Wednesday, October 09, 2019

"Slow, complicated death"

I don't think anyone has gotten to the bottom of the Bayou Steel closure yet. Governor John Bel sounds very certain that the Trump tariffs are the main cause.  There might be some truth to that claim but we don't have the information we need to assess it thoroughly.  Early reports about the closure (and the Governor's comments) suggested that Bayou's business depended heavily on the availability of imported scrap metal.  But in days since, that assertion hasn't been satisfactorily flushed out.

That doesn't mean the tariff isn't a catalyst. But the scrap metal supply line might be an oversimplification of how.   We read here that steel producers have suffered under the tariff due to the resulting "uncertainty."
The imposition of section 232 tariffs in March 2018 -- 25% on most steel imports and 10% on aluminum -- was supposed to protect domestic producers from cheap imports from China and elsewhere, but the main effect on the market has been to raise the sense of uncertainty, which has been seen mostly in declining inventories by steel-trading middlemen who account for the bulk of the steel market.
Anyway, the mechanics of the tariff's role here are still not very well defined. That's particularly true in the case of Bayou Steel where the company's ownership is being deliberately coy about the closure in what looks like a strategy to avoid compensating workers for the suddenness of their job loss.  Why the Governor isn't being more aggressive on that front, we do not know.  One would think standing up for laid off workers would be a higher political priority than issuing disputable statements about the Trump tariffs. He may be on the right track with the latter course, but it's a much more confusing public fight to pick than just standing up for workers in crisis.

At least the Trump ogres, in their response to John Bel, actually identify the vulture capitalist private equity firm that has been picking the company apart this whole time.  Of course, they say it like that's a good thing.
Bayou Steel folded like a cheap tent under the weight of a leveraged buyout by Wall Street vultures picking the carcass of a highly inefficient and antiquated plant.
That's a Trump Administration spokesperson telling us basically that American jobs deserve to be zorched by Wall Street and the Governor hasn't said a word against that because he too believes all things must bow to the "efficiency" of the market.  If only we would get rid of Trump and his "D.C. style politics" we get back to the bi-partisan work of handing out huge state subsidies to heavy industry.  That's how the economy is supposed to work, right? John Bel seems to think so.  His opponents definitely think so too. Their only real beef with him is they would prefer to be the person handing out the favors themselves.

This guy also seems to think so.
Jeff Sands, an investor who specializes in rescuing midsized companies near collapse, said he had tried contacting Black Diamond officials last week, including Stephen Deckoff, the firm's co-founder and managing principal, as well as the lawyer handling the bankruptcy, Christopher Ward, of Polsinelli PC in Delaware, who said initially on Monday that he couldn't remember exchanging emails with Sands.
But even he isn't that optimistic.
Sands said that since the company is now in bankruptcy proceedings, he feels the prospect of keeping it going has dimmed.

"I’m cynical," he said. "It will likely just die a slow, complicated death.

"We’ll follow and bid but the odds of it happening quick enough to keep the customers, workforce and vendors is slim."
So that's cheerful. Even in the best case scenario Sands, or an investor like him, moves in to "rescue" Bayou Steel, probably through a regimen of job and benefit cuts plus a renewed package of state tax exemptions.  The alternative is slow, complicated death, though so, what would we prefer?

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