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Do workers lose in private buyouts?

John Dimsdale Aug 16, 2007
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Do workers lose in private buyouts?

John Dimsdale Aug 16, 2007
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TEXT OF STORY

Scott Jagow: The problems in the credit market aren’t limited to mortgage companies. A deal to buy the student loan corporation Sallie Mae is in trouble. Yesterday, Sallie Mae shareholders accepted a $25 billion offer from a group of banks and private equity firms. But those buyers aren’t sure they can go through with the deal. And private equity deals may face another opponent: labor unions. John Dimsdale reports from Washington.


John Dimsdale: Andy Stern, the president of the Service Employees International Union, says private equity buyouts have not been good for American workers.

Andy Stern: We have not found one worker who’s received healthcare as a result of the buyouts. We have not seen one worker who’s gotten a raise as a result of the buyouts. Despite the billions of dollars in profits and fees that have been taken out of these companies.

Stern says private equity takeovers have resulted in 10,000 layoffs.

But lawyer Robert Profusek at Jones Day says private equity is revitalizing struggling companies. Take Cerberus Capital’s purchase of Chrysler.

Robert Profusek: Who is the biggest supporter of Cerberus at Chrysler? Answer: the UAW.

Auto workers, he says, recognize Cerberus is saving their jobs.

But the credit crunch may already be trimming private equity’s sails. Lenders demanding higher premiums are forcing firms to rethink their corporate-buying binge.

In Washington, I’m John Dimsdale for Marketplace.

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