In The News
Mercury Marine Saga proves media bilge -- updated Nov. 6
Update: Expanding the cost to taxpayers estimated in the article below, on Nov. 5 Gov. Doyle revealed that the war between Oklahoma and Wisconsin to keep and expand Mercury Marine jobs in the state would cost Wisconsin taxpayers $70 million. That is on top of the $50 million in loans plus other enhancements offered by the city of Fond du Lac.
By Dominique Paul Noth
Editor, Labor Press
For 15 years, the Institute for Wisconsin’s Future (IWF) has focused its fact-finding research on debunking fiscal myths and moving toward a common-sense equitable state tax policy.
So it was unusual – as even research director Jack Norman conceded at an October 13 press conference -- that its newest report details a headline-making drama (Brunswick Corp. and its Mercury Marine plant in Fond du Lac) that had absolutely nothing – zilch, nada, zip – to do with Wisconsin’s tax climate.
Which may be the point. Because the public was made to think quite differently and most of the media never questioned the corporate press releases, PR twists and FAX machinery. Even though the facts waiting to be dug out tell quite a different story.
In the public’s mind, the media painted a tale of a repressive Wisconsin tax policy and a stubborn union refusing to accept difficult economic times to keep a key recreational industry from maintaining a thousand jobs here.
In reality, a long swooning company (boats and gym and billiard equipment) that had eliminated 5,300 jobs elsewhere and closed or mothballed boating plants in five other states was trying to shore up its executive missteps by playing two states against each other for tax benefits and cheap labor -- and by demanding draconian wage and benefit cuts with no promises a few years out and no long-term economic plans for the communities involved.
The purpose of the IWF report was certainly not to defend the Wisconsin machinists at Mercury Marine, IAMAW Local 1947, which has long kept its own internal debates under wraps as union workers moved from outright rejection of the offer to a final third-vote accepting the company’s cuts. But the evidence that they were right to be skeptical of the company’s intentions is certainly in the report. So are reasons for anger at the way the company painted the union, whose members were by any factual diagnosis not the villains but among the victims of a corporate shell game.
The upshot of the company’s maneuvers was the state stepping in with millions of dollars in incentives, and Fond du Lac’s government fathers giving the company a $55 million package including a special sales tax on all its citizens.
Unless the community immediately starts seeking manufacturing alternatives, the jury is out and increasingly skeptical about whether the blandishments will keep Fond du Lac alive for more than a few more years.
By digging into the public record and corporate history in “The Twisted Saga of Mercury Marine,” the IWF uncovered facts most of Wisconsin media ignored:
Despite what was intimated, Brunswick (Mercury Marine) has not paid a penny in Wisconsin corporate taxes for the last nine years.
Its current losses are staggering but it has also successfully sheltered a billion dollars in profits from Wisconsin tax collectors.
It is unlikely to pay any state taxes under any formula for the foreseeable future, so massive are its current losses – and so dependent is its current policy not on changing a losing corporate culture but on wringing concessions from its workers and state governments.
Pity the stockholder. The company has been on a Titanic downturn even in a difficult economy. While its peer group of stocks suffered a 17% loss in value over the last few years, Brunswick stock nosedived 71%.
Pity the workers, and not just the blue collar variety that has endured the majority of 5,300 job losses at all Brunswick operations. Brunswick is also facing lawsuits from its white-collar employees in Fond du Lac for reneging on promised incentives for their cost saving measures.
Don’t pity the execs. Over three fiscal years, Brunswick CEO Dustan McCoy has received more than $10 million in total compensation. In roughly the same time frame, five long-term members of the board of directors of the Illinois-based corporation each received more than half a million in compensation. Two have strong Wisconsin ties – retired Harley Davidson CEO Jeffrey Bleustein and Johnsonville Sausage CEO Ralph C. Stayer.
None of the above offered any financial sacrifice in sympathy with what the workers were giving back.
Norman, a prize-winning business journalist at the state’s largest newspaper before providing such public policy analysis, was asked at the press conference whether financial givebacks from these executives would have made a speck of difference in the concessions being asked of the workers or the demands made on government for financial help. While he paused and looked rather amazed, journalists in the room did some notepad math to figure out what a penny an hour might mean, maybe just a month’s worth of heart medication for grandma.
The larger issue, Norman pointed out, was some sense of responsibility by Brunswick leaders for what they had wrought or some shared pain with the workers. Instead, and the news reports of the last few months made his observation indisputable, the company has been blaming the problems on the union workers or the state tax climate.
Brunswick has never paid Wisconsin income taxes, but its workers always have. And now because of corporate welfare the taxpayers are on the hook for a lot more.
When the half-cent sales tax goes into effect, Fond du Lac residents will be giving a lot to keep Mercury Marine afloat. And all state taxpayers will pay for the still evolving statewide incentive package that was partly made possible by Wisconsin’s failed effort to keep the General Motors plant in Janesville.
This, as Norman pointed out, is a story of corporate mismanagement, and apparent devotion to executive luxuries, that had nothing to do with the state tax climate.
In fact, the report demonstrates how Mercury Marine successfully played Oklahoma against Wisconsin. This is the two or three-state billiard shot that so many companies have executed in the past.
In this case, the Mercury plant in Stillwater thought it had won and wound up with nothing except potential closure. That supposedly cheaper workforce was a pawn in finding out which state would bend over furthest and quickest. This time it was Wisconsin, perhaps because Oklahoma assumed its cheaper wages and non-union status were the answer, though it had more to do with tax benefits and productivity. But no state has proved immune to this national pattern of communities fighting each other to keep or attract jobs. The games often extend beyond fiscal policy to such things as cheaper housing and health care.
Note, too, how for years Fond du Lac had the right but resisted imposing a sales tax to help its citizens’ health or safety – yet elected officials lined up within weeks to vote in a tax to bail out Mercury Marine and keep the jobs in place.
Many of the incentives come in low-cost loans, but even given that there are surprisingly few hooks to keep Mercury Marine in Fond du Lac. Economists are already warning that unless Brunswick turns its own behavior around, rather than patting itself on the back for getting the states and the workers to submit, and unless communities speed into long-term recovery plans, there are no guarantees. After all, how long will lower wages and higher tax help once you’ve established a policy that corporations can bribe communities?
The IWF report, available at the non-profit’s website, www.wisconsinsfuture.org, certainly clarifies that Wisconsin’s tax climate did not scare Brunswick away. Rather it seems Brunswick was able to panic the state and its workers into concessions while trusting that the media would not expose the corporation’s own difficulties.
Certainly, corporations can use the current partisan divide about taxes and the fears about unions to disguise the realities of their behavior.
But Norman concludes with a larger truth in the Mercury Marine saga -- “a sad documentary on how large corporations can reward executives for failure while damaging the manufacturing structures that generate real values.”