Published by El Nuevo Herald on June 07, 2015
Corporate mergers certainly create wealth. And the amount of such transactions is such that this year have come together exceed ten economies of Latin America. The downside of these mergers is generating unemployment.
Between January and May 2015, 10 mergers or acquisitions totaling $ 379 billion were agreed. The gross domestic product of all Central America reached $ 333 billion for the same period.
One of the most talked about mergers was the purchase of Kraft Foods by HJ Heinz, worth $ 45 billion. By the way, HJ Heinz was previously acquired in 2013 by the famous mega millionaire Warren Buffett, who in turn is a major shareholder in companies such as Wells Fargo, Chase, Citibank, Visa, American Express, Geico, etc. Buying on that occasion was for $ 28 billion.
And as in any merger, the latter caused many layoffs. For example, in November 2013, HJ Heinz closed its plant in Pocatello, Idaho, directly affecting about 400 employees.
The dismissed staff required immediate assistance, particularly in the area of training and finding new jobs.
In this regard, the Government, through the Department of Labor has approved emergency aid for $ 1.600 million.
Large corporations have been fusing increasingly through the years. And those mergers encompass all areas of business.
For example, in the area of aviation, the agreement between American Airlines and US Airways in 2013 for $ 13 billion exceeded the previous between United and Delta. In each case the unemployed were more than 10,000 people.
At journalistic level, Jeff Bezos, Amazon, bought The Washington Post for $ 250 million, a real bargain.
Previously bank mergers were famous: Chase-Chemical Bank for $ 10,000 million, Citicorp-Travelers for $ 70.000 million and Nations Bank-Bank of the Americas for $ 60,000 million.
At energy level, the merger Exxon-Mobil for $ 77.000 million was famous. So it was at automotive level the Chrysler-Benz for $ 130 billion, at laboratories level Glaxo-Smith Kline for $ 150 billion, and in the media, AOL-Time Warner for $ 150 billion.
These mergers not only result in thousands of layoffs, in addition, sometimes the public service deteriorates.
For example, previously, the telephone customer service at AT & T was quick and courteous. After that company merged with TCI (now Comcast), BellSouth and Yahoo. In this gigantic conglomerate physically it has difficulty serving 300 million customers. That is why the call is an automatic litany finally treated in other countries.
Of course, mergers are generally creating corporate wealth as they encourage investors to buy newly issued shares on the stock, whose price starts to be quoted higher and higher by increased demand.
This, in turn, becomes higher dividends to shareholders at the end of each fiscal year.
For the corporation are also positive cost reduction, increased sales and greater efficiency. The problem is that often the company that buys acquired the habits and norms of the other, that is, lower wages and benefits for its employees.
In practice just it happens that employees are terrified when they start to hear drums merger.
In continental Europe there is an explicit legislation limiting job losses after an extraterritorial merger. In the US and the UK there is no legislation.
It is time to assume our the role, defending the employment in our country as true support of the society in which we live that also is a bastion of democracy in the world.
We have to legislate in this regard.
BENJAMIN F. DeYURRE
Economist and journalist.
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