Caterpillar is a Prime Example of How Big Business Has Colluded with Government to Wipe Out America's Middle ClassIn January 2009, Caterpillar announced that it would slash 22,000 people from its 112,000-person workforce. The new round of job cuts spanned five plants in Illinois, Indiana and Georgia. Caterpillar Inc. is the bulldozer manufacturer that President Barack Obama used to help push his $787 billion stimulus plan. At a Caterpillar Inc. plant in Peoria, Ill., President Obama said that his proposed economic stimulus would allow the company's CEO to rehire some of the 20,000 recently laid-off employees. But when asked on February 12, 2009, if the stimulus could do that, Caterpillar CEO James Owens said, "I think, realistically, no. The honest reality is we're probably going to have more layoffs before we start hiring again." More than half of the 15,000 people that Caterpillar Inc. hired in 2010 were outside the U.S. Also in 2010, Caterpillar made plans to build its second factory in China. Legislators have been bleeding the next two generations of Americans dry by pouring money into corporations that are building in overseas locations to avoid paying taxes. On January 26, 2012, Caterpillar reported a 58 percent rise in quarterly earnings; the results capped a record 2011 in terms of sales and profits. The company is enjoying solid growth in its resource-equipment sector due to solid demand and favorable prices in the commodities markets.
March 31, 2014
Caterpillar has avoided paying $2.4 billion in U.S. taxes since 2000 by shifting profits to a wholly-controlled affiliate in Switzerland, according to the report released Monday by Sen. Carl Levin of Michigan. Levin chairs the Senate Permanent Subcommittee on Investigations.
"We don't reach those kinds of judgments," Levin said. "The question is, is it tolerable, and I don't think it is."
"Caterpillar takes very seriously its obligation to follow tax law and pay what it owes," Lagacy said. "Caterpillar's philosophy is that our business structure drives our tax structure. We comply with the tax laws enacted by Congress, by the states and by all of the many jurisdictions in which we conduct business."
Levin's investigation focused on the company's lucrative international parts distribution business.
"That tax strategy depends on the company making the case that its parts business is run out of Switzerland instead of the U.S. so it can justify sending 85 percent or more of the parts profits to Geneva," Levin said. "Well, I'm not buying it."
"We grow and build near our customers worldwide, not only because it's what they demand, but because remaining globally competitive helps create jobs in the United States," Lagacy said.
March 30, 2011
It used to be if a corporation wanted to practice the dark art of extortion, it would do so well outside of the public eye. Not these days; company CEOs are out in the open and proud of it when they want to extract yet more money out of the taxpayers.
Take the case of Caterpillar CEO Douglas Oberhelman. He wrote a letter to Illinois state governor Pat Quinn, complaining about the state’s recent increase in the corporate tax rate from 4.8% to 7.0%. He said at least four other states have approached the company offering generous allowances if Caterpillar would move its headquarters out of Peoria, Illinois. Neighboring states of Indiana and Iowa have admitted to lobbying Caterpillar, as has the far-away state of Texas. The company said it wasn’t threatening Gov. Quinn over the tax increase, but it had “to do what’s right for Caterpillar.” That’s corporate-speak for “we’re threatening to leave the state if you don’t rescind this tax increase.”
In the business of “let someone else pay for government services”, corporations are the hands-down winners. Corporations use the same roads as everyone else, fly out of airports, enjoy the services of the water, electric, and gas utilities, clog up the courts, get police and fire protection, and if necessary have their overseas interests secured by the military and the diplomatic corps. They just don’t want to pay for it. Fifty years ago corporate income taxes at the federal level generated about 6% of GDP; today the amount is less than 2% of GDP. The difference has been made up in increased taxes on individuals, and dramatically increased federal government borrowing.
At the same time, corporate profits in relation to GDP have soared. In 2010, the ratio was 9.46%, and the last time the corporate take of national income was this high was in 1929, when corporations earned 9.9% of GDP (an all-time record). Back then, corporate profits were the result of a booming economy, and were matched by accelerating corporate revenues. That’s not the case today. Revenues have been relatively stagnant the past three years since the 2008 financial crash. But corporate profits have recovered nicely – they were up 36.8% in 2010 on a yearly basis according to the Bureau of Economic Analysis – because corporations have several things going for them at the same time.
For one, the Fed’s zero interest rate policy has dramatically reduced corporate borrowing costs, and corporations have loaded up on long term debt at exceptionally cheap rates to lock in these benefits for years to come. Second, corporations are making much more of their income in emerging markets, including China and India, than ever before. If you look at a subset of non-financial companies among the S&P 500, their US earnings as a percentage of national income in QIII last year were 7.0%. In 1949, this number was 15%, and throughout the 1950s and 1960s corporations generated profits at a rate in excess of 12% of national income. The steady decline in these earnings has been made up in money earned from overseas operations, which used to be a negligible part of US corporate activities.
Combine all this with aggressive efforts to cut the tax bill, and you can see how corporations can be earning record amounts of income.
But the real kicker to the bottom line has been the reduction in labor costs. Last year alone, labor costs fell 1.5% for corporations, and nothing reaches the bottom line quicker than cutting the biggest expense corporations have. Not surprisingly, this has been reflected in the unemployment rate, which has been stuck in the 9% - 10% range for three years now.
It’s the theory of Ben Bernanke and the Fed that the zero interest rate policy, plus all the liquidity added from Quantitative Easing programs, will induce corporations to start hiring again, and all will be well. Maybe Bernanke should take a look at Europe, where unemployment in many countries has been stagnant for decades in the 10% to 20% range.
While economists in the US are fretting how long it has taken for the unemployment rate to move down, they might be better off investigating the question whether chronic high unemployment is here to stay. There is a lot to indicate this might be the case, especially if you think employment arbitrage is here to stay.
It may be hard to believe, but there was a time in America when corporate identity wasn’t so fixated on revenue and earnings. Reading through corporate annual reports from 1940 through 1970, much of the management discussion focused on customers and employees, and the communities the company served. There was no need for quarterly earnings statements, and the stock price was mentioned in passing. No one expected 15% earnings growth rates per annum except for clever start-up companies, like IBM. There was no such thing as executive options or deferred share grants, and executive salaries were shockingly low by today’s standards.
The change came in the early 1980s, when Ronald Reagan ushered in an era of low corporate tax rates and a reduced regulatory environment.
After all, they have the politicians on their side. It’s not just that corporate money buys votes in Congress. Fixing the campaign financing problem is only a part of the solution to reducing corporate influence in government.
Something also needs to be done about corporate extortion, and this problem is much harder to eradicate. Part of the dispute underway between the European Union and Ireland is on this issue of corporate extortion, aka tax arbitrage.
Ireland has a very low tax rate on corporate earnings – 15% - and Germany and France have made it a condition of granting loans to Ireland in its current budgetary crisis that the country increase its corporate tax rate to EU levels, thus eliminating the arbitrage possibility. Ireland has refused – the low taxes after all are deemed to be the source of the “Irish Miracle” of the last decade, when the country achieved envious growth rates by attracting new companies from abroad. Never mind that the Irish Miracle blew up under a mountain of unsupportable debt, and that many of the new companies packed up and moved away. The ones that stayed fired most of their Irish work force.Here you see the problem. Despite the obvious evidence that corporations are very fickle employers, politicians cling eternally to the myth that government must attract corporations in order to generate jobs. The Republican Party in the US has bought into this myth so thoroughly that even the Tea Party activists who are suspicious of corporations nonetheless, the minute they get into office, suck up to the corporate lobbyists.
The trend now is to take these tactics global, by moving the entire company to a different country. George Buckley, the CEO of 3M Corporation, said recently that he’s sees his company moving either to Canada or Mexico altogether if the business climate in US does not prove more amenable to corporate interests. How much more amenable does Mr. Buckley want the climate to be? Does he want no corporate taxes whatever – a free ride paid entirely by individual taxpayers? Should he be able to operate without any regulations? Should the 15% capital gains tax payable largely by corporate executives be abolished entirely? Maybe corporate executives should be exempt altogether from personal income taxes, the way the French nobility avoided taxes before the French Revolution.
Zug is a town of 26,000 people, but it is home to over 30,000 corporate headquarters. It offers one thing: a 15% corporate tax rate (just like Ireland). Transocean is typical of the companies that have headquarters in Zug; the company has no more than 15 employees in its headquarters, while it has 1,300 employees in Houston, Texas. Its headquarters is a corporate shell, yet it is a strong enough shell to avoid oversight or the reach of the taxman from the US. The Swiss government, of course, doesn’t care what the company does outside of Switzerland.
In order to do something about corporate extortion, you have to eliminate the corporate tax havens in places like Zug, the Bahamas, and the Cayman Islands. You have to convince states and provinces and nations to stop offering tax breaks and other incentives in order to garner precious corporate jobs.
January 19, 2012
The moves are familiar to anyone who's watched the auto industry struggle with its workers and union over the past several decades. But Caterpillar, unlike the automakers, hasn't suffered much economically. Indeed the company has long stood out for its profitability, in the last five years hovering above the top 13th percentile on the Fortune 500 list. In the last three months of 2011, as Caterpillar was pressing Canadian workers to give in to its requests, the company reported a 44 percent surge in profits from the previous year. Now, if workers continue to resist, Caterpillar appears to be threatening to take their jobs out of the country. Not to China or Mexico, but just over the border to Muncie, Ind., where desperate Americans are eager to take any job -- no matter how low the pay.
"In the small picture, Caterpillar is a really hard employer, but the big picture here is obviously the race to the bottom," said Linda Kaboolian, a lecturer in Public Policy at Harvard, who studies workplace issues and has closely tracked the company's practices through the decades.
"The interesting political question in this country is whether or not there's any wage floor which is too low," she said.The situation at Caterpillar illustrates an emerging problem with the nascent economic recovery: While corporations are rebounding from the depths of the recession, working Americans aren't. Corporate profits are at their highest level in decades while worker compensation is at a relative 50-year low. Much hope has been placed in the rebound of North American manufacturing, but while the industry has added some 334,000 positions in the past two years, many of the new jobs don't pay the old middle class wages.
The driving force behind these record profit gains are reductions in wages and benefits, according to a report by Michael Cembalest, Chief Investment Officer at JPMorgan, published last summer.
"It's a fundamental problem: Now we have a situation where there's not enough purchasing power in the American economy to feed this recovery," said Thomas Kochan, a management expert at the Massachusetts Institute of Technology.
"It's not all bad," he continued, pointing to companies like General Electric, which have slashed wages while profits were strong in return for continued investment in the United States and the promise of more jobs. Other companies must cut wages to stay alive, such as the auto makers, which pay new workers nearly half what starting employees made before the crash.
"But if it's just companies slashing wages because they've got the power to do so, then it's dysfunctional," Kochan said.While Caterpillar and the Canadian Auto Workers Union are currently at a standoff, observers believe there is little doubt that Caterpillar will win -- and equally little doubt that the company needs to slash wages for what Kochan would describe as functional reasons.
The company has deep pockets and a history of not backing down when it comes to labor disputes. It also holds a powerful trump card: since purchasing Electro Motive Diesel -- the company that owned the London assembly plant, one of the few facilities in North America that assembles locomotive engines -- in 2010, Caterpillar's rail operations holding company, Progress Rail, has opened a second assembly plant in Muncie, Ind. There, the non-union employees reportedly earn less than half of their Canadian counterparts -- $24,000 per year, wages that hover around the poverty line.
"My prediction is that the Canadians are going to lose this and it's because Caterpillar is the kind of company that will pay any price once it starts on this road, not because it's evil but because that's what its strategy is," said Kaboolian.The CAW says it considers Caterpillar's demands to be aggressive enough to block actual negotiation.
"We don't understand what Caterpillar's strategy is -- all we wish is that Caterpillar had never set foot here," said Jim Stanford, an economist at the CAW.Caterpillar has stayed silent throughout the dispute, directing all media inquiries to a web page which says that the cost of wages and benefits for a unionized EMD supply plant in Illinois -- work that requires less training and traditionally pays less -- is about half that of the London plant, and that the Canadian facility "has antiquated work rules that make the London operation inefficient.”
"The larger story is that an extraordinarily profitable company like Caterpillar has determined that a fair standard of living for a semi-skilled manufacturing employee is $24,000 a year," Kaboolian said. "Let's face it -- every time workers lose a fight like this, American business gets a clear message that you can ratchet down the wages a little further."RACE TO THE BOTTOM
The workers at the factory are mystified as to why Caterpillar would buy a company with a high-wage plant in Canada, only to lock out the workers less than two years later and suggest that the factory will eventually be shut down. At a recent “solidarity barbecue” held outside the plant, workers interviewed by The Huffington Post tried to put on a brave face. But many expressed fear about their future, even if the plant stays open.
"It would be a huge setback," said Bob Scott, a CAW plant chairman with 23 years at the plant. "I have grandchildren, and I have to say, for us to step back 20 years in wages -- for my children and grandchildren, it's not going to be much of a life."Ross Seeley, a pipe-fitter who has worked at the plant for 29-and-a-half years, said he is “hopeful," but when asked about how he thinks the dispute will end, his easy smile faded.
“They can kind of do whatever they want to do. I think they’re probably going to close the plant and move it, which is terrible,” said Seeley, whose retirement should be just six months away but remains uncertain as the lockout stretches on. “It leaves you speechless.”Officials at the CAW charge that Caterpillar opened the plant in Muncie in part to put pressure on the workers in London. They say that the company would lose nothing from a move, but it would leave behind a devastated community. In addition to the 465 jobs that would be lost at the plant itself, an additional 2,000 supply jobs would be lost by extension, according to estimates.
Manufacturers have long employed a strategy of building plants in locations with cheaper wages, like the union-averse southern states or in Mexico. But Indiana is part of the union-strong industrial backbone of America, and some say that the choice to locate a low-wage plant there would set a troubling precedent.
"They didn't go to Mexico, or Tennessee; they didn't need to," Kaboolian said.In Muncie, where the official unemployment rate is around 10 percent and the unofficial rate hovers near 20, the jobs would be welcomed, even if they came with low wages and slim benefits, according to the city's mayor. Formerly an industrial center, Muncie has lost over 10,000 manufacturing jobs in the past 15 years.
"I sympathize with everything that's going on with the workers in Canada and support their struggles for inequality," said Mayor Dennis Tyler. "But the truth of the matter is that it is the corporations, at the end of the day, that are going to make the decision. And we've got over 4,000 abandoned homes here and people that need to go to work."
January 26, 2012
Caterpillar Inc reported a 58 percent rise in quarterly earnings on Thursday that blew away Wall Street expectations and it projected strong growth for 2012 despite global economic uncertainly.
Caterpillar's results cap a record 2011 in terms of sales and profits. Acquisitions, increased demand for mining equipment, favorable commodity prices and growth in construction machinery and parts sales supported the company during the year.
Investors reacted positively to the report, with shares up 2.7 percent in premarket activity.
Peoria, Illinois-based Caterpillar said it would continue to break records in 2012, with profit expected to rise 25 percent to $9.25 a share, and revenue projected to increase between 30 percent and 19 percent.
"We're expecting 2012 to be another year of good growth," Caterpillar Chief Executive Doug Oberhelman said in a press release. "We have to be prepared for recovery in the developed world beyond 2012 and continued growth in emerging markets."The world's largest heavy machinery maker said net income for the fourth quarter was $1.55 billion, or $2.32 per share, compared with $968 million, or $1.47 per share, a year ago. That result was 59 cents above the analysts' average estimate of $1.73 a share, according to Thomson Reuters I/B/E/S.
Sales rose 35 percent to $17.24 billion, above Wall Street estimates of $16.05 billion.
Caterpillar's forecast for 2012 is above current Wall Street estimates.
Caterpillar warned that costs will rise to meet production needs, and the company is facing production capacity constraints. Oberhelman said construction markets in the United States and Europe will remain "depressed."
Still, the company is enjoying solid growth in its resource-equipment sector due to solid demand and favorable prices in the commodities markets. It also is seeing steady demand for after-market parts needed for equipment already in use.
December 28, 2010
Corporate profits are up. Stock prices are up. So why isn't anyone hiring?
Actually, many American companies are -- just maybe not in your town. They're hiring overseas, where sales are surging and the pipeline of orders is fat.
More than half of the 15,000 people that Caterpillar Inc. has hired this year were outside the U.S. UPS is also hiring at a faster clip overseas. For both companies, sales in international markets are growing at least twice as fast as domestically.
The trend helps explain why unemployment remains high in the United States, edging up to 9.8 percent last month, even though companies are performing well: All but 4 percent of the top 500 U.S. corporations reported profits this year, and the stock market is close to its highest point since the 2008 financial meltdown.
But the jobs are going elsewhere. The Economic Policy Institute, a Washington think tank, says American companies have created 1.4 million jobs overseas this year, compared with less than 1 million in the U.S. The additional 1.4 million jobs would have lowered the U.S. unemployment rate to 8.9 percent, says Robert Scott, the institute's senior international economist.
"There's a huge difference between what is good for American companies versus what is good for the American economy," says Scott.American jobs have been moving overseas for more than two decades. In recent years, though, those jobs have become more sophisticated -- think semiconductors and software, not toys and clothes.
And now many of the products being made overseas aren't coming back to the United States. Demand has grown dramatically this year in emerging markets like India, China and Brazil.
Meanwhile, consumer demand in the U.S. has been subdued. Despite a strong holiday shopping season, Americans are still spending 3 percent less than before the recession on essential items like clothing and more than 10 percent less on jewelry, furniture, electronics, and big appliances, according to MasterCard's SpendingPulse.
"Companies will go where there are fast-growing markets and big profits," says Jeffrey Sachs, globalization expert and economist at Columbia University. "What's changed is that companies today are getting top talent in emerging economies, and the U.S. has to really watch out."With the future looking brighter overseas, companies are building there, too. Caterpillar, maker of the signature yellow bulldozers and tractors, has invested in three new plants in China in just the last two months to design and manufacture equipment. The decision is based on demand: Asia-Pacific sales soared 38 percent in the first nine months of the year, compared with 16 percent in the U.S. Caterpillar stock is up 65 percent this year.
"There is a shift in economic power that's going on and will continue. China just became the world's second-largest economy," says David Wyss, chief economist at Standard & Poor's, who notes that half of the revenue for companies in the S&P 500 in the last couple of years has come from outside the U.S.Take the example of DuPont, which wowed the world in 1938 with nylon stockings. Known as one of the most innovative American companies of the 20th century, DuPont now sells less than a third of its products in the U.S. In the first nine months of this year, sales to the Asia-Pacific region grew 50 percent, triple the U.S. rate. Its stock is up 47 percent this year.
DuPont's work force reflects the shift in its growth: In a presentation on emerging markets, the company said its number of employees in the U.S. shrank by 9 percent between January 2005 and October 2009. In the same period, its work force grew 54 percent in the Asia-Pacific countries.
"We are a global player out to succeed in any geography where we participate in," says Thomas M. Connelly, chief innovation officer at DuPont. "We want our resources close to where our customers are, to tailor products to their needs."While most of DuPont's research labs are still stateside, Connelly says he's impressed with the company's overseas talent. The company opened a large research facility in Hyderabad, India, in 2008.
A key factor behind this runaway international growth is the rise of the middle class in these emerging countries. By 2015, for the first time, the number of consumers in Asia's middle class will equal those in Europe and North America combined.
"All of the growth over the next 10 years is happening in Asia," says Homi Kharas, a senior fellow at the Brookings Institute and formerly the World Bank's chief economist for East Asia and the Pacific.Coca-Cola CEO Muhtar Kent often points out that a billion consumers will enter the middle class during the coming decade, mostly in Africa, China and India. He is aggressively targeting those markets. Of Coke's 93,000 global employees, less than 13 percent were in the U.S. in 2009, down from 19 percent five years ago.
The company would not say how many new U.S. hires it has made in 2010. But its latest new investments are overseas, including $240 million for three bottling plants in Inner Mongolia as part of a three-year, $2 billion investment in China. The three plants will create 2,000 new jobs in the area. In September, Coca-Cola pledged $1 billion to the Philippines over five years.
The strategy isn't restricted to just the largest American companies. Entrepreneurs, whether in technology, retail or in manufacturing, today hire globally from the start.
Consider Vast.com, which powers the search engines of sites like Yahoo Travel and Aol Autos. The company was founded in 2005 with employees based in San Francisco and Serbia.
Harvard Business School Dean Nitin Nohria worries that the trend could be dangerous. In an article in the November issue of the Harvard Business Review, he says that if U.S. businesses keep prospering while Americans are struggling, business leaders will lose legitimacy in society. He exhorted business leaders to find a way to link growth with job creation at home.
Other economists, like Columbia University's Sachs, say multinational corporations have no choice, especially now that the quality of the global work force has improved. Sachs points out that the U.S. is falling in most global rankings for higher education while others are rising.
"We are not fulfilling the educational needs of our young people," says Sachs. "In a globalized world, there are serious consequences to that."
After Laying Off 22,000 U.S. Workers and Then Receiving Stimulus Funds from U.S. Taxpayers, Caterpillar Plans to Install Second Factory in ChinaAFP
September 29, 2010
Caterpillar, the world's largest manufacturer of construction equipment, will build a factory in China to produce mini hydraulic excavators, the company said in a statement.
Construction will begin in Wujiang, near Shanghai, at the end of 2010 and the facility should be ready in 2012 to begin production of mini excavators of less than eight tons, the company said Tuesday.
Caterpillar did not say how much the project will cost.
It is part of a long-term plan for investments in China that will make Caterpillar one of the leading manufacturers of construction equipment in the country.
"China is the world's largest market for excavators in the below eight ton class, and the development of this new facility will better position Caterpillar to provide our customers in China with solutions that will help them succeed," said Mary Bell, a Caterpillar vice president.Caterpillar already has a factory in Xuzhou, which is also near Shanghai.
Obama to 'Invest' $500 Million Tax Dollars in 'Partnership' Between the Feds and 11 Major CorporationsCNSNews.com
June 26, 2011
In his weekly address released June 25, 2011, President Barack Obama called for a campaign of "nation building here at home," citing as an example of what is needed to rebuild the American economy an initiative he announced Friday to "invest" tax dollars in what he called a "partnership" between the federal government and an initial group of 11 major corporations.
The administration's corporate partners in this venture include Caterpiller, Corning, Dow Chemical, Ford, Honeywell, Intel, Johnson and Johnson, Allegheny Technologies, Stryker and Proctor and Gamble.
In addition to the 11 corporations, the administration also picked a small group of universities to participate in the government-corporate partnership. These include the Massachusetts Institute of Technology, Carnegie Mellon University, Georgia Institute of Technology, Stanford University, the University of California-Berkeley and the University of Michigan.
The White House did not say how these universities were selected.As described in the White House statement, the largest single element of the partnership program will have the Departments of Commerce, Agriculture, Homeland Security, Energy and Defense spending an estimated $300 million in tax dollars to "co-invest with industry" in the development of products including "small high-powered batteries" and "alternative energy."
Obama also put a focus on government "investment" in "clean energy" and pointed to the government bailouts of General Motors and Chrysler as successes.
The White House said the creation of the government-corporate partnership program was based on a recomendation by the President's Council of Advisers on Science and Technology (PCAST). PCAST is co-chaired by John Holdren, head of the White House Office of Science and Technology Policy.
In Human Ecology: Problems and Solutions, a 1973 book that he co-authored with Paul Ehrlich and Anne H. Ehrlich, Holdren and his co-authors wrote: "Redistribution of wealth both within and among nations is absolutely essential, if a decent life is to be provided for every human being."
December 5, 2011
USA*Engage is concerned that sanctioning Iran will hurt the economy—not at all about allowing a rogue regime to acquire nuclear weapons.
But who is USA*Engage anyway?
- ABB Incorporated
- American International Group, Incorporated
- Applied Materials
- Baxter International, Incorporated
- Boeing Company
- Caterpillar Incorporated
- Chrysler, LLP
- CIGNA International
- Citigroup Inc.
- Deloitte & Touche, LLP
- Dewey & LeBoeuf LLP
- DHL North America
- E.I. du Pont de Nemours & Company
- Eastman Kodak Company
- Ernst & Young LLP
- ExxonMobil Corporation
- Fluor Corporation
- Ford Motor Company
- General Electric Company
- General Motors Corporation
- Google Inc.
- Halliburton Company
- Hanesbrands Inc.
- Hercules, USA
- Hewlett-Packard Company
- Ingersoll-Rand Company
- Johnson & Johnson
- JPMorganChase & Co
- KPMG, LLP
- Mars Incorporated
- Microsoft Corporation
- National Foreign Trade Council
- Occidental Petroleum Corporation
- Oracle Corporation
- PepsiCo, Inc.
- Pernod Ricard USA
- Pfizer Inc.
- PricewaterhouseCoopers LLP
- Procter & Gamble Company
- Prudential Insurance Company
- Ridgewood Group International
- Rockwell International Corporation
- Siemens Corporation
- Sullivan & Worcester LLP
- TE Connectivity
- Tyco Electronics
- United Technologies Corporation
- Wal-Mart Stores, Incorporated
December 2, 2010
The financial crisis stretched even farther across the economy than many had realized, as new disclosures show the Federal Reserve rushed trillions of dollars in emergency aid not just to Wall Street but also to motorcycle makers, telecom firms and foreign-owned banks in 2008 and 2009.
The Fed's efforts to prop up the financial sector reached across a broad spectrum of the economy, benefiting stalwarts of American industry including General Electric and Caterpillar and household-name companies such as Verizon, Harley-Davidson and Toyota. The central bank's aid programs also supported U.S. subsidiaries of banks based in East Asia, Europe and Canada while rescuing money-market mutual funds held by millions of Americans.
The biggest users of the Fed lending programs were some of the world's largest banks, including Citigroup, Bank of America, Goldman Sachs, Swiss-based UBS and Britain's Barclays, according to more than 21,000 loan records released Wednesday under new financial regulatory legislation.
The data reveal banks turning to the Fed for help almost daily in the fall of 2008 as the central bank lowered lending standards and extended relief to all kinds of institutions it had never assisted before.
Fed officials emphasize that their actions were meant to stabilize a financial system that was on the verge of collapse in late 2008. They note that the actions worked to prevent a complete financial meltdown and that none of the special lending programs has lost money. (Some have recorded healthy profits for taxpayers.)
But the extent of the lending to major banks - and the generous terms of some of those deals - heighten the political peril for a central bank that is already under the gun for a wide range of actions, including a recent decision to try to stimulate the economy by buying $600 billion in U.S. bonds.
"The American people are finally learning the incredible and jaw-dropping details of the Fed's multitrillion-dollar bailout of Wall Street and corporate America," said Sen. Bernard Sanders (I-Vt.), a longtime Fed critic whose provision in the Wall Street regulatory overhaul required the new disclosures.The Fed launched emergency programs totaling $3.3 trillion in aid, a figure reached by adding up the peak amount of lending in each program.
"Perhaps most surprising is the huge sum that went to bail out foreign private banks and corporations. As a result of this disclosure, other members of Congress and I will be taking a very extensive look at all aspects of how the Federal Reserve functions."
Companies that few people would associate with Wall Street benefited through the Fed's program to ease the market for commercial paper, a form of short-term debt used by major corporations to fund their daily activities.
January 26, 2009
Tens of thousands of fresh layoffs were announced Monday and more companies are expected to cut payrolls in the months ahead... The recession, which started in December 2007, and is expected to stretch into this year, has been a job killer. The economy lost 2.6 million jobs last year, the most since 1945. The unemployment rate jumped to 7.2 percent in December, the highest in 16 years, and is expected to keep climbing...
Thousands more jobs cuts were announced Monday. Pharmaceutical giant Pfizer Inc., which is buying rival drugmaker Wyeth in a $68 billion deal, and Sprint Nextel Corp., the country's third-largest wireless provider, said they each will slash 8,000 jobs. Home Depot Inc., the biggest home improvement retailer in the U.S., will get rid of 7,000 jobs, and General Motors Corp. said it will cut 2,000 jobs at plants in Michigan and Ohio due to slow sales.
Caterpillar Inc., the world's largest maker of mining and construction equipment, announced 5,000 new layoffs on top of several earlier actions. The latest cuts of support and management employees will be made globally by the end of March. An additional 2,500 workers already have accepted buyout offers, and ties have been severed with about 8,000 contract workers worldwide. In addition, about 4,000 full-time factory workers already have been let go.
Just last week, Microsoft Corp. said it will slash up to 5,000 jobs over the next 18 months. Intel Corp. said it will cut up to 6,000 manufacturing jobs and United Airlines parent UAL Corp. said it would get rid of 1,000 jobs, on top of 1,500 axed late last year...
U.S. Government [Taxpayers] Pays Subsidies to Large Companies to Help Pay Prescription Drug Benefits for Their RetireesReuters
March 30, 2010
U.S. companies have started to tally up the financial hit they say they will take as a result of the U.S. healthcare overhaul signed into law last week by President Barack Obama.
The government continues to pay subsidies to large companies, including AT&T Inc, Caterpillar Inc and Deere & Co, to help pay for prescription drug benefits for their large ranks of retirees.
However, the revamped law no longer allows companies to deduct the amount of the subsidies from their taxable income. Corporate America complains that the change amounts to a tax hike, while the White House says it essentially closes a tax loophole.
Not all big companies are warning of trouble. General Electric Co, for example, says it does not expect a "significant material impact" on its first-quarter results.
But a number of large U.S. employers have started detailing the expected hit to their bottom line. The latest warnings came from Prudential Financial Inc, which said on Monday that it would take a $100 million charge in the first quarter, and Allegheny Technologies Inc, which expects a $5 million charge.
The tally so far:
- AT&T said it would record a $1 billion noncash charge for the first quarter and evaluate prospective changes to the healthcare benefits it offers to both active and retired workers, according to a filing with the U.S. Securities and Exchange Commission.
- In a regulatory filing, Caterpillar described the regulatory change as a tax hike. It said accounting standards require the world's largest maker of earth-moving equipment to book a $100 million after-tax charge to reflect the change during the first quarter.
- Deere, a maker of farm equipment, said it expects to record a $150 million charge, mostly in its current fiscal second quarter. The expense was not included in the company's earlier 2010 forecast, which called for net income of about $1.3 billion.
- No. 2 life insurer Prudential said it expects a $100 million charge during the first quarter.
- 3M Co, which makes products ranging from Post-It notes to optical films for flat-panel televisions, will record a one-time non-cash charge of up to $90 million, or 12 cents per share. It said its January forecast of 2010 earnings did not include the impact of the healthcare law.
- Diversified U.S. manufacturer Honeywell International Inc in January estimated that healthcare reform would trim its first-quarter earnings by 4 cents to 5 cents per share. A Honeywell spokesman said last week that the company had not updated the earlier cost estimate and would continue to review the legislation.
- AK Steel Holding Corp will record a non-cash charge of about $31 million in the first quarter due to a reduction in the value of its deferred tax asset as a result of a change to the tax treatment of Medicare Part D reimbursements.
- Valero Energy Corp said it expects to take a charge of $15 million to $20 million in the first quarter due to the new healthcare legislation, and said it expects further tax costs to be calculated later.
- Metals processor Allegheny looks for a first-quarter one-time, non-cash charge of about $5 million, or 5 cents per share, due to the new healthcare law.
Caterpillar Inc. of Illinois announced nearly 2,400 layoffs despite President Obama using his home state’s company as an example of a struggling manufacturer that would benefit from his economic stimulus plan and save jobs. The new round of job cuts will span five plants in Illinois, Indiana and Georgia, and follows the January news that Caterpillar would slash 22,000 people from its 112,000-person workforce. Mr. Obama hosted an event in support of his stimulus plan at the company’s Peoria, Ill., headquarters in mid-February, saying the $787 billion stimulus would be “a major step forward on our path to economic recovery.” [Caterpillar slashes jobs despite stimulus, Washington Times, March 17, 2009]
Caterpillar Inc. is the bulldozer manufacturer that President Barack Obama used to help push his $787 billion stimulus plan. Chief Executive Officer Jim Owens, 63, is a member of the president’s Economic Recovery Advisory Board. Obama visited the Peoria, Illinois, headquarters on February 12, 2009, the final day of his campaign to press for Congressional passage. [How’s the stimulus working out for Caterpillar?, Michelle Malkin, April 21, 2009]
At a Caterpillar Inc. plant in Peoria, Ill., President Obama said that his proposed economic stimulus would allow the company's CEO to rehire recently laid-off employees. But the head of the company said he will have to fire more workers before he can rehire anyone who has been let go. Obama has said twice in the past two days that Caterpillar CEO James Owens indicated his company would be able to rehire some of the 20,000 recently laid-off employees. "Yesterday, Jim, the head of Caterpillar, said that if Congress passes our plan, this company will be able to rehire some of the folks who were just laid off," Obama said today in Peoria. But when asked today if the stimulus could do that, Owens said, "I think, realistically, no. The honest reality is we're probably going to have more layoffs before we start hiring again." - CEO Contradicts Obama on Rehiring Employees, ABC News, February 12, 2009
Legislators have been bleeding the next two generations of Americans dry by pouring money into corporations that are building in overseas locations to avoid paying taxes while “those of us making $250,000 less” get to choose our government-run health insurance and ain’t none of us paying one thin dime more according to TPTB. Yeah – that’s a huge run-on sentence, but I am just that upset! [What Stimulus Money Did For Caterpiller- But at What Cost to The American Taxpayer?, The PPJ Gazette, September 29, 2010]
Caterpillar paid no federal taxes in 2002 and 2003, nor did it pay Illinois corporate taxes in 2002, according to the study. When it did pay, it paid an effective rate of 1.1% on profits in 2001 and .4% (less than 1%) in 2003. And it was not alone. Other Illinois firms who skipped paying state corporate income taxes one or more years include Boeing, Sears, Brunswick, Sara Lee, Tribune Company and Baxter. The Citizens for Tax Justice study is admittedly eight years old. The organization will be releasing an updated study for the years 2008-2010 this summer, and the preliminary results indicate things have gotten even worse, according to Bob McIntyre, the CTJ’s director. But its findings are consistent with a 2007 report from the Governor’s Office of Management and Budget that found 48% of Illinois corporations with sales of $50 million or more paid no corporate income taxes here from 1997 to 2005. The net result is that the percent of state income tax paid by corporations has dropped from 20 percent in the 1970’s to 12 percent today. - The Grass is Always Greener . . . When You Get a Tax Break, The Week Behind, May 11, 2011
Caterpillar does not break out how much it pays in Illinois corporate income taxes, but taxes paid to states within the U.S. represented 4.7 percent of its worldwide tax bill last year, and only 1.2 percent of the company's worldwide earnings. In 2009, the company had a loss in the U.S. portion of its business and therefore owed no state or federal taxes. - The Caterpillar that roared, Chicago Tribune, April 3, 2011