WP: New Labor Strikes Deals With 'Private Equity Guys'

[Omaha Steve]

New Labor Strikes Deals With 'Private Equity Guys'

By Dale Russakoff and David Cho
Washington Post Staff Writers
Sunday, June 10, 2007; Page A01

The Steelworkers union has an investment banker working down the hall from its president. A Service Employees International Union organizer is becoming an expert on leveraged buyouts. The Machinists are loading up their research department with MBAs.

The embattled labor movement is learning to think like capitalists, but not by choice. As burgeoning private equity funds bought U.S. companies last year worth more than half a trillion dollars -- a tenfold increase in only three years -- unions are shoring up their diminished bargaining power to try to negotiate worker-friendly financial deals with these new masters of the universe.

"In the union, we learn everything flat on our butt," said Ron Bloom, in-house investment banker for the United Steelworkers of America. "We get hurt and we say we're not going to get hurt again."


After dismissing private equity funds as "strip and flip artists," UAW President Ronald A. Gettelfinger conceded that the Cerberus buyout of Chrysler was "in the best interest of our membership."

Strategies are evolving as fast as the deals. The strongest unions have traded concessions for a share of eventual profits and for limits on how much money investors can take out of a business. Others have formed alliances with investors who honored labor commitments, becoming finders for potentially lucrative deals elsewhere.

The Steelworkers are labor's most seasoned financial dealmakers, going back to the 1980s and 1990s, when the industry shed more than 400,000 U.S. jobs. "Companies were going bankrupt and putting themselves up for sale and the private equity guys were the only ones who showed up," Bloom said.

Now private equity funds are swinging multibillion-dollar deals in coal, textiles, food processing, hotels, real estate -- every sector of the economy. Pooling money from the super-rich and financial institutions, the funds buy companies on the cheap and mortgage them heavily, aiming to restructure and sell them in three to five years at profits that far exceed those in the stock market. Because wages and benefits are the biggest costs in most companies, the strategy puts maximum pressure on workers, which is where unions come in.

FULL 3 page story at link.

[pnorman]

1. Thanks, Steve.

I just posted an excerpt of that on my union BBS. Since there's a 3KB size limit on the postings there, I NEED the URL. Here it is: http://www.washingtonpost.com/wp-dyn/content/article/2007/06/09/AR2007060901413.html

pnorman