Last month, the Guardian reported on how union workers at a company called Momentive Performance Materials went on strike for 105 days to try to limit yet more cuts to wages and benefits from its private equity owners, led by Apollo, and largely lost. Momentive, located in upstate New York, is a particularly poignant example because its employees face real safety and health risks.
The article dwelled on the role of another private equity investor, Blackstone, and its CEO Steve Schwarzman’s links to the Obama Administration. Some of the union members hoped in vain that Trump would rein in Schwarzman. As we’ll discuss, they would have done better to keep their eyes on the party that was driving this bus, Apollo, and the unusual level of fees that it was pulling out of Momentive. This isn’t just profiteering at the expenses of workers, which is sadly bog standard for private equity firms. It’s also such a departure from normal private equity rent extraction that limited partners and the SEC should be concerned.
Background: Momentive’s Business and Workers
The Guardian provided a solid overview of Momentive’s operations and how its private equity overlords have squeezed its union members after it was sold by General Electric in 2006. Key sections of the article:
Workers went on strike at Momentive last November hoping to fight off a new contract that would have slashed their healthcare and retirement benefits…
Workers complain that successive CEOs have negotiated worse contracts and left shortly after with a big bonus. In 2008, Momentive slashed production workers’ wages by 25%-50%. In 2013 the company froze pensions for workers younger than 50. This time they came after healthcare, especially retiree healthcare…
In the meantime, the fortunes of Momentive’s owners and senior management have grown. The current CEO, the aptly named John Boss, took home $5.4m in salary and other compensation in 2015. His 2016 salary will be disclosed shortly; no one is expecting him to take a pay cut…
[President of the IUE/CWA Local 81359 union Dominick] Patrignani proudly chats me through the bewildering array of silicone-based products Momentive makes and that end up in everything from lipstick, car parts and the adhesives that are used in stamps and bandages to airplane seats and the glue that held the tiles on the space shuttle. Making those products involves an arsenal of hazardous chemicals and processes that require a highly trained and safety-conscious workforce. (Later he delivered me a hand-drawn diagram setting out the formula of many of the chemicals used.)
This is dirty, dangerous work. Workers talk about high rates of cancer among their colleagues, past and present. One wrong move could spell catastrophe not just for the plant but for upstate New York. As with miners, steelworkers and other blue-collar workers, the quid pro quo used to be higher wages and better benefits. Not any more.
“Everyone knows the risks,” Kevin Mack says. Dangers from hazardous materials come – “sometimes it’s in the blink of an eye, sometimes it’s long-term.” He had an operation for oral cancer last year, and Jack has had prostate cancer. Since they have been on strike, he’s met seven other men with similar diagnoses. Kevin said his healthcare was already inadequate to cover his family’s needs. Now he is being asked to pay into a health savings account to cover future costs.
Via e-mail, labor historian and sometimes Naked Capitalism guest poster said the outcome wasn’t quite as bad as the Guardian article indicated, but that is a small consolation:
I spoke a few days ago with a women in the union leadership at the Momentive plant; she was more upbeat about the settlement than this article portrays, but still at best we’re talking about workers having to put up concerted resistance to avoid giving up everything the company wanted to take back. Again, I don’t think most people have any idea how defeated people feel out there. Which is why those folks who are fighting back deserve some attention.