More on ADM
Monday, Oct 7, 2013 - Posted by Rich Miller
* Phil Rosenthal has the best reality check column on ADM that I’ve yet seen…
Yep. A company with a $24 billion market cap is haggling over a $24 million, 20-year incentive from a state that’s teetering on the edge of insolvency. Then again, that’s how she got rich, dearie.
“ADM has been minding its pennies and nickels and dimes over the years in order to make sure we remain competitive, because in the commodity business, it is extremely, extremely competitive,” Ray Young, the former General Motors exec who has been ADM’s chief financial officer since 2011, told state legislators at a hearing in Chicago last week. “We’re talking about pennies and nickels per bushel in terms of being able to make money or lose money. So from our perspective we need to be competitive in every aspect of our business.
We’re talking about a company that had 2012 net income of $1.2 billion on sales/revenue of $88.92 billion. That’s a super-thin 1.3 percent. Then again, the net profit is a thousand times higher than one year of the proposed state tax break.
* More…
“It is essentially blackmailing the state,” Currie said. “It essentially is saying if you don’t jump to, if you don’t go do this for us, we might think about going somewhere else.”
Actually, that threat comes from the EDGE requirements themselves, which force companies seeking that particular tax credit to actively consider locating the new jobs in another state. It is the equivalent of a sign around your neck telling passersby you will only give them money if they put a gun to your head. It does tend to encourage such behavior.
Yep. But it can also be a decent tool to help companies expand. Ford is a prime example of that.
* More…
The numbers tossed around concerning Archer Daniels Midland’s relocation of its headquarters to Chicago have Decatur keeping 4,400 of the 4,500 ADM jobs it now has, with 100 moving to Chicago or wherever the new headquarters ends up and another 100 new jobs to staff the proposed accompanying tech center.
But ADM had 4,800 workers based in Decatur at the end of 2011, before the head count was reduced through a combination of retirements and layoffs. Across the state of Illinois, the number of ADM workers went from 6,400 then to a little more than 6,000 today.
The trend is most definitely not our friend.
* A bit of history from the Decatur paper…
It does seem unsettling, at first glance, that any company wants incentives to move jobs from one community in the state to another. However, Illinois would be the loser if ADM were to relocate its world headquarters to another state.
And the politicians complaining about ADM’s request really have no one but themselves to blame. The state gave massive tax incentives to Boeing to lure their world headquarters to Chicago, a move that created, at most, 500 jobs. The state also gave incentives to Tate & Lyle to keep executive jobs in the state. Those jobs were moved from Decatur to Hoffman Estates. The state also has awarded incentives to other major corporations to stay. ADM is merely following the trail others have paved.
Past incentives don’t excuse this one, but why single out ADM when other companies have been at the state trough much longer?
* On the other hand…
• In the fiscal year ended June 30, 2012, ADM gave a total compensation package to CEO Patricia Woertz worth $9.4 million — nearly eight times the size of the annual tax break it is seeking.
• In February, ADM’s board voted to increase the company’s dividend payout to shareholders by 8.6 percent to 19 cents per share. On an annual basis, that would equal about $500 million.
• ADM’s bottom line has remained in the black even though over the last decade it paid more than $500 million in fines and legal settlements in a price fixing scandal that sent three top executives to prison. One of them was a key government whistle-blower in the case whose bizarre exploits were chronicled in a best-selling book, “The Informant,” and a hit Hollywood movie by the same name starring Matt Damon.
* Even so, some Republican gubernatorial candidates have offered support. Bill Brady…
“We have to face reality. We can’t be populist in this. The reality is because the governor has raised taxes so high, there are other alternatives (for ADM to relocate) out there,” Brady said in an interview on WGN-AM 720.
Quinn also vetoed lawmakers’ paychecks pending a plan to deal with the unfunded pension liability. A Cook County judge ruled the governor’s action unconstitutional, a decision Quinn has asked the Illinois Supreme Court to review.
“You don’t tie ADM to another issue that the governor’s failed on,” Brady said of the pension issue. “We need a governor who will move away from the populist point of view and do the right thing in each instance.”
Actually, the tax rate doesn’t really have much of any impact on ADM here. As I’ve pointed out time and time again, ADM pays little to no state income tax.
* Kirk Dillard…
“The workers compensation costs for ADM or Caterpillar or Illinois companies is 3, 4, 5 times higher than it is in surrounding states,” Dillard said. […]
“The governor has been the governor for five years. He’s had a legislature that’s completely controlled by his political party. Pension reform should have been done a long time ago,” Dillard said.
“The governor is pretty good at playing the hostage game these days,” Dillard said, referring to his failed attempt to withhold lawmakers pay until they passed a pension bill.
* Dillard’s running mate Jil Tracy is also on board…
When asked about the possibility of Archer Daniels Midland Co. receiving tax credits to move its global headquarters from Decatur to Chicago, Tracy said if ADM qualifies for the tax breaks then there’s no reason to oppose it.
“I think it’s important to listen and see if help is needed,” she said. “We have to be engaged, especially if other states are offering tax breaks.”
- walkinfool - Monday, Oct 7, 13 @ 10:49 am:
Good info.
ADM looks like a very tightly-managed company, at least financially. I was surprised their CEO is making as little as she is, given what happens in that crazy marketplace.
- Robert the Bruce - Monday, Oct 7, 13 @ 10:51 am:
The devil is in the details - I’m quite skeptical of how long ADM’s planned growth of 100 jobs will last. I’d love to see the state come up with a good way of providing incentives to retain/attract companies in growth industries who truly project to create jobs over the next decade.
- Demoralized - Monday, Oct 7, 13 @ 10:54 am:
==I was surprised their CEO is making as little as she is==
Yes, she should definitely be paid more because $9.4 million a year is hard to live on. I’ll send her a sympathy card.
- Anon - Monday, Oct 7, 13 @ 10:56 am:
Gov. Squeezy is saying he needs to take more pension money to pay for the ADM tax break?
- wordslinger - Monday, Oct 7, 13 @ 11:01 am:
It was bizarre for Quinn to link ADM to pension legislation.
If ADM starts to seriously consider offers from out of state, he’ll wear the jacket for it.
The whole issue is bizarre. No matter what you think of these corporate welfare deals, it’s still $1.2 million a year. In the scheme of things, the money is hardly a deal-breaker for the state or ADM.
The one benefit is that it has raised publicly the fact that our large corporate exporters pay little or no income tax.
I don’t think that’s widely known. And it certainly calls into question the motives of the Civvies whose companies have no skin in the game (hint: it’s the personal income tax on their big salaries).
- Rich Miller - Monday, Oct 7, 13 @ 11:17 am:
===The one benefit is that it has raised publicly the fact that our large corporate exporters pay little or no income tax.===
I disagree. I don’t think any media outlet, save for this one, has focused at all on that. Basically, they’ve just bought into the he said, she said of “blackmail” versus “lower the tax rate.” Unbelievably lazy on their part.
- A guy... - Monday, Oct 7, 13 @ 11:23 am:
Rich, there might be some laziness, but there’s also “it’s too complicated to cover” and fewer reporters to do any detailed research on it. Whenever you get a story that’s complicated, their default response is that there isn’t enough interest in it. Check it out, I promise that’s true.
- Rich Miller - Monday, Oct 7, 13 @ 11:25 am:
===but there’s also “it’s too complicated to cover” ===
That’s not an excuse because it’s not complicated at all. ADM’s guy admitted the truth at the House Revenue hearing last week. There’s a quote and everything.
- Ghost - Monday, Oct 7, 13 @ 11:29 am:
The Country in general is seeing a shrinking of the middle class.
The States economy does better the larger the proportion of middle class residents. Many States with large job growth are just growing minimium wage jobs; these in trun create large drains on their economies.
ADM pays well. Whatever money the company itself makes, those employees all buy houses, clothes, go out to eat, pay property tax, and buy things with their liquid income. We want to keep middle class jobs in the State. if this helps add 100 middle class jobs good for us!
We dont need more walmarts and Jimmy johns who fight over providing insruance and paying minimium wage. We wants employers like ADM which have good pay and good benefits.
- wordslinger - Monday, Oct 7, 13 @ 11:31 am:
Yeah, you’re probably right.
How complicated is it to point out the Big Dogs pay no corporate income taxes?
- Oak Tree - Monday, Oct 7, 13 @ 11:31 am:
Unfortunately, Governor Quinn has already opened Pandora’s box with other corporations like Boeing. The decision is based on Quinn’s business knowledge and his whims. It is a little like Obama “picking and choosing” which companies should survive the nation’s financial downturn and get what. The reality is that ADM won’t leave the state for $24 million. ADM and Pat Woertz can’t be blamed for also asking for a free lunch since she and others have seen Quinn toss away the state’s money so other perhaps less deserving corporations can improve their bottom line for their shareholders. Unfortunately at this point in time, Quinn is looked upon as a loveable but slow-witted buffoon by the nation’s corporate CEOs. It is as if Quinn has hung a sign around his neck that says, “Please take advantage of me. I am not too bright. “
- Angry Republican - Monday, Oct 7, 13 @ 11:38 am:
According to Steven Rattner, Ray Young was unprepared, incompetent and devoid of anything approaching a clue. Given Ray Young’s track record at GM, I wouldn’t trust his ability to run ADM’s finances
- wordslinger - Monday, Oct 7, 13 @ 11:39 am:
–Unfortunately, Governor Quinn has already opened Pandora’s box with other corporations like Boeing.–
Boeing? They moved to Chicago in 2001.
- Mokenavince - Monday, Oct 7, 13 @ 11:44 am:
Dillard is 100% right when it comes to workers comp costs. Quinn should give them the incentives
to stay. St. Louis would take them in a minute.
The Company started in Minneapolis they would welcome them back. Quinn gets mixed up sometime times.
- wordslinger - Monday, Oct 7, 13 @ 11:51 am:
I don’t think St. Louis, Indy, or Minny would be in play. Those ADM poohbahs don’t want to spend all their time switching planes in Chicago as they travel the country and world.
Not enough direct flights in those cities.
- Jack Handy - Monday, Oct 7, 13 @ 12:02 pm:
Next up … State Farm
- Nearly Normal - Monday, Oct 7, 13 @ 12:30 pm:
Jack Handy–
State Farm just spent millions upgrading their infrastructure here in Bloomington. Yes, they have other offices in the US and have expanded those BUT The Farm is not buying property. Instead, they are leasing office spaces.
In June, Ed Rust said he wished he had a dollar from everyone predicting SF was moving out of Bloomington to help pay for some of the infrastructure improvements.
- Decatur gal - Monday, Oct 7, 13 @ 2:09 pm:
I think they want to be in Chicago and that huge incentives aren’t needed. But reasonable incentives are, otherwise they look stupid, and they need to appear fiscally responsible.
- Anonymous - Monday, Oct 7, 13 @ 2:14 pm:
sure, reward the do-nothing shareholders with dividend increases instead of the employees doing the work. that makes sense eh…
give the corporations a tax credit so the corporations can use the additional profits to reward the out of state and foreign shareholders with dividend increases. export the money and trickle down economy.
also the executive shareholders get the benefit of increasing their income while shifting it to the lower capital gains tax rate. it’s a win-win for them.
meanwhile, follow the money. the state lawbreakers demand 130 million dollars over 30 years for so-called pension reforms. turn-a-round and give 20 million of that savings to adm over 20 years. transfer the wealth from the public employees to the corporate execs that hold us hostage for ‘new jobs’
yeah, the new jobs..
which doesn’t mean that someone currently unemployed in illinois will get one of those ‘new jobs’ of that the ‘new job’ will be full-time with a living wage.
i challenge you to look-up the number of current foreign h1-b visa request illinois corporations have open while the state has the second highest unemployment rate in the nation and 66 percent of our youth in their early 20’s either unemployed of not working full-time. college grads returning home to live with their parents as the corporations sit there with a straight face saying they are unable to find qualified candidates.
i’m not buying it.
this is what i call economic terrorism.
- 4 percent - Monday, Oct 7, 13 @ 2:36 pm:
ADM spends $8 billion (yes, billion) dollars every year with Illinois suppliers. That’s an awful lot of instate companies that benefit from ADM’s location.
As I’ve noted, ADM’s revenue largely comes from exports and sales around the globe. Since they don’t sell a lot of product in Illinois, they don’t have a lot of income attributable to the state, hence the lower income taxes paid here.
Secondly, for those that think ADM is bluffing, I’d remind you that their current executives are not Illinois natives. They are all relatively new to ADM and Illinois and don’t have the long-time roots and history that the Andreas family had with the company.
- wordslinger - Monday, Oct 7, 13 @ 2:44 pm:
–ADM spends $8 billion (yes, billion) dollars every year with Illinois suppliers. That’s an awful lot of instate companies that benefit from ADM’s location.–
Uh, so what? What does that have to do with the issue? Are they supposed to get it free.
I’ve spent virtually 100% of my income in Illinois every year since I started detasselling corn when I was 12.
Can I have an effective state income tax rate of one half of one percent?
- fake county chairman - Monday, Oct 7, 13 @ 7:31 pm:
Would a small company qualify to get the same tax credits.Or just the big guys.