The Romney campaign releases a video where a former VP of that damned Kansas City steel mill, GS Technologies, essentially thanks Romney and Bain Capital for buying and bankrupting it. Hours later, they take the video down. Maybe talking about the loss of 750 jobs during a recession is a bad idea.
It’s another indication that the Romney team are confused. They very badly want to pound away at the “I’m a great businessman who will find you a job” message. But Romney the actual person isn’t that guy.
My reading of the facts (here, here) behind Bain’s handling of GST Steel is that they were very aggressive in manipulating the company for gain while the business environment was volatile. This included charging the company (which they owned) $900,000 a year to manage it. Bain’s typical behavior was a bad fit for a troubled company in difficult times.
The first thing they did was raise money by selling $125 million worth of bonds. What did they do to justify all that new debt? Gave almost all of the cash away in dividends to stockholders. Bain was the biggest stockholder of course, so it was paying itself handsomely for buying the business. The sizable dividend also sent a strategic message to the other well-off owners and potential investors, hedge and mutual funds: we are looking out for the rich guys. We will take care of the bottom line.
“Paying distributions with debt is not uncommon,” Campbell Harvey, a finance professor at Duke University, told Reuters. “The only thing that strikes me as a bit unusual is the size of the dividend. There would be logic in them saving some cash for a downturn.”
The grand scheme failed. They ran the business poorly, later saddled it with even more debt, and had no cash to survive the upheavals in energy costs and foreign competition. When the company went belly up, the management reneged on severance, pension and health insurance promises. You-know-who had to come in and bailout the workers, and only a little bit.
Seeing that, the Obama team pounced: “After purchasing the company, Mitt Romney and his partners loaded it with debt, closed the Kansas City plant and walked away with a healthy profit, leaving hundreds of employees out of work with their pensions in jeopardy.” Cue Politifact:
We found, through corporate filings, interviews and investigations by other news organizations, that the statement is accurate but needs some clarification. First, it’s true that Bain added significantly to GST’s debt load while paying dividends to itself. The plant’s closure, however, happened after Romney had left daily operations at Bain, though he led Bain during six years of its majority investment in the plant. And other, outside factors were at work, making the steel industry a tough business. Steel prices were low and electricity costs were high, and those forces drove other steel mills out of business around the same time.
The statement’s last two claims are solid: Bain (and Romney) made a profit from taking over GST, and the employees lost many benefits their union had negotiated, including supplemental pension payments. The federal government had to step in to shore up the fund.
We rate the claim Mostly True.
I find it odd that the Romney people would get anywhere near the GST Steel story. They’re either incompetent or deaf to the howls of pain coming from the working and middle classes. Bain was a very aggressive business even in the worst of situations, and this reminds us of so many other businesses, bankers and investment entities in particular, whose habits ended up decimating the economy.
Knowing the ease with which The Candidate Who Wasn’t There can disappear, you can guess his take:
“I take personal responsibility for making the investment,” Romney said in a statement at the time of the plant closure, according to the Globe. “But I didn’t manage these companies. Our philosophy at Bain Capital was to support management teams in companies where we saw potential for growth, or in companies that were in financial distress that we thought we might be able to save.”
And isn’t that odd? He’s running as a business wizard who’d like to personally find you a job, or a career. But all he’s ever been is a profit-driven mega-manager, a remote and reliable source of worker misery. His record puts the lie to his promises.