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Town May Seize Factory to Prevent Dismantling by Vengeful Owner

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This story illustrates how far some companies are willing to go to preserve their bottom lines and assert their right to operate in an unfettered manner, even when that includes breaking the law and violating contracts.

Huffington Post, via its daily political newsletter Huffington Post Hill, does some additional reporting on the very peculiar case of the battle between Esterline Technologies, its unions, and now the town of Taunton, Mass.

Esterline is in the process of shuttering its Taunton manufacturing operation, Haskon Aerospace, which specialized silicone-rubber seals and gaskets for military planes and the airline industry. Even though the company has always been profitable, Esterline is moving production to non-union operations in Mexico and California.

Here’s where it gets ugly. Esterline had given the union, the United Electrical, Radio and Machine Workers union, the right of first refusal to buy the facility and operate it itself. But the company decided to renege on the deal when the union had to insist that the company obey Massachusetts law and pay for three months of medical care after employees were let go. Esterline started dealing in bad faith, and said it would cut the already-agreed-upon severance package by $143,000. That’s not kosher; it’s called “regressive bargaining” and the unions have filed charges with the National Labor Relations Board.

Esterline has now turned punitive. Its latest position is that it needs to compensate for these additional severance costs (since when is complying with the law an add on?) and has scheduled an auction for the plant’s equipment. The union went to the Taunton town council and have secured a preliminary commitment for it to use its eminent domain powers under the Fifth Amendment, which permits governments to take control of private property for public purpose (the council is waiting for the results of a legal analysis before it takes a formal vote). Huffington Post reported that the town solicitor presented his preliminary findings, and the council voted unanimously to call on Esterline to postpone the auction while he completes his research.

Esterline posted nearly $120 million in profits and paid its CEO in excess of $6 million last year. This scorched-earth battle is over an operation that employs 100 people.

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80 comments

  1. Francois T

    The link at “moving production to non-union operations in Mexico and California”. does not work.

  2. Francois T

    Amazing how easily people invested with seemingly unchecked power forget Newton’s Law ie. Action = Reaction

    Esterline needs a good spanking: City Council should just use its eminent domain power, seize the plant, and initiate an extreme hard ass negotiation lasting a very looong time…just to make them understand how it feel to be used and abused when you got the short end of the stick.

  3. attempter

    These days I’m as suspicious of eminent domain as anyone, since it’s usually used for corporatist purposes.

    But here’s a poster child case for it. The town should absolutely seize the forfeit “property” of this criminal organization, which is openly flouting its contracts* and promising to destroy property which clearly belongs to others.

    (But what are the workers doing right now? Have they seized the works? They have every right to do so, and I’d say they better do so just to be on the safe side. The town should of course not interfere with this.)

    *We always hear so much blather from the corporate bootlicks, er, economic “liberatarians” about the “sanctity of contracts”. So let’s see if we hear it in this case.

          1. pneywoodsfats

            Well, that’s what Castro did 50 years ago when he nationalized the old Esso refinery in Havana–it was on the tax rolls for $10,000, so that’s what they got. Even better, he gave Esso/Exxon $10,000 in Cuban government bonds, lol.

            Maybe the town council here could pay off the company in MBS’s–at face value, with no recourse.

  4. jim

    “Esterline posted nearly $120 million in profits and paid its CEO in excess of $6 million last year. This scorched-earth battle is over an operation that employs 100 people.”

    $6 Million for managing 100 people sounds like an excesssive pay package. Unless however, the company was privatety owned and operated by the founder,in which case I would agree they could pay whatever they want but certainly woudn’t expect them to have union employess.

    1. Yves Smith Post author

      This is not their only operation. The point is the company is decently profitable, and the three months of health care costs for 100 people, which is a legal obligation that the company is effectively fighting via breaking other agreements, is rounding error relative to the CEO’s bonus.

    2. Kurtis

      Esterline is a multi-national manufacturing company with operations in 12 U.S. states, Canada, China, France, Germany, Mexico and the U.K. and have almost 10,000 employees worldwide. I wouldn’t be too quick on questioning his salary! In fact, IMHO, Mr. Lawrence has done a phenomenal job during his tenure in growing Esterline as a whole. Also, did anyone think that maybe the Union has poised themselves as non-competitive over the years?

      I personally cannot blame Esterline for taking any action to maximize the profits of any of its divisions. As a company, it is their fiduciary responsibility to their shareholders. They OWN the company, and if the town wants to take the building under eminent domain, then so be it, however eminent domain does not cover any contents nor the core business and their clients. That my friend, would be a good example of socialism/communism! A town seizing a company, their intellectual property, clients and equipment! I’d like to see them try!

      Kurtis

  5. Goin' South

    This is very similar to what took place in Argentina. Workers would physically seize the plant and ask the local authorities to validate their action by expropriating the factory.

    That attempt to quickly sell the machinery was a common tactic in Argentina as well.

    Naomi Klein and her husband made a very interesting documentary about the process called “The Take.”

    Note also that the UE is the same union involved in the Republic Windows takeover in Chicago at the beginning of 2009.

    Good on them.

  6. Paul Tioxon

    A National Infrastructure Bank as well as State Infrastructure banks may be needed to prevent the political coup d tat via economic disinvestment in the USA. The truth that a democratically controlled republic always had European Socialist properties is not anything new. Aside from the US Postal Service, an originally cabinet level post headed by none other than Ben Franklin, many internal improvement were financed by the states, including in Pennsylvania, the first rail road, which grew to become the Pennsylvania Rail Road and what is now called the Main Line of Philadelphia, it’s blue blooded suburban golden acres. The property rights of the vast corporate system has developed into a mortal threat to the nation state system and the democratic political dimension of state control. Without economic political power as the moral equivalent of military power, the nation state is allowing its liquidation to be replaced by a system that puts the private rights of capital before the common welfare, the common defense and even common sense. It needs to be about more than currency manipulations of a central bank. It needs to be about deliberation on technological, industrial and agricultural policies to maintain the social order. And it needs to be firmly under the public’s control, not the private shareholder’s financial interest.

  7. Race to the Bottom

    Open the border with Mejico, move the union and labor to where the jobs are. Seriously, that would put a swift end to this kind of stuff.

  8. Ringaroundthecollar

    Predatory Capitalism and destruction of the social contract.
    We are seeing these examples all over. I’m sick of reading about this kind of vicious shit from corporate bastards. We need to start naming who the CEO is and post their picture with stories like this. It’s like reading about a new form of genocide. Economic Genocide against Americans. These sonsofbitches, these destroyers of worlds, these damn bastards from hell! Doesn’t everyone realize they are the destroyers, the mass murderers, and they are traitors. Their actions constitute nothing less than treason. Steal all they can and then run off to another country. Locusts is what they are. A plauge of locusts wrecking destruction and mayhem on a scale which makes a mass shooting insignificant! Corporate Treason? Why not? Don’t they now have the same and more rights as a living human being? Should they not then be held to the same account? For what is treason if not this kind of wanton destruction of our nation?

    1. Yves Smith Post author

      I’ll admit the reference was not as clear as it could have been. The statement was that the parent, Esterline, has always been profitable. It presumably bought Haskon out of bankruptcy, so it got the assets on the cheap, meaning it had a cost basis very different than that of the previous owners. There is no indication anywhere that Esterline was losing money on this business, this looks like an opportunistic move.

      Moreover, some of the coverage indicates that Esterline doesn’t want the employees to have the operation because they are worried about them as possible competitors. That contradicts the idea the the plant is inefficient and uncompetitive.

      1. James Regal

        It seems only right then that you change the text of your wirte-up to clarify this point. i.e. Your third paragraph really does imply that the Haskon company has always been profitable which is not the case based on other articles cited.

        Have you verified other statements in your write-up to confirm accuracy? Otherwise it does seem to call into quesiton the validity of your position and statements.

  9. Don

    The feelgood reaction of using Eminent Domain to punish is absolutely not the right course. Its intent was to insure govt properly compensated owners for property that govt used, not to be a bat to be used in private disputes.

    Use it in this case and it becomes another precident govt can point to in further usurping our private decisions.

    1. Ringaroundthecollar

      Good points but I see no loyality to either the employees or to the nation that allowed the owners to profit. As I said, it is treason in every sense if ideas like protecting our nation, our communites, our families mean anything at all. We need only elevate in our minds that little difference exists between destoryed infrastructure caused by enemy bomber and missiles, or by predatory capitalistism
      clearly seen in this case. No excuse is possible when all the posts are reviewed.

    2. Anonymous Jones

      Your interpretation of the words “public” and “private” are not so developed, it seems…it is entirely possible that the difference between the two ideas is slightly fuzzier and more complicated than you apparently believe.

      1. Ringaroundthecollar

        His? Mine? Like all law, it’s manipulated purpose is to deprive the have nots of what they have managed to gain.
        I do not agree with what ep3says. Since corporations are now the supposed equivelant of living beings, the use of the property for the public good is upheld.

      2. Paul Tioxon

        Public and private do not have to be interpreted.
        Their meaning is quite clear. The lying BS represented by this nonsensical comment is part of the over all ideological struggle, and political struggle. Res Publica, the things of people as a whole, in aggregate, not individually, which would be private or personal affects or property rights of the citizen. There, see, we are figuring things out all by little selves, as opposed to our bigger selves writ large in the polity.

  10. Aiden Potts

    Is the legal basis for eminent domain, property confiscation, due to the bargaining actions of the company or the fact that the jobs are going away if they move? If the latter, then eminent domain for this case would make property rights obsolete. It would make (small) company rights obsolete. It would elevate the power of every town council and local bureaucrat to that of king. And how does bargaining in bad faith justify town confiscation of private property either. No, I am not a tea partier, just a fiscally conservative, socially liberal person who is disgusted by our figurehead democracy which is actually a corporate plutocracy, but then we get the government we deserve. Get over the naive idea that there are any answers in our present situation and with the present level of clueless denial in this country. Cheer up, it has not gotten worse, yet.

    Aiden Potts

    1. Yves Smith Post author

      Eminent domain does not mean confiscation, the owners have to be paid fair value. So your underlying premise is incorrect.

      The town is not buying the property, the union was going to buy it. So the town would take it and use funds from the union to pay the previous owners. You have the structure of the deal all wrong.

      And, with all due respect, where have you been? Communities have long used eminent domain to take property from homeowners to further development, historically to get rid of slums (which didn’t necessarily make things better) or put in superhighways. More recently, it’s been used by developers to justify other “takings”, the rationale is always promoting local jobs. So you are saying businesses should get better treatment than private citizens? You seem outraged over the assault on the rights of businesses, when all these “rights” the most important, the use of a corporate structure that allows owners to escape from liability, come from the state.

      1. Steve Hamlin

        “Communities have long used eminent domain to take property from homeowners to further development, historically to get rid of slums (which didn’t necessarily make things better) or put in superhighways. More recently, it’s been used by developers to justify other “takings”, the rationale is always promoting local jobs.”

        All of which are either clear public purposes (highways), or to alleviate “blighted” economic conditions. Even under the much-objected to Kelo decision, the entire town was classified as “distressed.” The desire for mere jobs in an otherwise functioning local economy doesn’t qualify, and states post-Kelo, not including Massachusetts, have enacted restrictions on eminent domain to exclude even Kelo-like actions, and certainly this action.

        Yves, just like you are well-served in realistically assessing the likelihood and magnitude of RMBS put-back litigation, you’d be well-served to realistically assess the likelihood of success of this extra-judicial taking, and this proposed action is definitely outside of the jurisprudential history of eminent domain takings in the U.S. It won’t happen, not should it – too close to Venezuela for my comfort.

        1. DownSouth

          Steve Hamlin said: “All of which are either clear public purposes (highways), or to alleviate “blighted” economic conditions.”

          False.

          Kelo v. City of New London, 545 U.S. 469 (2005 was a case decided by the Supreme Court of the United States involving the use of eminent domain to transfer land from one private owner to another to further economic development.

          Here’s a notorious example that happened in Texas that shows your claim to be untrue.

          1. Steve Hamlin

            I referenced Kelo, in which the entire area was designated “distressed” and the goal was to increase the productive use of that land (i.e. dirt). That is not the case here.

            In the Texas case, the property was taken by the city government for a publicly-funded government building (that they presumably lease to the Rangers). That is not the case here.

            I reiterate – the history of U.S. eminent domain takings has nothing to do with a city using eminent domain to take an operating factory that the owners won’t sell to a particular group.

            Under Kelo, which states have and are curtailing, it would not be unconstitutional for the city to use eminent domain to take that LAND with the goal of increasing it’s economic use, but that ruling says nothing about taking an operating business and selling it to another party to keep operating.

  11. Jim Haygood

    The town in question is ‘Taunton,’ Mass.

    ‘Public purpose’ in eminent domain actions needs to be defined narrowly to prevent abuses. In a notorious case in neighboring Connecticut, the town of New London condemned private residences to make way for retail development — and the corporatist Supreme Court said it was okay.

    http://en.wikipedia.org/wiki/Kelo_v._City_of_New_London

    Shopping centers as ‘public purpose’? Such a scam — more like giving wealthy developers the right to declare your neighborhood a slum so they can bulldoze it and build another superfluous mall.

    Esterline’s actions sound nasty. Legal remedies based on contract and labor law are available. They should be pursued before opening the Pandora’s box of abusing eminent domain for essentially private purposes. The same expansive use of eminent domain that might save the workers’ factory can also demolish their houses for a sports stadium or a corporate campus.

    1. Dirk

      Yes. That New London decision was awful. Don’t put a weapon on the table that your enemy is more willing to use than you. I realize that the union doesn’t have the White House and Congress on speed dial like, say, Goldman Sachs does, but there must be some local judge they can appeal to halt the sale until the legal issues are cleared up.

    2. Ringaroundthecollar

      Currently I would disagree. Corporation are now considered the same as an individual by the Supreme Court, are they not? Clearly this was never the intent of the law to allow private property to be siezed for commerical profit.

      Perhaps the Supreme Court understands the threat to liberty posed by unrestricted capitalism, and in making corporations individuals, the sword is now sharp on the other side, well at least for a few inches. If one can be convinced that a shopping mall is in the public good, then certainly a factory that employs the local population is as well.

      What is wrong with turning the tables would be my question.

      1. Dirk

        Because two wrongs don’t make a right. And yes, corporations as people is an even worse Supreme Court ruling.

        1. Ringaroundthecollar

          Maybe so, it reminds me a great deal of another epoch and the decisions by the Supreme Court which set the stage for events to come. As in todays time, the court operated with in its’ own epoch of accepted notions when it handed down the infamous Dred Scott v. Sanford in 1857. Four years later the Civil War began.

          What I’m seeing here, in the comments, is a notion of what’s acceptable. Yet against this backdrop of what seems like conventional defense of capitalist notions are the realities of what most people are experiencing.

      2. AR

        IIRC, the Supreme Court’s rationale in the Kelo decision was that the proposed development would increase the tax base, which supposedly would redound to the public good.

        The development never proceeded. The land is vacant, last I read. I wonder what the taxes are on vacant land in New London?

  12. Paul Repstock

    Again and once more MSM publishes a “Headline” and the “Mob” howls for blood.

    Why is MSM more credible today than it was yesterday? The article appears thin on detail and parts are missleading.

    This plant may only employ 100 people. However, the “Highly paid” CEO is managing a company employing 9,000 people.

    1. Yves Smith Post author

      That’s a pretty egregious mischaracterization of what I wrote.

      The point of the 100 person reference is that the dollar amounts at issue here, involving three months of health care a 100 person plant, are clearly bupkis relative to the company’s profit and even the CEO’s pay.

  13. ep3

    So, the city council/union takes over the plant and the customer (whoever buys their gaskets) helps fund the CEO to start a new company that supplies the same parts but based in Mexico. So the company in Mass. goes under anyway and the city council is left holding the bag on any unfunded liabilities and closing costs. Sounds like a back door bailout for the CEO disguised as a populist movement.

    I wish them luck. Just take a visit to Michigan (anywhere but Grand Rapids) and you can see all sizes of towns that are economic war zones left over from factories closing and moving to Mexico.

    1. Ringaroundthecollar

      Well, I agree and no boot licker is going to change my feelings either. I say fine, take your company and yourself and all your stockholders with you. Any company that feels the need to abandon the people who made them rich should have all their citizenships cancelled, along with all their supporters. That would end a lot of this nonsense when owning a stock became a crapps table at deportation. Oh, so your in Mexico and can’t get back, well too bad, try liberia I hear they do citizenship cheap.

      1. Ringaroundthecollar

        Maybe I didn’t go far enough. Not only should the owners and stock holders have their citizenship cancelled, and be deported to their selected new factory location, but all their personal property should be siezed as well by the State to be auctioned in order to pay for the costs involved. States are short funded anyways. Here is a perfectly logical solution.

    2. Yves Smith Post author

      You have the deal wrong here. The town is not “buying” the plant ultimately. The union had the right of first refusal. The town would step in to assure the sale to the union can take place. And there is no reason to think the plant is unprofitable now, it would not make sense for the union to buy it if it did not think it could make a go. Even if a private investor gets involved, it would want to see unions members investing. That presumably means they’d put their pensions at risk in this deal.

      A right of first refusal always lower the value of a property in a sale. Some bidders will be deterred. Esterline gave away this right, which was a concession to the union, and now has decided to renege on that. The town, if it intercedes, is acting via the only means it has to try to restore the union’s position as a buyer of the assets.

  14. Paul Repstock

    Perhaps there is more to this story than I am able to understand. Certainly there is a lack of detail and background in the information given.

    There are apparent inconsistencies in the article. For one, the company is clawing back $143,000 from the severance packages offered to the workers, then the article alludes but does not state that the average pay was $32,000???? And goes on to talk about the “Highly Skilled” work force.

    There is also no mention of any background for the decision to close the plant and move production. Such a move would probably cost Esterline more than any severance costs and medical benifits. Those deciions are not taken lightly.

    The headline also stresses “Vengefull Company”. What were they vengefull about?? The decision to move was certainly made long before this benifit dispute arose.

    Was this a case of a greedy city council deciding to extort taxes from the most obvious deep pocket in town? as it a resopnse to years of union militancy??

    I don’t know. I can guess from having seen similar situations. However, there is not enough information for me to give an opinion.

    1. Ringaroundthecollar

      Of course predatory capitalism has had nothing to do with this issue, it’s all unions that are responsible for manufacturing running off to other nations; Is that it? You speak of transfering a “Plant” like you were potting a new one! Transfer is correct in that it is a transference of wealth in the strict sense of Adam Smith.

      I do not mean to be offensive, I’m just angry that with 22% unemployment I am still hearing defense of what amounts to treason. First, corporate lobbists lobby to remove protection barriers, then they wail about unions and being uable to compete in a “Global Market.” Now, they run off to another nation. Oh, that’s capitalism is it? Well what about patriotism and loyality to ones’ nation and it’s people? I have never known a Union Shop that didn’t outproduce a non-union shop. This hasn’t a thing to do with Unions driving out American Enterprise. It has to do with criminality.

    2. Yves Smith Post author

      Can you not do math? What about $1430 per worker do you find perplexing? That’s about a week and a half of pay. If you boss stiffed you of a week and a half of pay in a severance, deal, you’d say it was no big deal?

      1. Paul Repstock

        Yves; Your original statement did not show that the $143,000 was the agregate total for the clawback from all the employees, hence my misunderstanding of the point of this. I know of several plant shutdowns where severance has exceeded $143,000 per worker.

        Part of my response was probably a reaction to the howl here about abandoning “the people who made them rich”…
        Labour is a two sided contract.

        Anyhoo..I will quit now. There is not enough information for me to say anything.

        1. Ringaroundthecollar

          No, I should appologize, I should appologize, but with such intelligent people as yourself, we sometimes forget that it isn’t corporations which made our nation what it once was, it was the people. I have no desire to see what I am seeing in the destruction by runnaways; corporations without conscience, without loyality, and without honor. Scamming the people with boggus 401k ponzi schemes, with paper promises of a carefree retirement. I am certainly not a socialist, and have never believed in any of these things, yet, today, it has been the lobbists who have re-written the laws. Even forcing people to entrust their supposed retirements in corporately choosen retirement schemes. So the socialism isn’t coming from the people. It has been coming directly from the corporate lobbists that have and are pushing such things. Well, I’m out in weeds now.

  15. bob goodwin

    Just a guess here, but I think this is a one sided, pro union point of view.

    I am sure that the company would be happy to maximize its profits in either location. I am sure the bad blood evolved over strong arm tactics on each side.

    As for ‘rule of law’ arguments, it is not at all clear to me that 3 months of health care payments over a layoff applies to a situation where a plant is transfered.

    As for ‘rule of law’ arguments, it is not at all clear that eminent domain applies in this situation.

    As for ‘rule of law’ arguments, it is not at all clear to me that it is less regressive bargaining to auction a plants equipment than it is ask for health care payments retroacrively.

    Unions have played a large role in the demise of American manufacturing, it is not at all shocking to me that plant owners are reduced to fighting for their rights.

    1. Yves Smith Post author

      This is a violation of your “rule of law”. The company had given the union the right of first refusal and is now reneging. That’s clearly set forth above.

      Your discussion of unions is pure ad hominem. You have no evidence as to whether the plant was uneconomic (it appears not, otherwise, as per above, it would make no sense for the union to buy it) and even if it was, whether the union had any role. Even the Economist, hardly a bunch of pinkos, has pointed approvingly to research that shows that skill based unions are value added (as in they set standards for members, they serve as a form of credentialing). The ABA and AMA, and accountants are de facto white collar unions. Do you have a problem with them too and see them as detrimental to America? All you are doing is making a general slur.

      1. Steve Hamlin

        “This is a violation of your “rule of law”. The company had given the union the right of first refusal and is now reneging.”

        Then you settle it in court, where breaches of contract are decided. You don’t settle it by extra-judicial takings made to bully the other side, which would be objected to if the parties were different.

        Either you are for the rule of law, or you are not. Principles mean the most when they are inconvenient.

        1. DownSouth

          Steve,

          As I demonstrated in my response to you above, you have precious little knowledge of the law. Either that, or you are willing to just make up whatever law it is that suits your fancy.

          While that sort of ignorance and/or dishonesty might work with the Rush Limbaugh or Glenn Beck crowd, it won’t get you very far here on NC.

          1. Steve Hamlin

            Why the slander about Rush and Beck (who I abhor)?

            As for my knowledge of the law, I would genuinely be interested in case law that talks about using eminent domain to take an operating business and deliver that operating business to another to continue operating in the same manner. Name one?

            And I stand by my statement – if the company breached a legally-enforceable promise they made with the union, then the proper remedy for that is in court, not in an eminent domain taking by the city. The fact you don’t see that undermines your claim to have any knowledge of the law.

            What ignorance and dishonesty on my part?

        2. Chris

          Just because it’s “law” doesn’t mean it’s good or righteous or should be obeyed period. This is especially true if your judge happens to be a corrupt bastard, which many of them are.

    2. Ringaroundthecollar

      Is this a Sole Proprietorship or is it a corporation with hired guns to maximize profits?

    3. Doug Terpstra

      Very lawyerly semantics, Bob. Yeah, yeah, that’s it; it’s a “plant transfer”, yeah; it’s not a “layoff” at all! Or wait, we could call it an “involuntary retirement”. As long as we’re careful to change the language and we can just walk away from the contracts…well at least, we can when it comes to workers, but not when it comes to taxpayer-funded bonuses for bankrupt MF-CEOs. You’re a hoot.

      You may right about eminent domain, but it seems very appropriate tool here, public benefit, for leverage to ensure the company honors it’s contract AND the rule of law on severances. Unless the either/or was explicit in the terms of the contract, then why should they evade the sacred “rule of law”? They are trying to retroactively change the contract, and your anti-union libertarianism betrays its manifest double standards.

  16. jpe

    “since when is complying with the law an add on?”

    Since the company was under no obligation to offer the plant to the workers in the first place. They’d be foolish not to gross up the price by the extra cost.

    1. Ringaroundthecollar

      I have to respond, but how can one argue with such sound logic? Of course there is no need to concern ourselves with yet another empty factory littering our nation. Homeless people with childern or rising crime caused by such events, and why? Well, because it’s all perfectly legal. Isn’t that just grand?

    2. Yves Smith Post author

      No one is obligated to enter into an agreement, but having entered into one, you need to respect it or we have no society, much the less an economy.

      You don’t know why the company made the deal, but it DID make the deal. Now it has had a bad case of buyer’s (or in this case, seller’s) remorse because it didn’t do its homework and forgot about the medical obligation.

      Let’s say you were selling a house and the buyer went to contract. The only out is if he can’t get financing. The bank approves the mortgage application. But then the buyer finds out your community has really high water and sewer charges. He comes back to you and says he wants a lower price because he didn’t know about those charges.

      This is exactly the sort of behavior Esterline has engaged in. You’d never defend it in a different context, but because a company and union is involved, somehow that’s acceptable to you.

      Esterline trying to retrade a deal because it failed to do its homework. The union may have found a viable response. And you have a problem with people taking the legal strategies available to them when one party has cheated on a deal?

      1. Ringaroundthecollar

        I agree and what seems to escape capitalists is that the first thing to flee a nation which doesn’t have fair rules of play is capital. Money will flee any nation without the rule of law, and the subversion of fair practices in law is a death sentence to an economy. Thus, all lobbists should be waterboarded until they confess who pays them to write what and for what reasons. Hey, it’s legal too, I think?

        1. angry zebra

          Money won’t flow from a lawless country if money doesn’t have to obey the law. see: Banana Republic

  17. pineywoodsfats

    In a government that cared about its industrial workers, the president could just make a persuasive phone call to the CEO of the company regarding its lucrative military contracts.

    Oh well . . . . .

  18. AR

    This reminds me of this story from August:

    Mott’s workers in western New York had been on strike for three months….

    Labor Says Mott’s Apples Are Rotten to the Core
    by Michael Winship, CommonDreams, August 24, 2010

    [snip]

    [Bruce Beal, AFL-CIO Local 220's recording secretary] said he and the other union workers were shocked when new owner Dr. Pepper Snapple Group — despite a profit of $555 million on sales of $5.5 billion last year — demanded massive contract concessions; among them, slashing wages by $1.50 an hour, the elimination of pensions for new employees, a 20 percent reduction in their 401K’s and a change in their health plan Beal says would force members to pay out of pocket an additional $6000-8000 a year.

    In an official statement playing on the region’s economic hardship, the company declared that, “DPS workers in Williamson enjoy significantly higher wages than the typical manufacturing employee in Western New York… As a public company, Dr. Pepper Snapple Group has a fiduciary responsibility to operate in the best interests of all of its constituents, recognizing that a profitable business attracts investment, generates jobs and builds communities.”

    Bruce Beal dismissed the DPS argument as “a line of bull… They don’t give a rip about their employees, just lining their pockets is all they’re concerned with.” He points to Larry Young, the company’s CEO, whose salary has risen 113 percent over the last three years to $6.5 million, and says that workers were told that they were nothing more than a “commodity, like soybeans… When we talked about how the company’s demands would cause our members to lose their homes or have their cars repossessed, they looked right at us and said, ‘You are living beyond your means.’”

    Beal says the union has heard that other profitable businesses are discussing the strike and saying that if DPS wins, they, too, will demand massive concessions.

    http://www.commondreams.org/view/2010/08/24-6

    DPS is sending ‘scabs’ from Duffy Mott (a non-union plant in PA) up to NY to fill in for strikers! The pay in PA is $17, and in NY it’s $21, plus benefits. Average wages in the Williamson, NY area are $14. Union officials say that 70 percent of the plant’s workers earn $19 or less an hour and that many are highly experienced and deserve well more than $14 an hour.

    1. Ringaroundthecollar

      That’s the modern school of business. The so-called Mack Truck model of business: Doesn’t matter who you are, if you go outside and get run over by a Mack Truck, well too bad, we have your replacement.

      Another take is the Mule Team School of Business. You get a team of mules and you whip them until they die, and then you get another team.

      This is the total philosophy of business in our time.

    2. John S.

      “and deserve well more than $14 an hour”

      If they “deserved” it, someone else would be willing to pay it.

      1. Ringaroundthecollar

        Yes, the race to the bottom isn’t a corporate race to the bottom. It’s a labor race to the bottom.

  19. John S.

    Just what we need is another manufacturer run by the government. Sounds like a great shorting opportunity.

    1. Yves Smith Post author

      When cities use eminent domain to facilitate the construction of malls, do they own the mall? No.

      The town is looking into using eminent domain to allow the union to buy the factory. There is nothing in this story that says the town will operate the business, but you project that upon this situation.

  20. Vooch

    Union thuggery – obviously behind all this.

    Plant goes bankrupt twice within ten years. That is all one needs to know

    1. Patricia

      Oh, yeah, that’s a smart ripost, Vooch. Don’t read the article, you needn’t know the issues at hand; just respond with your usual salivary gland slop to the word “union”. Yep, Pavlovian economics and law at it’s very best. You are amazing.

  21. Don

    Instead of the evil and good being slipped back and forth on the unions and the corporations, lets get back to the simple things: the corp and the union are having a dispute involving a sale, this should be settled in court, instead the town wants to use eminent domain to end run the legal system. I get the contracts and such and believe they should be legally enforced in court. What I am seeing is all sorts of justification of how in this particular case the govt misuse of authority is ok because just this once we want a particular outcome (even if it makes a not so clean precident).

    Some genies are best left in the bottle.

    1. reprobate

      This is corporate shilldom in a pretty wrapper.

      You assume that the courts will provide a fair outcome. Litigation costs a minimum of $50,000, and it can get to hundreds of thousands of dollars before you bat an eye. Courts are NOT a level playing field, your assertions to the contrary. How are 100 workers going to fight against a company with a $120 million bottom line? Answer: not. All Esterline would have to do is go a few rounds in court and the workers would quickly be out of dough.

      1. liberal

        You assume that the courts will provide a fair outcome.

        This also struck me when reading several of the comments above.

        1. ltk

          When the inevitable dispute comes in the eminent domain case, where do you expect that it will be resolved? I assume that you would rather not let the courts decide it, if you believe them to be corrupt; but then who? Should the city council operate with no higher authority, with the ability to sell any business or other property for less than market value? (If the eminent domain proceeding occurs at market value, then it’s pointless, because the union could just as easily have bought the equipment at open auction. So the fact that they are seeking this implies that they expect to get it for cheaper.)

          This is very different from traditional uses (and even abuses) of eminent domain. Typically, eminent domain is used against an owner who is unwilling to sell to anyone, whose property stands in the way of some larger development. Here, with the property in question scheduled for sale on the open market, there’s no such argument. The only possible reason for the union to pursue eminent domain, instead, for example, of a structure that guarantees them equal treatment to other bidders at auction, is because they want the property for less than it would fetch at auction.

          If the courts are corrupt, and biased in favor of large corporations and against unions, then that’s a problem; but it’s not one to be resolved by hugely expanded use of eminent domain. On the off chance this actually went through, it would create a powerful tool for the politically-connected. This seems unnecessary, to resolve what is basically a contract dispute, if that.

  22. molecule

    No one is assuming anything. We use the courts to settle disputes. That’s just how it works. Rule of law and all of that.

  23. P. Petters

    Yves writes: “A right of first refusal always lower the value of a property in a sale. Some bidders will be deterred. Esterline gave away this right, which was a concession to the union, and now has decided to renege on that. The town, if it intercedes, is acting via the only means it has to try to restore the union’s position as a buyer of the assets.”

    Yves, you’re completely inventing this. Easterline did not give the union the right of first refusal. The union wants it, and that’s why it’s asking the City Council to exercise eminent domain. From the Taunton Gazette:

    “Knowlton [the UE rep] said the 85 men and women of Local 204 want a “right of first refusal” to buy the specialized equipment used to manufacture silicone-rubber seals for aeronautic industry contracts.

    “He said officials of Bellevue, Wash.-based parent company Esterline Technologies Corp. so far have refused his request and threaten to auction off the equipment to the highest bidder in December.”

    There are no contractual issues here that justify the use of eminent domain. There’s no contractual obligation that’s been broken, no promises that have been reneged on. Haskon owns the equipment, and wants to auction it off. If the union wants the equipment, it can buy it at the auction. If it can’t afford to pay for it, then it won’t be able to get it. You’re arguing for having the state step in and seize private property based on nothing more than your knee-jerk biases.

  24. Bill White

    From Dickens’ Hard Times:

    The wonder was, it was there at all. It had been ruined so often, that it was amazing how it had borne so many shocks. Surely there never was such fragile china-ware as that of which the millers of Coketown were made. Handle them never so lightly, and they fell to pieces with such ease that you might suspect them of having been flawed before. They were ruined, when they were required to send
    labouring children to school; they were ruined when inspectors were appointed to look into their works; they were ruined, when such inspectors considered it doubtful whether they were quite justified in chopping people up with their machinery; they were utterly undone, when it was hinted that perhaps they need not always make quite so much smoke. Besides Mr. Bounderby’s gold spoon which was generally received in Coketown, another prevalent fiction was very popular there. It took the form of a threat. Whenever a Coketowner felt he was ill-used – that is to say, whenever he was not left entirely alone, and it was proposed to hold him accountable for the consequences of any of his acts – he was sure to come out with the awful menace, that he would ‘sooner pitch his property into the Atlantic.’ This had terrified the Home Secretary within an inch of his life, on several occasions.

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