NY Times: ‘Industries Find Surging Profits in Deeper Cuts’

I can’t say it any better than the NY Times headline writer — Industries find surging profits in deeper cuts. The article itself, from Sunday’s Business section, is a great read, if painful. There’s too much in it to clip cleanly, but the opening captures one of the main points. (By the way, the end of this post contains an action suggestion; the goal isn’t depression, but information and motivation.)

And now the article. It seems Harley-Davidson, that staple of American symbology, as a tale to tell (my emphasis):

By most measures, Harley-Davidson has been having a rough ride.

Motorcycle sales are falling in 2010, as they have for each of the last three years. The company does not expect a turnaround anytime soon.

But despite that drought, Harley’s profits are rising — soaring, in fact. Last week, Harley reported a $71 million profit in the second quarter, more than triple what it earned a year ago.

This seeming contradiction — falling sales and rising profits — is one reason the mood on Wall Street is so much more buoyant than in households, where pessimism runs deep and joblessness shows few signs of easing.

Many companies are focusing on cost-cutting to keep profits growing, but the benefits are mostly going to shareholders instead of the broader economy, as management conserves cash rather than bolstering hiring and production. Harley, for example, has announced plans to cut 1,400 to 1,600 more jobs by the end of next year. That is on top of 2,000 job cuts last year — more than a fifth of its work force.

The article goes on to talk about management “leveraging its position” to make workers more productive. (Care to work there? You too can be “leveraged.”) And because it’s the business page, there’s a handy link so you can add Harley-Davidson to your portfolio. America at work.

The whole piece is good, with lots of corporate examples.

But I’d like to close with the graph that goes with the article, a two-parter:

On the left, look first at GDP (light gray). Now Employee Compensation (dark gray). Now Profit (black). Now look at the last three dots on the graph. The amount of GDP that I didn’t go to Employee Compensation — was added to Corporate Profit, almost one-for-one.

Now look on the right. That’s corporate cash. Remember what we said about deflations — that cash was king and things were its footstool? The corps are sitting on a mound of cash, waiting for the price of what cash buys to fall to the floor. Wanna bet that wages are one of the things they’re watching to fall?

The types who run these companies may be predatory and unpatriotic, but they’re not stupid.

One way to fight this, by the way, is to organize the unemployed as a political force. They are both potent, large (unfortunately) and highly motivated — very much like draft-age students during the Anti-War Movement. If you’re considering action, consider this.

GP


Gaius Publius is a professional writer living on the West Coast of the United States.

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