opinion

DuPont: Believing in things that aren’t there anymore

What follows may sound, at least superficially, like a liberal/progressive/left-wing assault on capitalism and the free-market system. Or to put it another way, a tax-the-rich, Robin Hood economic philosophy.

It is not.

Rather, it is a lament, for lack of a better description, of the drift of American business into a new form of fascism. Another name for it might be corporatism, if that’s a word.

The presenting situation here is the upcoming proxy fight involving the E.I. du Pont de Nemours Corp. and the effort by Nelson Peltz and his Trian hedge fund to elect four Peltz nominees, including himself, to the DuPont board. Among other things, Peltz openly advocates breaking up DuPont into smaller, more specialized companies.

Hence, he wants to sell off the Hotel du Pont and the DuPont Country Club in Wilmington. Peltz asserts they are money-losing appendages to the corporation and should be closed or sold. Ellen Kullman, DuPont’s chairman and CEO, pushed back by saying the hotel and country club are revenue-neutral and no economic drag on DuPont’s bottom line.

Be that as it may, the Peltz argument illustrates at least two things. One is the corrosive obsession by hedge funds and other bundled investors not only on the bottom line (profits), but also on the value of a corporation’s stock. Peltz and those like him argue that things like the hotel drag down the value of the stock because they suck profits out of the bottom line.

The same is true in a different way with various subsets of the company. For example, if DuPont makes less money than it used to manufacturing nylon, then it should get rid of the nylon segment and concentrate on its newer, more profitable lines. That this results in a town of less than 10,000 population losing 1,000 jobs because its nylon plant is closed is of no concern to Peltz.

Similarly, hedge fund managers and their like don’t care if Apple makes all its iPhones in China if that is more profitable than making them in California. Or if Maytag closes all its plants in Iowa and moves them to Mexico because it can pay workers there $5 an hour.

This obsession with quarterly profits and stock value is warping the American economy as well as having a deleterious effect on civic values. It used to be that when you had a big company – or even a small company – in your town, that it had a sense of civic responsibility in that it contributed generously to the civic weal. Hence, in Wilmington, you have a du Pont hospital, du Pont schools and in lower Delaware, even a du Pont Highway built decades ago because Coleman du Pont thought the state needed one.

Or, as Mrs. Kullman pointed out in response to the notion of selling off the Hotel du Pont, “this isn’t New York.” Wilmington doesn’t have any other first-class hotel with a Five-Star restaurant.

Similarly, in Newton, Iowa, where there used to be three Maytag factories, there once was a Maytag Hotel, and there still is a Maytag park and Maytag swimming pool. Maytag once offered full-ride scholarships to graduates of Newton High School. That was when Frederick Maytag and his son and grandsons ran the company.

When I was a child, and well into my adult years, my father owned the newspaper in my hometown. But family ownership of newspapers, not to mention broadcast stations, has slipped away, too. The Sulzberger family still controls (but doesn’t really own) the New York Times. However, the Meyer/Graham family has sold the Washington Post. The Chandlers sold the Los Angeles Times. The Pulitzers sold the St. Louis Post Dispatch. The Cowles heirs sold the Minneapolis Star-Tribune and the Des Moines Register. The Taylors sold the Boston Globe. The Hobby family sold the Houston Post before it closed.

A year or two ago, we had to call the Maytag repairman. You remember those old commercials about how lonely the Maytag repairman was because Maytag appliances rarely broke. In this case, our clothes dryer was about 20 years old. This young man commented while disassembling our dryer that this one was built “Maytag strong.” The good news is that Whirlpool has recognized that you can only charge more for a washing machine if it is a better machine.

The reason for too much inferior stuff is that corporatism dictates relentless cost cutting that results in deterioration of the product. My father’s newspaper now is owned by a big, national chain. So what has happened to it? Well, one thing is that the editor/reporter was transferred to another paper a while back. He was not replaced. And it shows. Yet they still want $1 for the skinny little thing.

In the cases of Maytag, DuPont and other manufacturing corporations, the relentless cost cutting too often means exporting the jobs to low-wage places. It also means large corporations like this often hoard their cash rather than hiring more workers. When my father owned that little newspaper in years of yore, his number of employees rarely fluctuated up or down much from year to year notwithstanding the economic conditions. As a result, some years he made more than others.

Neither did it affect what he viewed as his civic responsibility to support local causes, such as buying stock in the farm co-op and being a member of the country club even though he didn’t play golf. Neither did it affect his determination to publish a high-quality newspaper. The Cowles brothers had the same philosophy for the Des Moines papers back in those years, too.

My father is dead. So are John and Gardner Cowles. So is Col. Robert R. McCormick of the Chicago Tribune. So are the Fred Maytags senior and junior.

Reid K. Beveridge has covered state politics in Texas, Iowa, Wisconsin, Delaware and Washington, D.C. He is now retired at Broadkill Beach. Beveridgere@prodigy.net.