America’s next secretary of commerce may be a private equity kingpin who owes his ample fortune to a career of manipulating the misfortune of America’s workers.
By Sam Pizzigati
Does that opposition make Wilbur Ross a corporate good guy?
Not quite. Wilbur Ross has made his private equity billions the old-fashioned way — by exploiting American workers right here in the US of A.
Ross has been working the financial industry’s bankruptcy beat since the mid 1970s. His specialty: scouring America’s economic landscape for failing companies in down-and-out industries, buying them up cheap, and then “flipping” them for big profits.
Those profits typically come right out of the hides of workers.
Ross has never shown much interest in the difficult details of turning mismanaged enterprises into companies that can operate efficiently and effectively over the long haul. His private equity empire focuses instead on cutting costs.
And that cost cutting comes easy with companies in bankruptcy or about to fall into it.
Bankrupt companies can dump their liabilities — like mandates to fund pension plans — off the corporate balance sheet and onto somebody else’s shoulders. They can, as the economists like to say, “externalize” their costs.
Ross started externalizing his way to billionaire status with the steel industry. He waited until two steel giants — LTV and Bethlehem Steel — hit the bankruptcy skids, then picked up the two companies for a song, after going bankrupt had enabled the companies to shift their pension obligations onto the government-run Pension Benefit Guaranty Corporation.
In no time at all, the International Steel Group that Ross created in 2002 to house his steel company collection would become the nation’s largest steel producer. He then sold it, late in October 2004, for 14 times his original investment.
By that time, Ross had also branched out big-time into textiles, where he followed the same basic M.O. as in steel. He created an International Textile Group and packed it with bankrupt textile companies that had successfully sidestepped their pension obligations and squeezed various other concessions out of workers. Ross would squeeze some more and even move some jobs overseas.
Ross next moved into coal. Early in fall 2004, he spent over three-quarters of a billion dollars to buy up a Kentucky-based coal-mining company, Horizon Natural Resources, and created the International Coal Group to host it.
Ross nurtures companies that sidestep their pension obligations.
“Ross’ buy-in,” the Chicago Tribune would later report, “came only after a bankruptcy court judge released Horizon from its promise to pay health-care benefits to its retirees.”
The Ross-run International Coal Group then added another bankrupt rust-belt operation, the Anker Coal Group, to its portfolio. Anker made a fitting takeover target. The company was already busy slashing costs — by playing fast and loose with mine safety regulations.
That compromising with safety would continue under the watch of Wilbur Ross, right up until the second day of January in 2006 when an explosion at one of the company’s mines in Sago, West Virginia, left 12 miners dead.
Wilbur Ross, now 78, is still fishing for potential bargains. He’s been “scouting for distressed companies in marine shipping,” Bloomberg reported earlier this fall. But that scouting around, complains Ross, is getting ever more difficult.
“It’s harder and harder and harder to find value,” he’s complaining, “even if you look in the dustbin.”
Ross himself may one day end up in history’s proverbial dustbin. But for the moment, with Donald Trump about to occupy the White House, Wilbur is riding higher than ever.
Institute for Policy Studies associate fellow Sam Pizzigati co-edits Inequality.org. His most recent book: The Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle Class, 1900–1970. Follow him on Twitter @Too_Much_Online.