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Boeing: profits flying high! But “Return On Investment” for government, union givebacks is… not so great

Boeing DreamlinerBoeing announced its Third Quarter financials this morning.

net earnings increased 18% to $1.36 billion, or $1.86 per share.  The quarter’s results were strong enough that Boeing increased its full-year guidance: the company is now forecasting full-year earnings per share between $8.10 and $8.30 per share.

Think these better-than-expected profits are the result of skilled CEOing by Jim McNerney (who jokes about “cowering” employees)?

  • What about the record-setting $8.7 billion in tax breaks from the State of Washington?
  • What about the concessions accepted by Boeing’s unions? (who gave up their defined-benefit pension plan in an effort to keep jobs in the Seattle area?)

Think that rosy profit outlook has anything to do with Boeing’s decision to transfer 2,000 engineering jobs from the Seattle area to other, lower-cost places?

Or Boeing’s decision to assemble its Dreamliner exclusively in South Carolina (not Washington State)?

Presumably, this corporate maneuvering is “in the interests of Boeing’s stockholders”… whose dividends increased by more than 50% last year.

Stockholders including Jim McNerney… who at last report, owned more than 466,000 shares of Boeing stock… which, as I do the math, means he’s probably expecting about $340,000 in “unearned income” when Q3 dividends are announced.

Beginning to understand why he’s in a joking mood?

Read our previous Boeing coverage here.

Taxpayers Are Paying Profitable Corporations To Create Jobs?

Toyota GT86 – Frontansicht, 17. September 2012, DüsseldorfWhen word first spread that Toyota was moving jobs from California to Texas, some right-wing talking heads were blaming California’s government.

But within a day, the Wall Street Journal had figured it out: it was actually Texas’ government.  Yes, the newspaper owned by Rupert Murdoch broke the story: Texas to Pay $10,000 for Each Toyota Job

Texas offered Toyota $40 million to move, part of a Texas Enterprise Fund incentive program run out of the governor’s office. At $10,000 a job, it was one of the largest incentives handed out in the decade-old program and cost more per job created than any other large award. Last year, Texas spent about $6,800 to lure each of 1,700 Chevron Corp. positions to Houston and $5,800 for each of 3,600 Apple Inc. jobs shifted to Austin.

Ok, so… let me see if I can get this straight.

Toyota just had a second year of record profits.

Toyota wasn’t actively considering locating in Texas.  “Toyota narrowed its preferred locations to Denver, Atlanta and Charlotte, N.C.” before choosing to move to Texas because of the economic incentives.

$10,000 a job.  Courtesy of Texas taxpayers.

Gosh, it’s a good time to be a corporation.

OK, I need to give the Wall Street Journal some credit here: they have been working the “state economic incentives for jobs” beat for a while now.  From their 2013 story about Washington state’s genuflection to Boeing:

Officials from most of the states Boeing invited to participate have publicly expressed interest. Missouri’s governor, Democrat Jay Nixon, on Tuesday is to sign a package of incentives approved last week by the state’s largely Republican legislature. The measure would be worth $150 million annually to Boeing if the company creates at least 2,000 jobs in Missouri.

Ok, by my math: $150 million a year divided by 2,000 jobs equals $75,000 per job per year… which would have been courtesy of Missouri taxpayers.

Back to their story:

Washington’s legislature last month approved sweeteners valued at $8.7 billion over 16 years—which experts say is the largest corporate-incentive package in U.S. history—in an effort to keep the jobs

And, back to my math: $8.7 billion over 16 years is about $544 million a year – or, more than three times what Missouri offered.

If we’re still talking about 2,000 jobs… that’s about $272,000 per job per year, courtesy of Washington state taxpayers.

Wow.

(Boeing, by the way, just distributed $3 billion as dividends and stock buy-backs.)

Yes, this is what has been going on, all across America.  Billions of dollars in government aid to corporations, even as Congress cut the Food Stamp program and rejected an increase in the minimum wage.

It’s a really good time to be a corporation.

Or a CEO.

Or a lobbyist.

(But not such a good time to be a US veteran.  More than a million veterans are minimum-wage workers who won’t see their pay increase.  And another million veterans just had their Food Stamp allotments cut.  Where are our priorities?)

Boeing versus its unions: de ja vu all over again

Boeing DreamlinerOh, dear.

Looks like Boeing’s corporate culture is still stuck in that same old pattern.  Still looking for government handouts, still insisting on concessions from their labor unions.  Or they’ll (once again) move production to a low-labor-cost southern state that is willing to give them lots of money to locate there.   (How much is “lots”? According to Reuters, the package on the table in Washington state is: $8 billion in tax incentives plus another $10 billion in transportation infrastructure.)

Now… myself, I remember (vividly!) a certain NLRB case, the last time Boeing threatened its unions and moved production to a southern state.  Do you think that maybe Boeing didn’t get the memo when the Senate finally confirmed President Obama’s NLRB appointments?

Or is Boeing just trying to create another opportunity to litigate all those anti-worker legal theories, which weren’t tested because the Machinists asked the NLRB to drop that enforcement action?

I, myself, don’t see any significant difference between Reuters’ account of what is happening now and what happened back when Boeing moved Dreamliner production out of Washington.  But maybe that’s just me.

And maybe I’m the only one who thinks that low labor costs don’t lead to high-quality products.

And maybe I’m the only one who thinks that holding local jobs hostage while basically forcing a government to give you money isn’t an honorable way to do business.

But then again, I’m not a Boeing stockholder.

And I’m not likely to fly anywhere on a Dreamliner, any time soon.

Read NHLN’s previous Boeing coverage here.

Tax Policy: Time to go Back to the Future?

President Dwight EisenhowerRemember what it was like, back in 1952?  The nation’s unemployment rate was 3%.

Remember the days of annual raises? Back in 1952, the average family income was growing by about 5.4% a year.

Remember the days when one job was enough for a family to live on?  Back in 1952, 75% of American families had only one income.

Remember when our country had a solid middle class?  Back in 1952, CEOs were paid only 47 times as much as their average employee.  (These days, CEOs receive about 230 times what their employees earn.)

Back then, lobbying was an $8-million-a-year industry.   In 2010, lobbying reached an all-time high of $3.55 billion (even after adjusting for inflation, that’s about 46 times what corporations spent lobbying 60 years ago).

What else has changed?  Tax rates.  After all that lobbying, Congress has slashed the tax rates that apply to top-income individuals.  (The top tax rate used to be 90% — both for earned income and for dividend income.  Now, the top tax rate for wage income is 35%, while taxes on dividends are capped at 15%.  Back in 1952, corporate dividends were taxed as “income”; now they are considered “capital gains”.)

What else?  The structure of executive compensation has changed significantly, to reflect changes in the tax laws.  Back in the 1950s, most executives received salaries plus perks such as a company car.  Now, executives receive compensation “packages” that can dwarf their base salary — including “non-cash” awards of corporate stock, which takes advantage of the low capital gains tax rate.

What else has changed? As CEOs receive more of their compensation in stock, they have a bigger personal stake in decisions about what to do with corporate profits.  Should the company reinvest profits by expanding operations and hiring new employees? Or pay profits out to shareholders as dividends?   Implement a long-term growth strategy?  Or loot the company for as much immediate payout as possible?  When top executives own millions of shares, they have a huge personal stake in that decision.

Remember how casino mogul Sheldon Adelson pledged to spend $100 million on Mitt Romney’s campaign?  Wonder how he could afford it?  It was only a fraction of the amount Adelson received this year in stock dividends from his company – even though “Dividend payments to shareholders are not standard in the casino industry, as companies generally still prefer to spend cash on new growth opportunities.” (Are you wondering who made the decision to pay dividends rather than grow the business?)

That $100 million was also slightly less than what Adelson could have received – just in lower taxes on dividends – just in one year – if Mitt Romney had been elected President and had been able to implement his proposed tax policies.  (All told, Adelson could have received tax breaks totaling $2.3 billion, if Romney had been elected.)

Lots of things have changed, since 1952.  Sixty years ago, who would have dreamed that one person would try to buy a presidential election?  Or that a presidential candidate would propose tax breaks which would benefit a single campaign contributor to the tune of $2.3 billion?

Maybe it’s time to start asking whether all those tax cuts have actually benefited America’s economy?  Or have they only benefited America’s richest individuals?

Maybe it’s time to consider what effect those tax cuts have had on corporate decisions.

Maybe it’s time to consider what effect they’ve had on America’s middle class.

Maybe it’s time to stop giving CEOs tax incentives to loot their own companies.

Maybe it’s time to go back to the 90% tax on dividend income, at least for dividends paid to executives by the companies they control.

 

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