chest-thumping photo-ops.

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A Madoff lesson: Don’t have all of your money with one adviser, especially a long ranger who has control over generating account statements.

A corollary: Employers should NEVER use lone rangers to manage their pension and 401(k) funds, and should instead use only established firms with enough employees to spread the responsibility and controls around.

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Post-election, John McCain has frequently acted like a jerk: Example 1; Example 2, which should be nicknamed “Leggo His Blago.”

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Worth revisiting, via Hot Air:

….. minimum wage (laws) do not achieve the main goals set forth by their supporters. They reduce employment opportunities for less-skilled workers and tend to reduce their earnings; they are not an effective means of reducing poverty; and they appear to have adverse longer-term effects on wages and earnings, in part by reducing the acquisition of human capital.

Minimum wage laws hurt teenagers and the least skilled the most. The least skilled tend to have disproportionately high minority representation, even though they are supposedly the people most loved by the Democratic Party. That does not (logically) compute.

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This is an odd and awfully polite statement to make while the Japanese auto makers continue to take market share from Detroit’s Big Three:

“There is absolutely no way in my view that the Big Three’s woes can work as a plus for the Japanese automakers,” said Tsuyoshi Mochimaru, analyst for Barclays Capital in Tokyo.

Right. Broke and desperate competitors going out of business couldn’t possibly help Toyota, Honda, or Nissan (/sarc).