- Oct 9, 1999
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Vulture capitalism at work.
Read the whole article to see how the hedge fund vultures held the entire auto bailout captive by buying control of Delphi and ultimately breaking their union and closing but 4 of its 29 US plants and shipping their jobs to China.
Mitt Romney and the high flying hedge fund boyz: Hypocrisy and greed.
Mitt Romneys opposition to the auto bailout has haunted him on the campaign trail, especially in Rust Belt states like Ohio. There, in September, the Obama campaign launched television ads blasting Romneys November 2008 New York Times op-ed, Let Detroit Go Bankrupt. But Romney has done a good job of concealing, until now, the fact that he and his wife, Ann, personally gained at least $15.3 million from the bailoutand a few of Romneys most important Wall Street donors made more than $4 billion. Their gains, and the Romneys, were astronomicalmore than 3,000 percent on their investment.
Read the whole article to see how the hedge fund vultures held the entire auto bailout captive by buying control of Delphi and ultimately breaking their union and closing but 4 of its 29 US plants and shipping their jobs to China.
One of President Obamas first acts in office, in February 2009, was to form the Auto Task Force with the goal of saving GM, Chrysler, their suppliers and, most important, auto industry jobs. Crucial to the plan was saving Delphi, which then employed more than 25,000 union workers.
Obama hired Steven Rattner, himself a millionaire hedge fund manager, to head the task force that would negotiate with the troubled firms and their creditors to avoid the collapse of the entire industry. In Rattners memoir of the affair, Overhaul, he describes a closed-door meeting held in March 2009 to resolve Delphis fate. He writes that Delphi, now in the possession of its hedge fund creditors, told the Treasury and GM to hand over $350 million immediately, because if you dont, well shut you down. His explanation was corroborated by Delphis chief financial officer, John Sheehan, who said in a sworn deposition in July 2009 that the hedge fund debt holders backed up their threat with an analysis of the cost to GM if Delphi were unwilling or unable to provide supply to GM, forcing a shutdown. It would take years and tens of billions for GM to replace Delphis parts. At that bleak moment, GM had neither. The automaker had left the inventory of its steering column and other key components in Delphis hands. If Delphi laid siege to GMs parts supply, the bailout would fail and GM would have to be liquidated or sold offas would another Delphi dependent, Chrysler.
Rattner could not believe that Delphis managementnow effectively under the hedge funders controlwould want to be perceived as holding GM hostage at such a precarious economic moment. One Wall Street Journal analyst suggested that Singer was treating Delphi like a third world country. Rattner likened the subsidies demanded by Delphis debt holders to extortion demands by the Barbary pirates.
Romney has slammed the bailout as a payoff to the auto workers union. But that certainly wasnt true for the bailout of Delphi. Once the hedge funders, including Singera deep-pocketed right-wing donor and activist who serves as chair of the conservative, anti-union Manhattan Institutetook control of the firm, they rid Delphi of every single one of its 25,200 unionized workers.
Of the twenty-nine Delphi plants operating in the United States when the hedge funders began buying up control, only four remain, with not a single union production worker. Romneys job creators did create jobsin China, where Delphi now produces the parts used by GM and other major automakers here and abroad. Delphi is now incorporated overseas, leaving the company with 5,000 employees in the United States (versus almost 100,000 abroad).
Another outcome may have been possible. In June 2009, the Treasury and GM announced a bailout deal theyd crafted over months with the cooperation of the United Auto Workers. GM would take back control of Delphi via a joint venture with Platinum Equity, a buyout firm led by billionaire Tom Gores, a self-described Michigan man who grew up in the shadow of Delphis Flint plant.
The final Platinum plan, according to Delphis official statement posted on Marketwire in June 2009, lists plants in fourteen locations slated for closing, which would have left several of Delphis plants still in business, still unionizedand still in the United States. Crucially, the deal would have returned key Delphi operations, including the production of steering columns, directly to GM.
The hedge funders stunned Delphi by refusing to accept the Platinum plan. Harshly criticizing it as a sweetheart deal, they demanded 45 cents on the dollar for the debt bonds they had bought on the cheapmore than double what the Treasury-brokered Platinum deal would pay.
Then the Singer-led debt holders swooped in. After the Platinum deal was announced, Elliott Management quietly tripled its holdings of Delphi bonds, purchased at just one-fifth of their face value. By joining forces with Silver Point, Paulson and Loeb, Singer now controlled Delphis fate.
Mitt Romney and the high flying hedge fund boyz: Hypocrisy and greed.