Last Sunday, members of Local S6, the machinists union that represents about 3,000 workers at Bath Iron Works, filed into the Augusta Civic Center to vote on a new four-year contract. Though the union’s current contract was not set to expire until next May, executives at BIW, a subsidiary of General Dynamics, pushed to review the terms of the workers’ employment this fall. Setting wages and benefits for the shipyard’s largest union this year will allow BIW to be more “competitive” come March, when it bids against two other shipyards for a big contract to build cutters for the Coast Guard, and as it prepares future bids to build more destroyers for the Navy.
As the workers well know, becoming more “competitive” is a corporate euphemism for lowering labor costs, and sure enough, the new contract they were voting on would do just that. The union’s current contract included an 8.25 percent pay increase over its four-year period. The new one stipulates that workers will not get another raise for the rest of this decade and will shell out more money for health insurance co-payments and higher deductibles. On the “plus” side, if you can call it that, the company will increase its contribution to the union’s pension fund by “small increments” each year, the BDN reported, and give workers a $2,500 annual bonus, the first of which will be paid this Christmas Eve.
In the larger scheme of things, workers were led to believe that should the company’s increased “competitiveness” result in BIW securing the lucrative Coast Guard and Navy jobs, they won’t be fired. So the choice is really between accepting a de facto pay cut or risking unemployment and financial ruin. When the votes were counted, 1,045 workers rejected the offer, but over 1,300 decided to accept it.
It’s safe to say that Doug Barton, a union worker from Pittston, was not among those who voted yes. As the Associated Press reported, Barton expressed his opinion of the deal by burning the 124-page contract outside the Civic Center while a crowd of fellow workers gathered around him. “We’re the best shipbuilders in the world, and that’s all they’re going to offer?” Barton asked, according to the AP’s David Sharp. Executives at BIW and General Dynamics can now “laugh their way to the bank,” he said.
And he’s right. The executives and board members of General Dynamics literally have more money than they know what to do with, so they’re using it to pay themselves and their shareholders while cutting jobs, denying raises, and threatening the families of the workers that remain with destitution.
The giant defense contractor has been reaping record profits this year, thanks in part to the resurgence of its Gulfstream aircraft division, which makes private jets for corporate executives and other members of the .01 percent. Gulfstream “booked almost $1 billion in new orders” during the second quarter of this year, the Wall Street Journal reported in July, its best performance since the Great Recession hit seven years ago, according to Phebe Novakovic, General Dynamics’ chief executive.
The corporation’s marine systems unit (the one that builds the big warships) did even better in the third quarter of this year, posting a nearly 15 percent jump in revenue (compared to the aircraft division’s 2.4 percent increase).
Rather than share these record profits with the workers at the shipyard on Washington Street, Novakovic and her board have been spending billions on Wall Street to buy — wait for it… — General Dynamics’ own stock, through a process known as “buybacks.”
When Novakovic, a former CIA operative, became CEO in 2013, General Dynamics repurchased 9.4 million of its own shares. Last year, she tripled that to 29 million shares (valued at about $4.5 billion), and the corporation is on track to match or exceed that this year.
In addition to enriching shareholders, buybacks make it possible to further enrich executives who receive the bulk of their compensation in the form of stock options. Robert A.G. Monks, a shareholder activist and corporate governance consultant who lives in Cape Elizabeth, explained how this works during an appearance on the Ralph Nader Radio Hour last month. Stock options granted to executives increase the overall number of shares, which in turn dilutes the value of the stock. To prevent that devaluation, the company “buys back” its own shares, a financial maneuver that Monks called “part of one of the great wealth transfers in private business history.”
Novakovic’s salary in 2014 was $1.56 million, the Washington Business Journal noted, and she got a cash bonus that year of $4.25 million — exactly 1,700 times larger than the bonus BIW workers will get this year under the new contract. The rest of her nearly $19 million compensation package consisted of stock awards and options.
Merry Christmas, Mrs. Novakovic.