Reference no: EM13766055

The reading for this module (Adler chapters 9-12) focus on the changing structure of the company from simple individual (Archie Sergy) ownership to complicated "financialized" Wall Street forms of ownership; union busting battles that paralleled battles against civil rights activists in the south; the lure of Mexico to the company's leaders, and the impact of Wall Street "leveraged buyouts" on the company's strategic direction.

The change in ownership of Universal from a single individual (Archie) to a "holding company" and ultimately to Wall Street financial speculators had an important impact on the business decisions made by this company. In fact, it sets up the circumstances that led to the end of Mollie's job, or at least her job for her, in Paterson, New Jersey. 
Remember that Archie had sold the company in 1963 to a "holding company" (meaning a company that makes nothing of its own; it simply owns or "holds" other companies that do) named Pennsylvania and Reading (P&R). In early 1968 P&R itself gets bought up by another holding company, Northwest Industries. As explained in the reading, these companies are "conglomerates," operating in a number of unrelated lines of business. Later in 1968, Archie dies of a heart attack. At this point, Universal Manufacturing has severed its ties to its initial founder -- Archie -- and has entered the realms of high finance. 

I have found that students sometimes find the reading a bit confusing because of all the details of the many ownership changes the company went through, so I want to briefly give an overview here to clarify the main outlines of what occurred. What happened to Universal is part of a larger story of how U.S. capitalism and the U.S. economy were changing. 

To briefly summarize changes in the ownership of Universal Manufacturing: 

1) Up until 1963, owned by Archie Sergy
2) From 1963 to 1968, own by Pennsylvania and Reading, a holding company
3) In 1968, sold to Northwest Industries, a conglomerate in many lines of business
4) In 1985, sold to Bill Farley, a "Wall Street financier" who was an associate of the Wall Street "whiz kid" Michael Milken (who pioneered "junk bonds" with nothing tangible to back them up, and other innovative ways of making millions and billions with other people's money -- he eventually was banned from Wall Street for his breaking of rules in ever more reckless pursuit of quick profits). 
5) Later in 1985 (consummated in 1986), sold to Andy Galef, another associate of Michael Milken, who subsumes the company into the conglomerate named MagneTek. 

Wall Street "money men" like Farley and Galef had no interest in companies like Universal for anything other than buying and selling them for quick profit. They knew nothing of manufacturing; they were strictly financial prospectors. Once Galef had control of the company, he fired (over the 1986-1987 period) all of Universal's top managers, often in a brutal manner and always with an eye to shutting down existing operations, not to improve them or keep them as going concerns. Terms like "shell company" and "cash cow" capture the essence of the relationship between entities like MagneTek (Galef) and ongoing manufacturing concerns ("cash cows") like Universal. In 1987 MagneTek opened a maquila (factory) in Matamoros, Mexico; within two years the Paterson plant would be closed down and Mollie would lose her job. As you will learn in next week's reading, the two remaining U.S. plants (Blytheville, Arkansas, and Mississippi) would be closed less than a decade later. 

It is important to understand that Farley and Galef bought Universal with mostly borrowed money (not their own), and that the company became increasingly "leveraged" -- meaning indebted -- with each sale. The huge debts to pay off -- junk bonds held by speculators demanding very high interest rates to compensate for the risk they were taking -- combined with the massive fees going to individuals like Galef and Milken in the form of "fees," made it imperative for Universal/MagneTek to make large profits, and very quickly. There wouldn't be (and couldn't be) any patience with "slow times" or temporary low profits or even losses, such as an individual owner like Archie or a less "financialized" (Wall Street-dependent) company could display. 

All of these changes meant growing insecurity and lower living standards for the workers of Universal, like Mollie. The book reading also describes how the company used its ownership of multiple plants to play off workers in one location against those in another, forcing concessions in wages and benefits out of the employees while the profits for owners and top managers remained very healthy. 

As part of this lesson, you will view the video "The Wall Street Connection." It was made in the 1980s, at the height of the wave of "financialization" of our economy (the center of power moving to Wall Street and financial entities rather than manufacturing companies) that enters into the trajectory of Mollie's job. As you view the video, pay close attention to the differing views on whether the Wall Street takeover of companies ("financialization" of the economy) is a good thing or a bad thing, and whether governmental regulation over the behavior of financiers and investment banks should be practiced or not. From the point of view of the reading in the book, it is a bad thing; for an alternate view, note what William Simon says in the video. We will be discussing these issues on the discussion board. 

Remember that, in this class, we are viewing all these issues through the eyes of a worker. In this case, the worker is Mollie James (or Dorothy Carter, in Mississippi). For this class, we are to view the issues from a worker's perspective, just as we did with Ehrenreich's Nickel and Dimed.
The other issue covered in this reading is "union busting" - the battle the company fought to resist an attempt to unionize its workforce in Mississippi. Note how race baiting was used to fight the union organizing drive in Mississippi, how similar tactics were used against union organizers as were used against civil rights activists (death threats, denial of facilities to meet, etc.), and how racists initially controlled even the new union after it was successful (even though the union later became a fighter for equal rights and part of the struggle for racial equality and elected African-American leadership). 
Sitting in the background is Mexico, which was to be the final destination of Mollie's job.