Can Corporate Raider Wilbur Ross Deliver on Trump’s Blue-Collar Promises?
Trump’s pick for commerce secretary has a track record of saving American jobs. Whether he can bring many back to the Rust Belt remains to be seen.
A decade ago, cheap Chinese cloth was hammering American textile makers. Companies like Burlington Industries and Cone Mills, two big U.S. makers of denim, mattress coverings, upholstery, and carpets, were bankrupt and shedding jobs.
That’s when Wilbur Ross, a billionaire corporate raider who cut his teeth at Rothschild, the famed British investment bank, spotted an opportunity. He snapped up Burlington and Cone Mills, both of which had filed for bankruptcy, and bundled them together into a new company, the International Textile Group (ITG). Then he drafted a blueprint to compete with low-wage Chinese workers: move up the value chain to sew more specialized textiles. He ended up saving hundreds of jobs, even as rival textile firms continued to hemorrhage jobsand, still now, go belly up.
“The jury would say Wilbur Ross was a very good thing for those companies,” said Augustine Tantillo, the president of the National Council of Textile Organizations, the industry’s trade association.
Ross is now President-elect Donald Trump’s choice for commerce secretary. “Nobody has made better deals than Wilbur Ross,” a spokesman for the real estate magnate said on Wednesday when announcing Ross’s nomination.
Together with Steven Mnuchin, a former Goldman Sachs trader who served as Trump’s campaign finance chief and has been tapped to be Treasury secretary, the Wall Street duo is tasked with fulfilling Trump’s campaign promises to his blue-collar supporters. That includes somehow bringing back manufacturing jobs to the Rust Belt and doubling recent U.S. economic growth rates while also scrapping or renegotiating trade deals like the North American Free Trade Agreement and threatening destructive trade disputes with America’s biggest trading partners.
It’s a tall order. Manufacturing makes up but a tiny slice of the U.S. workforce, and most of the 5 million manufacturing jobs lost since the turn of the century are due more to automation than trade deals or globalization. The structure of the global economy has also changed since Ross’s revival of textile mills and other industries in the 2000s. Now, the aftershocks of China’s economic slowdown rather than its rise pose a direct threat to the kind of blue-collar workers Trump pledged to protect; Chinese overcapacity in steel production, for instance, has swamped the global market and driven down prices.
Meanwhile, few economists consider GDP growth of 4 percent a year likely, when it has only averaged half that since the 2008-2009 fiscal crisis. Many experts do worry, though, that Trump’s tax cuts and spending plans will increase the budget deficit. Muddying the waters even further, it’s not even clear that Trump’s prospective cabinet picks are fully in step with him on economic policies: According to the Palm Beach Post, Ross was a registered Democrat until two weeks ago.
Democrats in Congress are already raising the alarm about Trump’s nominees. Sens. Elizabeth Warren and Bernie Sanders issued a joined statement blasting Trump’s choice for Treasury secretary. “Steve Mnuchin is just another Wall Street insider. That is not the type of change that Donald Trump promised to bring to Washington — that is hypocrisy at its worst,” they said. Mark Paustenbach, a spokesman for the Democratic National Committee, added, “Donald Trump continues to stack his administration with the same insiders and financial elites he railed against during the campaign.”
Those concerns echo much of what worries big labor organizations. The AFL-CIO has long warned of the dangers of a Trump presidency to its working-class members and endorsed his Democratic rival, Hillary Clinton. So did the American Federation of State, County, and Municipal Employees; the Service Employees International Union; and the National Education Association.
But many union voters ignored their leadership, particularly in the Rust Belt. Trump had the best showing among union workers by a Republican since Ronald Reagan in 1984. The acid test for them will be whether, when it comes to saving traditional manufacturing jobs, Trump and his team, including Ross, can deliver.
Trump can already point to some early successes before he even takes office. Air-conditioner manufacturer Carrier said this week that it would keep 1,000 factory jobs in Indiana, rather than move them to Mexico. That announcement came after Vice President-elect and current Indiana Gov. Mike Pence dangled $7 million in state tax breaks before Carrier’s parent company, United Technologies.
“This is about the president-elect and vice president-elect making good on their promise to go to bat for American workers,” Trump spokesman Jason Miller said during a conference call with reporters Thursday.
A decade ago, in textile plants in North Carolina and South Carolina, Ross opted to transform U.S. mills into more sophisticated operations. Instead of competing with low-wage Chinese workers on basic piecework, he shifted ITG’s focus to more complicated products, like uniforms for the U.S. military and other entities. That gave them a competitive edge over cheap but less-skilled overseas workers.
The results of his investment are mixed. From 2004 to 2014, North Carolina gained 1,945 jobs making nonwoven textile products and $719 million in nonwoven textile factory investment. But Ross hasn’t been able to save all the jobs at ITG.
In 2012, Bloomberg reported that in the 1970s, before widespread automation, 2,800 workers were employed at a Cone Mills factory in White Oak, North Carolina. In 2012, that same facility had 300 workers. Smaller payrolls beat shuttered factories, argued Tantillo, the industry lobbyist.
“When you look at our situation in 2016 compared to 10 years ago, it’s exponentially better,” he said. “The industry was contracting at a rate where people were honestly concerned about whether there would be an industry. But he stuck in there for the better part of 12 to 14 years [and] made those companies much more stable.”
Ross also sought to stabilize the troubled U.S. steel industry, but with even more mixed results, said Scott Paul, the president of the Alliance for American Manufacturing, a partnership between manufacturers and U.S. steelworkers advocating more job-friendly policies. In 2002, Ross bought bankrupt American steelmaker LTV just before then-President George W. Bush slapped steep tariffs on foreign steel, which would act as a shield of sorts for U.S. producers.
Ross then bought a handful of other struggling firms — Bethlehem Steel, Weirton Steel, and Acme Steel — to form the International Steel Group, a smaller rival to behemoth U.S. Steel. To turn them around, he slashed costs. Ross cut retirement benefits for more than 190,000 steelworkers and retirees by moving private pensions to the federal Pension Benefit Guaranty Corp. At one Acme site in the Midwest, he cut the number of salaried personnel from 200 to 25. At Bethlehem Steel, he got rid of 3,000 jobs through buyouts and voluntary departures.
A year later, in 2003, he took the company public and then sold it for $4.5 billion to Indian billionaire Lakshmi Mittal in 2004. Mittal merged the International Steel Group into what is now ArcelorMittal, the world’s largest steel producer. Since then, the company has cut jobs around the world, but American employees have been largely spared.
It might be hard for Ross to re-create, in government, even the moderate success he had in textiles and steel. American manufacturing is not ailing — output is at an all-time high and has doubled since 1984. It just requires fewer and fewer workers. In many cases, there is little need to create new jobs to keep production booming. Even as Carrier jobs were saved, bearings maker Rexnord, which has operations near the Carrier plant in Indianapolis, plans to lay off about 350 workers while electronics manufacturer CTS will get rid of more than 200 jobs at its Elkhart plant.
And plenty of other factors shape firms’ employment decisions: governmental regulations, infrastructure, proximity to supply chains and final markets, and the cost and education of the local workforce. Carrier’s parent company required a subsidy from state coffers to keep jobs in Indiana that by market logic would have fled abroad — but that’s hardly a model for boosting manufacturing employment nationwide.
And the ArcelorMittal acquisition of Ross’s steel group underscored the increasingly globalized nature of a heavy industry like steelmaking, where cheaper labor costs and lax environmental regulations make it easier for overseas factories to undercut U.S. producers — and make it all the harder to shake the rust out of the Rust Belt.
According to the U.S. Bureau of Labor Statistics, America has lost 48,000 steel jobs since Ross dove into the sector. It might have been even worse; according to the Philadelphia Inquirer, a steel union boss in 2005 called the deal a “good [arrangement] for Wilbur Ross and his return on investment, and it’s been a good deal for us.”
“Were it not for Wilbur Ross, there would be thousands upon thousands fewer steelworker jobs in the United States than there are today,” Paul said, but conceded that U.S. manufacturers are still swimming upstream when it comes to job creation.
“He was able to save some jobs, not all the jobs,” Paul said.
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