Obama ad against Romney regarding GST Steel - Truth shows the exact opposite of Team Obama intent

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    May 21, 2012 4:11 PM GMT
    Cliff notes version

    Team Obama: GST was a healthy, happy, quality steelmaker until Bain plundered its worth and stripped its 750 workers of their due. "It was like a vampire," laments one former employee in the ad. "They came in and sucked the life out of us."

    Truth:
    B.C. Huselton, a vice president of the business at the time, tells me that in 1990 the Armco CEO held a meeting. "He told us, 'Look, we either try to sell it, or we've got to shut it down.'"

    Bain nonetheless saw some potential and in 1993 joined other investors to acquire it for $80 million. Management renamed it GS Technologies (which would become part of a larger GS Industries) and poured an additional $100 million into modernization.

    In 2001 it would become one of 31 steel companies that went bankrupt from 1993 to 2003. (Mr. Romney left Bain in 1999.) The steel crash was the economic drama du jour, with Congress railing about "dumping."

    A private-equity firm looking to quickly strip value from a company—to "suck" the life out of it—does not do so by investing $100 million in modernization and holding on for eight years, through bankruptcy.

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    http://online.wsj.com/article/SB10001424052702303360504577410573651845802.html

    Vampire Capitalism? Please - GST Steel would have failed much earlier without Bain. by Kim Strassel

    This week the Obama campaign debuted its attack on Bain Capital, the private-equity firm Mitt Romney founded. Its two-minute ad purports to tell the story of GS Technologies, a Kansas City-based Bain investment that went bankrupt in 2001.

    To hear the Obama campaign, this is a tale of greed: GST was a healthy, happy, quality steelmaker until Bain plundered its worth and stripped its 750 workers of their due. "It was like a vampire," laments one former employee in the ad. "They came in and sucked the life out of us."

    GST is a tragic tale, though in a different way. The real story of GST is that of a private-equity firm trying to spark some life into a uncompetitive, over-unionized industry. Bain's crime here—if that's what you call it—was giving a dying steel plant an unexpected eight-year lease on life.

    When Bain bought the Kansas City mill in 1993, steel was a scene of carnage. Global players were pouring out cheap products, and America's high-cost steel plants couldn't compete. The industry had lost 200,000 jobs in preceding years. In 1992 alone, the six largest U.S. steel mills had lost a combined $3 billion. Armco, the company Bain would buy the plant from, would lose $641 million in 1993.

    The Kansas City plant was itself dying. At its 1970 height it employed 4,500; by the late 1980s it was down to 1,000. A year before acquisition, Armco had laid off another 75. Its equipment was old; it faced fierce competition at home and abroad.

    B.C. Huselton, a vice president of the business at the time, tells me that in 1990 the Armco CEO held a meeting. "He told us, 'Look, we either try to sell it, or we've got to shut it down.'" Armco had shut down another Kansas City facility, Union Wire Rope, only a few years before.

    The Kansas City plant had two product lines—high-carbon rods and grinding media (used in mining)—that it felt could give it a competitive edge. But it needed investment, and Armco was tapped out. Bain nonetheless saw some potential and in 1993 joined other investors to acquire it for $80 million. Management renamed it GS Technologies (which would become part of a larger GS Industries) and poured an additional $100 million into modernization.

    The strategy worked for a time. The market firmed up and GSI became a U.S. leader in steel rods. In 1994 it felt confident enough to distribute a dividend to investors. In both 1996 and 1997, GSI would realize $1 billion in revenue.

    And then came the tsunami. The late 1990s saw a new outpouring of cheap steel from elsewhere around the globe. The Asian financial crisis walloped the mining industry, cutting demand for GST products. The price of GST's electricity and natural gas skyrocketed. The union dug in, refusing to make concessions. By April 1997, it was on strike, shooting bottle rockets at guards. Labor costs spiked, and by 1999 GSI was reporting $53 million in net losses.

    In 2001 it would become one of 31 steel companies that went bankrupt from 1993 to 2003. (Mr. Romney left Bain in 1999.) The steel crash was the economic drama du jour, with Congress railing about "dumping."

    At the time, GST's union blamed the company's bankruptcy on the political class, for failing to hamstring imports. "We can't compete against the steel imports that are being sold under cost," said the president of GST's union in 2001. "Our pleas fell on deaf ears in the political arena." The Bush administration would ultimately slap on giant tariffs.

    The bankruptcies were led by unionized companies that, like airlines and textiles and Detroit, had negotiated pay and benefits that helped drive their employers under. GST's pension benefits would get passed on to the federal Pension Benefit Guaranty Corp., which in 2002 received $7.5 billion in claims from the steel industry alone. The PBGC covered GST's basic pension payouts.

    The Obama ad doesn't note that the broader company, GS Industries, employed 3,500 and that the Kansas City plant (with 750 workers) was the only one shuttered. Other plants were bought and operate today. Nor does it mention Bain's other steel investment in the early 1990s, in an Indiana start-up called Steel Dynamics. The firm touts innovative technology and a nonunion workforce. It today reports $6.3 billion in revenue—25 times what it claimed in its 1996 IPO—and employs 6,000.

    A private-equity firm looking to quickly strip value from a company—to "suck" the life out of it—does not do so by investing $100 million in modernization and holding on for eight years, through bankruptcy. Bain has surely made its share of mistakes, and one may well have been trying to resuscitate a traditional steel firm in the grip of industry upheaval. The irony, says Mr. Huselton, is that this plant "wouldn't even be in today's news, if it hadn't been the opportunity that came with Bain. Those jobs would have been gone in 1993."

    That's a more revealing story—of the pressures of a global market, the dangers of an inflexible workforce, and the opportunities that come with private equity and risk-taking. It's just not one Team Obama wants to tell.
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    May 21, 2012 5:26 PM GMT
    southbeach1500 saidMore lies from the Democrats... as expected.

    The thing that's interesting is this is the one they picked, or maybe the first one. It is so easily debunked, not just proven false, but showing the exact opposite of their intent that you have to wonder:

    1. Is this the best example they could come up with?

    2. Are they really incompetent?

    3. Do they think independents and even their base is stupid to not see through this?

    Given that pension plans, institutions, many kinds of entities invest with private equity, (PE) their attacks on PE will ultimately be seen as attacks on the free enterprise system. Not only is it an argument they will lose, but they will damage themselves significantly because they will lose credibility and be seen as outside the mainstream of what drives this country.
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    May 21, 2012 9:41 PM GMT
    southbeach1500 said
    socalfitness said
    southbeach1500 saidMore lies from the Democrats... as expected.

    The thing that's interesting is this is the one they picked, or maybe the first one. It is so easily debunked, not just proven false, but showing the exact opposite of their intent that you have to wonder:

    1. Is this the best example they could come up with?

    2. Are they really incompetent?

    3. Do they think independents and even their base is stupid to not see through this?

    Given that pension plans, institutions, many kinds of entities invest with private equity, (PE) their attacks on PE will ultimately be seen as attacks on the free enterprise system. Not only is it an argument they will lose, but they will damage themselves significantly because they will lose credibility and be seen as outside the mainstream of what drives this country.


    I think it's #3.

    I'd say #1 and #3, but people are starting to think #2 as well. The economy favored them in 2008 with the meltdown just weeks before the election, and the hope and change fluff was effective. His team might now be much harder pressed when fluff no longer works among most and he has to hide from his record.
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    May 21, 2012 9:58 PM GMT
    Romney's entire stump speech is on long lie:

    http://romneytheliar.blogspot.com/2012/01/romneys-stump-speech-wall-to-wall-lies.html
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    May 22, 2012 1:16 AM GMT
    southbeach1500 saidObama campaign 2.0 making MANY mistakes...


    Such as?
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    May 22, 2012 1:22 AM GMT
    http://online.wsj.com/article/SB10001424052702303360504577412403839709854.html?mod=ITP_opinion_2

    Bain Capitalism 101 - How does a rapacious company get repeat business?

    Watching Obama campaign ads or MSNBC, one could easily come to the conclusion that Bain Capital makes money by destroying the companies it owns. So for voters unsure about the business that Mitt Romney founded but still reluctant to trust the financial analysis offered by community organizers, some perspective might be helpful.

    The basic Obama-liberal critique goes like this: Bain buys a company, loads it with debt and then sucks out cash before foisting the wounded business upon an unsuspecting buyer or a bankruptcy court. In the risk-taking world of private equity such a scenario can certainly happen, and it's true that Bain likes management fees and dividends as much as the next partnership.

    But then how to explain the history of Bain Capital? Mr. Romney started the business in 1984. The company has since bought and sold many businesses and executed thousands of financing transactions.

    If Bain's standard operating procedure were to hand the next owner of one of its companies a ticking bankruptcy package, how is Bain still finding buyers nearly three decades later? And who would agree to lend money to a company backed by Bain? Wouldn't word have gotten around by, say, 1987 that Bain's portfolio companies weren't creditworthy?

    The liberal critique of private equity assumes that the financial industry is full of saps who have been eager to lose money across the table from Bain for 28 years. This is the same financial industry that the same liberal critics say is full of greedy schemers when it comes to padding their own pay or ripping off consumers. But financiers can't be both knaves and diabolical geniuses at the same time.

    Learning about Bain successes like Staples or Gartner or Steel Dynamics confirms the logical conclusion that Bain had to be creating value along the way—for investors, for lenders, and that means for workers too.
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    May 22, 2012 1:43 AM GMT
    southbeach1500 saidObama campaign 2.0 making MANY mistakes...

    A disaster in the making icon_lol.gif

    Obama's Campaign Off to a Rocky Start - Record in May has been one mistake or disappointment after another.
    http://www.realjock.com/gayforums/2377717/
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    May 25, 2012 2:13 PM GMT
    With discussion about dishonest video ads, the one in the OP is extremely obvious.
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    May 25, 2012 3:43 PM GMT
    socalfitness saidWith discussion about dishonest video ads, the one in the OP is extremely obvious.


    The public really doesn't seem to be buying that line anyway about Obama especially with one of the slowest recoveries in modern times on record and with Obama's miserable record in "investing" public funds, not to mention his foreign policy record.

    The narrative that Obama is anti-markets is one that seems to be sticking - and his attacks on Bain just play to this.
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    May 25, 2012 4:30 PM GMT
    riddler78 said
    socalfitness saidWith discussion about dishonest video ads, the one in the OP is extremely obvious.


    The public really doesn't seem to be buying that line anyway about Obama especially with one of the slowest recoveries in modern times on record and with Obama's miserable record in "investing" public funds, not to mention his foreign policy record.

    The narrative that Obama is anti-markets is one that seems to be sticking - and his attacks on Bain just play to this.

    Obama will try and pivot, but what he will succeed in mostly is giving the opposition (Romney team, GOP, and Super-PACs) excellent material.

    1) He says profit is different than creating jobs. But facts are making firms profitable and supporting a healthy private sector economy is the best way to reduce the unemployment rate. Plus, the opposition can point to the same tactic the Obama team used, specifically to cite the jobs saved by all the successful companies that did not go out of business.

    2) He says being a PE CEO provides no qualifications to be POTUS. False - the experience and skills that directly apply are a) Executive ability, b) Leadership, c) Detailed understanding of the private sector, and d) Realizing the ability of the private sector and limiting government to what the private sector cannot do.

    3) The jobs lost at his playing venture capitalist with taxpayer dollars with his cronies at companies such as Solyndra pull the rug out from under him in the job creation argument. Also the number of jobs lost in the GM restructure further diminishes his argument about jobs lost when PE companies restructure businesses about to go out of business.

    4) Given the totality of his spoken words and actions, he has given strong support to the notion that he is fundamentally an anti-capitalist ideologue.
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    Jun 16, 2012 3:07 PM GMT
    More to counter the left BS
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    Jun 16, 2012 3:08 PM GMT
    socalfitness saidMore to counter the left BS
    How old are you again?icon_rolleyes.gificon_rolleyes.gificon_rolleyes.gif