Adding Insult to Injury: After Deep Union Concessions, Mercury Marine Execs Snag Bonuses
By Roger Bybee
A few years ago, U.S. Rep. Paul Ryan (R-Wis.) explained the supposed realities of globalization to workers: "We have to be honest with people, delivering a kind of cold wake-up call about the need for change in a fast-shifting economy."
Translation: It is no longer realistic to believe that corporations can afford to reward loyalty and hard work. The burden of change is on you. You are on your own.
This wake-up message was delivered this week to Fond du Lac, Wis. members of the International Association of Machinist Lodge 1947, who produce outboard motors at Mercury Marine. They learned that the Mercury Marine/Brunswick Corp. is granting bonuses to white-collar workers and executives in the wake of enormous pay cuts imposed on production workers last year.
Six months ago, Mercury production workers grudgingly accepted 30% pay cuts to keep their Mercury Marine manufacturing faciltiy in Fond du Lac. The bonuses add insult to that injury, and are an expression of contempt to IAM members who had given massive concessions after Mercury Marine and its parent Brunswick Corp. threatened to abandon Fond du Lac and move 1,800 jobs to Oklahoma.
The concession demand were so deep and sweeping—and community pressure on IAM members to retain the city’s largest employer at any cost so strong—that it took three votes before the union members finally approved the concessions.
In exchange, the corporation agreed to close its Stillwater, Oklahoma, plant, toss the workers there overboard, and move about 400 positions to Fond du Lac.
TAXPAYERS HIT, TOO
Forced into granting subsidies to keep the company around was both Fond du Lac, and the state of Wisconsin. Fond du Lac County and the city gave the firm $53 million in incentive packages—covered by taxpayers. The state is also granting tax breaks contingent on Mercury Marine’s employment levels. Only 19 jobs have been added thus far.
The fundamental inequity of the corporation’s announcement of white-collar bonuses delivered a new shock to many of the workers and their families. One woman, writing a comment below a Milwaukee Journal-Sentinel story on the bonuses, explained the devastating impact of the concessions on her family’s finances:
My Dad has worked for Mercury for 17 years. He was laid off last January, brought back in late September at a $9 per hour pay decrease, yet his foreman’s pay went up $5,000 a year. What’s fair?
Mercury Marine badly explained its rationale for white-collar and executive bonuses to the Journal-Sentinel, maintaining that some employees were far more indispensable to the company, while the unionized production workers were, well, downrjght dispensable.
The imperative need for "management retention" through cash incentives echoed the words of AIG executives in awarding bonuses to themselves:
Mercury says the bonuses – from corporate parent Brunswick Corp. – are needed to retain management talent in difficult times.
"We want to come out of this downturn as a much stronger company, and that includes the development, motivation and retention of all employees," said company President Mark Schwabero.
However, it turns out that Mercury Marine and Brunswick were not simply the victims of the recession, but of severe mismanagement by CEO Dunstan McCoy, according to "The Twisted Saga of Mercury Marine," a report written by Jack Norman and Karen Ryoster for the Institute for Wisconsin’s Future, a progressive think-tank:
The only ones protected from loss have been the decision-makers at the very top of the Brunswick hierarchy.
CEO McCoy collected over $10 million between 2006 to 2008 and his five Board members who received an average of $342,737 each during this same time period….
The story of Mercury Marine is a sad documentary on how large corporations can reward executives for failure while dismantling the manufacturing structures that generate real value.
Wisconsin’s income tax didn’t scare the company. Workers didn’t drain the firm’s cash. Rather, the company’s senior executives and directors presided over an internal fiscal meltdown while collecting massive incomes.
As IWF’s report shows, the downturn in Mercury’s fortunes began well before the Great Recession, which hit full force in late 2008:
Since McCoy took over [Dec. 5, 2006], the price of Brunswick stock has fallen 71%¬far lower than the stock market as a whole. For comparison, the S&P 500 index, a standard measure of stock performance by larger firms which includes Brunswick, fell only 15% during the same period. A better comparison may be Brunswick’s peer group of stocks–S&P’s Consumer Discretionary group–which the company itself says it most closely resembles and which includes Brunswick.
During McCoy’s tenure, while Brunswick stock dropped 71%, the S&P Consumer Discretionary group fell only 17%.
Despite this miserable performance by McCoy and his management team, the nature of corporate power in America allows them to hoard rewards for themselves and impose the penalties for their mistakes on others, IWF argues:
For McCoy, the total value of these non-salary benefits is nearly triple the size of his basic salary. In the three full years since becoming Chairman and CEO, McCoy’s total compensation was $3,566,793 in 2006; $3,398,800 in 2007; and $3,137,801 in 2008. The three-year total was $10,103,394.
Meanwhile, the costs of mismanagement were imposed on workers and the public. Mercury Marne/Brunswick discarded 5,300 workers in the U.S. and 2,000 overseas. As The Twisted Saga relates:
Brunswick decisions have eroded the economic stability of many communities. In January 2009, Brunswick reported that it had "closed, mothballed, or sold" fifteen North American boat factories.
These operations were located in states across the country ¬ South Carolina, Oregon, Washington, Minnesota, North Carolina and Tennessee. The next will be in Oklahoma.
The scare over the possible loss of Mercury Marine profoundly shifted public debate in Wisconsin to the right, away from the question of corporations’ obligations to worker and support to how to make Wisconsin’s tax system even more tilted toward corporations.
Leading this shift was right-wing Democrat State Rep. Robert Ziegelbauer, who cited Mercury Marine, among several other Wisconsin employers, as "examples of international manufacturers under stress." "The higher tax burden they now find in Wisconsin is a powerful incentive to look elsewhere when their business recovers with the economic cycle."
$1.1 BILLION IN PROFITS—ZERO TAXES
However, despite the firm’s contention that the huge concessions in Fond du Lac were necessary to offset its dire state, "its total profits in the seven years were $1.1 billion," reports IWF.
The profits didn’t trigger harsh taxation, as Wisconsin’s corporate tax statutes are quite favorable to major businesses, with 62% of corporations with revenues of $100 million or more paying no corporate income taxes in 2002, the IWF has reported.
Carefully scrutinizing Mercury Marine/Brunswick’s tax returns in Wisconsin, IWF learned that Mercury Marine paid absolutely no corporate income taxes in Wisconsin over the 2000-2007 period.
Rep. Ryan also said this in the New York Times story quoted above: "We also have to help produce a climate where people and companies can survive and thrive."
Right now, as Mercury executives receive bonuses and workers get used to reduced wages, Wisconsin’s climate appears far friendlier to companies than people.