LORDSTOWN, Ohio—General Motors’ decision to close its plant here, which employed 1,400 workers, came after a four-year war waged by Wall Street hedge fund managers to force more stock buybacks, short-term cash payouts and inflated dividends, a new report released today by the American Federation of Teachers and the Hedge Clippers campaign reveals.
The report follows two days of vitriolic tweets by President Trump, who attacked the Lordstown plant’s United Auto Workers president, claiming he “ought to get his act together and produce.” In fact, for months, the UAW and the AFT; their Lordstown, Ohio, and national affiliates; elected officials; and community groups, have pleaded with GM not to close the plant and move production of larger, high-demand vehicles to Mexico. They urged GM to retrofit the plant, which has been producing the Chevrolet Cruze, to build popular sport utility vehicles and trucks.
The AFT represents the teachers in Lordstown public schools, many of whom have family employed at the plant. The closure could decimate the community’s tax base—Lordstown’s two schools currently receive about $800,000 a year in property tax revenue. With the plant idle, the property could be devalued, drastically affecting funding.
The report exposes how GM’s decision to close Lordstown and shutter two other North American assembly plants and component factories followed a four-year bid by hedge fund managers to squeeze company profits.
Five hedge fund managers have been leading the attacks: David Tepper of Appaloosa Management, David Einhorn of Greenlight Capital, J. Kyle Bass of Hayman Capital Management, Frank Brosens of Taconic Capital and Ravenel Boykin Curry of Eagle Capital Management. Multiple funds have demanded that GM shell out over $25 million in stock buybacks and dividends—five times as much as GM will save from closing the Lordstown and Hamtramck, Mich., plants.
“The Lordstown community has been loyal to GM for 52 years, and GM was a trusted employer and community partner. Now hedge funds have muscled their way in and are lining their pockets at the expense of the real people who worked to make GM a household name,” said AFT President Randi Weingarten.
“This report looks under the hood of the closure decision and exposes greed at its worst. Shareholder buybacks do nothing but enrich those wealthy shareholders. This is not a story of a struggling corporation that cares about investing in America, American jobs and American communities. This is a story of rampant greed and structural deficiencies in the economy, which incentivize the hollowing out of our communities for short-term financial gain. And this is a story about the fate of the people President Trump promised to protect. Many voted for him, but instead he’s attacked their communities and their unions while governing to protect the hedge funds that are waging war on GM.”
About two years ago, the Lordstown plant employed 4,600 workers, but GM cut two shifts, leaving just 1,400 workers. Closing the plant will affect not just the families of those who have lost their jobs, but the lives of thousands more who worked for GM suppliers and the larger community.
“The closing’s impact on students is heartbreaking. How can we expect kids to be focused on learning, when their families are deciding whether to move hundreds of miles away or stay? Some GM workers have left their families behind to take jobs, tearing families apart. This is weighing on kids and making everyday tasks so difficult,” said Alyssa Brookbank, president of the Lordstown Teachers Association.
Ohio Federation of Teachers President Melissa Cropper said the closure is especially galling given that Ohio, in 2008, granted GM an unprecedented $82 million tax credit to guarantee that the Lordstown plant stay open for 30 years. The funding paid for a $317 million retool of the plant for production of the Cruze. GM also received a $50 million taxpayer-funded federal bailout in 2009, when workers also agreed to cuts to help prop up the company.
“GM was quick to take state and federal money when it needed the funding desperately, then turned around and answered the call of Wall Street when investors wanted more and more profit out of their GM investment. This isn’t what a responsible American corporation does,” Cropper said.
The report documents how hedge fund investors repeatedly launched pressure campaigns to prevent GM from reinvesting their profits anywhere but back into their own share price after the federal government bailout. Through paid agents, harassing proxy measures and public threats, funds extracted billions in buybacks, unwarranted cash payouts and ruinous job cuts.
“It’s not too late for GM to reverse its decision, avert disaster and reconfigure the Lordstown plant to produce the larger vehicles. That’s what’s good for America and what’s good for GM,” Weingarten said.