February 3, 2010 - No. 25
Vale's "One Mine" Disconnect
• Vale's "One
Mine" Disconnect
• Capital-Centred Restructuring versus
Human-Centred Renewal
• Vale's Capital-Centred View on Production
Costs
Vale's "One Mine" Disconnect
Whose community?
Our community! Whose resource? Our resource!
Who decides? We decide!
The not-so-secret plan
leaked by Vale
Inco management speaks volumes of the great disconnect between
monopolies and Canadians. While Canadians are deeply concerned with the
economic crisis, the wrecking of manufacturing, unemployment, the
degrading of social programs and
public services and the increasing attacks on trade union rights, the
monopolies are conspiring to use the insecurity of the crisis to fatten
their pockets at Canadians' expense and strengthen their dictatorial
power and control over Canada's economy, politics and people.
Vale plans to reduce employment in its Sudbury mines by
almost half and cut what it calls "current nickel production costs"
from $4-5 per pound to less than $3. Forcing a strike of Inco workers
by demanding concessions is the opening shot in its plan. The nucleus
of Vale's egocentric plan is for greater
guaranteed profit at the expense of miners and metallurgical workers
and their communities, and for that profit to be taken out of the
region and country. (See article "Vale's Capital-Centred View on
Production Costs.")
Vale's One-Mine Plan for Capital-Centred Restructuring
Vale's not-so-secret "one-mine plan" released to the
media bad-mouths Inco workers, salaried employees and even managers for
having a "sense of entitlement" and "being mediocre." This is quite
astounding given the fact that only a few
short years ago Vale handed over $19 billion to a finance holding
company to acquire Inco, which it now denigrates and wants to blow
apart. The plan calls for capital-centred restructuring saying the
"nickel business has to re-invent itself" to serve better a Vale global
monopoly that demands more and more tribute
and absolute servitude. (To view the not-so-secret-plan click
here.)
The plan calls for a "one-mine approach," which
although vague can only mean Vale's neo-liberal line with no other
views tolerated or accepted. Vale's "one-mine approach" demands "high
employment engagement" in support of Vale's strategy and a ridding of
union influence. This is the George
W. Bush line for worker/management arrangements: either you agree with
the power that holds the authority of ownership or you are against the
company and its one-mine neo-liberal line and should be fired.
Workers are not allowed to
have any views or influence
on working conditions, wages, benefits, the future of the mines and
refineries or any other matter concerning production that conflict with
the "one-mine" line, especially views organized and expressed
collectively in a trade union. Workers and
their communities are not allowed to have any views that contradict the
monopoly on the direction of the economy and the role that nickel
production could play in developing the nickel communities and regions,
especially views organized collectively as a workers' political
opposition that could become a powerful
voice of public opinion and material force for a human-centred
alternative.
Monopolies such as Vale and
Xstrata are fixated on
making as much money from Canada's resources in the fastest possible
time. They are not concerned with leaving behind viable communities
with sustainable economies, modern infrastructure and first-rate social
programs. Monopolies are in the regions
to exploit the best of the resources, take out what they can in the
fastest possible time and then disappear leaving ghost towns in their
wake. That is not an exaggeration. Just read the one-mine plan from
beginning to end. Where in Vale's plan is there anything remotely
connected with the concerns of the community
and the long-term viability of the economy and region? Nowhere. The
plan is narrowly concentrated on the needs of Vale owners of capital
and debt and that is the big problem with the monopolies. Monopolies
trump the people, the economy and even society itself.
In the plan's own words: Vale Inco needs to develop a
one-mine approach, with an integrated business plan focused on cash
generation and profitable operations, which is a rehash of its CEO's
neo-liberal jargon of "being cash-flow positive under all business
cycles." According to the plan, a one-mine
approach means the company would have one production schedule and
standard approaches to such things as shift schedules, equipment,
incentives and discipline. Anyone who dares suggest that the "standard
approach" is not in the best interests of workers, who may face many
different and challenging situations,
or is not in the long-term interests of the community and economy is
branded "mediocre" with a "sense of entitlement" and should be drummed
out of the nickel industry and community.
The one-mine capital-centred approach would encourage a
"culture focused on success of the division, rather than individual
mine." But who defines success? If "success" were narrowly defined as a
victory for the "division," would that not mean workers would be
competing against workers to achieve
a company-defined "success"? If "success" were narrowly defined as
profit for the company to take out of the regions and Canada, would
that not mean a failure for the nickel communities and potential
long-term disaster?
According to a workers' opposition, would
"success" not
be that the added-value produced by workers is poured back into the
nickel communities to guarantee their long-term viability? But that is
not the monopoly way as defined by its narrow aim focused on cash
generation and profitable operations,
an aim obsessed with "being cash-flow positive under all business
cycles." Would "success" mean an operation with low work injuries?
Would "success" mean mining even low-grade ore bodies and doing
everything possible to find new mining, refining, manufacturing,
marketing and service possibilities even though
that would harm the cash-flow and bottom line? Would success mean the
pouring of mine added-value back into the communities to create a
self-reliant regional economy without destructive business cycles? But
that is not the monopoly way and would never be deemed a success. That
type of human-centred success
is only a feature of a workers' opposition, united and determined to
fight against monopoly right and its one-mine dictate and egocentric
aim.
The one-mine approach speaks of a "need to introduce
language to enable flexible transfers between mines as required."
"Introduce language"? Where would this language be introduced? In the
collective agreement? In public opinion? When monopolies use the word
"flexible" it generally means to trample
on workers' rights.
The one-mine dictate says it wants to cut mine staffing
to 1,500 and specifically cut Creighton Mine staff from 500 to 200 yet
have Sudbury Inco produce 180-200 million pounds of nickel a year. The
one-mine dictate focuses on "improving labour productivity by 25%." Yet
the plan, in addition to
cutting staff, proposes to cut projected capital expenditures in half,
to $100 million a year.
Productivity is an objective process. To throw out
numbers in the abstract is disinformation not a process of informing
and enlightening. In the simplest terms, productivity in mining can be
improved three ways: on the backs of workers by increasing the
intensity of work, by introducing more mechanization
through capital expenditures or by mining only those ore bodies that
are the easiest to mine and abandoning all others. If the plan is to
cut in half both capital expenditures and employment then an
improvement in productivity of 25 per cent could only come on the backs
of the remaining workers and by mining only
the easiest ore bodies. That is an ugly capital-centred plan indeed
and must be soundly denounced and rejected.
Capital-Centred Restructuring versus
Human-Centred
Renewal
Vale's "one-mine" dictate
is a capital-centred plan
opposed to the rights and needs of workers, their communities and the
general interests of Canadian society. Vale launched the one-mine
dictate in practice last summer with its demand for concessions,
forcing a strike on Inco miners and metallurgical workers.
The one-mine dictate has unfolded with the use of anti-worker
mercenaries to restart production even when workers are engaged in a
legal strike, thus poisoning the atmosphere in Sudbury. It has flared
to the point of hiring anti-strike security mercenaries who are
themselves a most violent provocation. The plan
includes a propaganda campaign to portray workers' just resistance to
company provocations and defence of an effective picket line and
strike, as hooliganism and terrorism. The one-mine dictate appears to
be heading towards the use of agents
provocateurs to organize staged
violent encounters, which is something
Vale is importing from its fights to oppress people in poor developing
countries. Whatever may happen during the just resistance of Inco
workers defending their rights, Vale is the culprit for introducing
this violence and turmoil into the nickel communities. The one-mine
dictate with its forced strike and violent
provocations is capital-centred restructuring, a declaration of class
war and violence against Inco workers and their communities and
Canadian society.
Workers and their allies
need to unite, discuss and
organize around their own human-centred program for renewal of their
workplaces, communities and socialized economy in a concerted effort to
forge a People's Canada. Resistance against Vale's violent
restructuring and demands for concessions is
an essential aspect of a human-centred renewal.
The one-mine dictate and violence of Vale reflect a
great disconnect with the nickel communities and Canada. All Canadians
should unite behind Inco workers in this fight to oppose Vale and its
one-mine dictate to steal our resources and added-value and leave
nothing behind for the future of our children
and communities. The Vale takeover of Inco is a failure and net
detriment to Canada. The Canadian and provincial governments have the
social responsibility to intervene to defend the rights of Canadians
and the general interests of society and restrict monopoly right.
Workers and their allies have the social responsibility
to organize themselves politically as an effective workers' opposition.
This Canada belongs to Canadians, and workers and their allies have the
right to a say-so and control over the direction of their economy,
communities and country.
Restrict Monopoly Right! Resist Vale's
Violent One-Mine Neo-Liberal Dictate!
Fight for Human-Centred Renewal
of the Socialized Economy,
the Economic Base of a People's Canada!
Victory to Inco Workers and the Nickel Communities in Their Just Strike
Struggle!
Vale's Capital-Centred View on Production Costs
When Vale speaks of
"production costs" it lumps together
the costs of machinery, fuel and other supplies with the claims of
workers on the added-value they produce. To put workers' claims on what
they produce in the same category as production costs is deliberate
mischief-mongering. The wages, benefits and
pensions of Inco workers are legitimate claims on the added-value
active workers produce. Only those with a capital-centred mindset could
possibly misconstrue wages as a cost of production. Mining and
metallurgical workers can only consume what they have produced. There
is no other source but the added-value
workers produce and exchange for other commodities.
Vale Inco owners of capital and debt can only claim
(and consume) as profit of enterprise and interest what Inco workers
have produced. There is no other source for Vale Inco profit and
interest but the added-value workers have produced.
Production costs arise from a transfer of value that
has already been produced. This transferred-value, unlike active
workers' work-time, cannot give rise to new value, only an equivalent
value that is consumed in the production process. Production costs are
those things that have already been produced,
mostly somewhere else such as machinery, tools, fuel and other supplies
needed in the production process. Costs of production do not add value
but rather facilitate the production of new value by active workers.
Costs of production, unlike active workers, simply transfer their own
value to the new commodity during
the production process. The cost of production is returned when the
commodity is sold.
Inco miners and metallurgical workers use costs of
production such as machines, tools and fuel to produce new added-value
mostly in the form of nickel. Added-value produced by active workers
becomes the source of claims by those same workers, retired workers,
owners of capital and debt and government
taxes. Those claims cannot come from costs of production, as income
from those costs simply replaces the original expenditure. The wages of
workers, the profit and interest claimed by owners of Vale Inco capital
and debt, and government taxes all come out of the new added-value
workers produce. Those claims
on added-value by workers, owners of capital and government cannot be
considered costs of production unless one of those groups takes a very
subjective narrow view and declares the claims of others as a cost to
themselves. In that sense, workers could just as easily denounce the
claims of owners of capital and
debt as costs of production to themselves and their communities.
To lump workers' claims on added-value together with
costs of production reveals an ulterior motive to place owners of
capital at the centre of the economic universe demanding the actual
producers pay them tribute. This is similar in intent to medieval
monarchs and lords placing themselves and the
earth at the centre of our solar system demanding tribute from the
actual producers, which at that time were mainly peasants.
When Vale executives speak of reducing costs of
production and falsely include workers' wages and benefits as part of
those costs, they are using "costs of production" as a euphemism for
stealing wages, benefits and pensions from Canadian workers and their
communities and turning that added-value
into profits and interest seized by owners of capital and debt and
taken out of the regions and economy.
Reducing real costs of production such as machinery,
fuel and other supplies does not give rise to any additional value.
Reducing costs of production per pound reduces the intrinsic value of
nickel but does not produce any additional value. Reducing real costs
of production can only result in more money
to the company if the nickel market price moves higher than its
intrinsic value or price of production, which the monopolies always try
to do through global manipulation of prices. But monopoly manipulation
of prices is a major cause of economic dislocation and crisis, as the
last few years have dramatically witnessed.
Reducing workers' claims on the added-value they
produce does not result in any more added-value but does transfer
wages, benefits and pensions from workers to owners of capital and
debt. This phenomenon also is a factor in causing economic crises and
making them more profound and long-lasting.
Reducing workers' claims on what they produce can be particularly
devastating in smaller communities that rely on one or two major
industries such as Sudbury.
For further analysis of Vale's neo-liberal line of
"being cash-flow positive in all business cycles" see TML
article Vale Insists All Units Must Be "Cash-Flow Positive" below.
From the Party Press
Vale Insists All Units Must Be
"Cash-Flow Positive"
- K.C. Adams, TML Daily,
July 21, 2009 -
Don't we all wish to be cash-flow positive.
This expression reflects the narrow outlook of monopoly
capitalism and its subjective egocentrism. In business, the expression
"cash flow" is generally descriptive of a management practice
organizing incoming and outgoing streams of cash. This involves
arranging purchase of material inventory and
other expenses with income from sales of goods and services. Even
healthy companies do not always have a positive cash flow for reasons
outside their control, which necessitates a line of credit. Also,
emergencies such as the current economic crisis wrecking sales and
freezing credit can make a positive cash flow
impossible and bankruptcy a possibility for otherwise strong companies.
Vale removes the verb "to have" from the expression and
turns a fairly routine management practice organizing cash flow, into
an absolute noun phrase or predicate using the copular or linking verb
"to be": to be "cash-flow positive."
Vale is or will be cash-flow positive in all business
cycles according to its directors. Vale and each of its operations are
or will be "cash-flow positive" or else.
This is silly posturing, which even goes against normal
business practice. Just imagine every business "being cash-flow
positive" in the normal course of buying and selling, without the
intervention of credit either in the form of a line of credit or bills
of exchange. Capitalism would grind to a halt rather
quickly.
Vale's absolute (cash-flow positive) expresses a desire
of monopoly right to dominate as an empire and dictate terms to others
not just workers but suppliers and buyers of their goods, and demand
that all serve its empire as subjects. Vale even hypocritically denies
the role of credit in maintaining an
effective cash flow that does not damage a company's interests. It also
denies the role of credit in the expansion of production (extended
reproduction) even though Vale is one of the largest borrowers in the
world and an active participant in the financial sector as trader of
derivatives, hedger and lender.
Capitalism cannot function with all companies
simultaneously "being cash-flow positive." This would require a level
of cooperation and planning in contradiction with capitalism's division
of the socialized economy into competing privately-owned parts.
Originally, credit from industrial capital having
been transformed into loanable capital, especially bills of exchange,
allowed capitalism to function and extend reproduction. But expansion
through credit inevitably gives way to surplus goods and services that
cannot be realized because the masses are relatively and absolutely
impoverished and incapable of buying
them.
The business cycle is now global and more destructive
given such practices as monopoly control of prices above or below their
prices of production, the siphoning of value into the financial sector
and its parasitic practice of making money out of money, which draws
even more wealth into the financial
oligarchy. These practices promote anarchy in the production of goods
and services, uneven development or underdevelopment of economies,
infrastructure and the delivery of social programs and tend to
impoverish the working class and poor countries even further especially
in relation to the capacity of modern
means of production. This contributes to global and national trends
towards a growing gap between rich and poor, the concentration of
wealth and power in fewer hands and powerful global monopolies that can
even manipulate and dominate states. The most powerful imperialist
countries such as the U.S. Empire
spend enormous sums on weaponry and waging war to capture sources of
raw material, markets and spheres of influence all of which generates
more severe and longer-lasting economic crises.
Not all businesses have equal opportunity in the world
of monopoly right. The state and the savings of the masses have become
the largest creditor and source to manage cash-flow for those with
political power. This results in business winners and losers according
to who benefits from pay the rich
schemes. The investment bank Goldman Sachs is a winner because it had
its chairperson and significant shareholder Henry Paulson as secretary
of the U.S. Treasury doling it billions of Troubled Asset Relief
Program (TARP) dollars, a pay-the-rich scheme that has continued under
President Barack Obama's Treasury
Secretary Timothy Geithner who as former president of the Federal
Reserve Bank of New York comes from the same monopoly capitalist cabal.
Looking at Vale's 2008 Financial Report
For a time, monopolies can manipulate market prices to
generate positive cash flows beyond a capitalist's wildest dreams. Vale
had a positive cash flow of almost $20 billion in 2008 mainly from high
market prices and despite paying $2 billion in interest
and fees, losing over a billion dollars in trading derivatives, and
being in an industry that is subjected to extreme tension from a
falling rate of return on invested capital because of industrial
productivity.
Vale's 2008 report gives general details of the claims
of "personnel," those who produce and deliver its social product. The
claims of Vale workers on the added-value they produced in 2008 are
quite small compared with the enormous costs of circulating and fixed
capital (material consumed during
the production process plus expenses from such items as contracting out
machinery repair), which are called transferred-value. Using
capital-centred accounting, Vale lumps together workers' claims on
added-value with costs of production (transferred-value) into one
category it calls "costs of goods sold (COGS)."
Of the total "costs of goods sold," "personnel expenses" or claims of
workers on added-value accounted for only 12.1 percent ($2.139 billion)
out of the total COGS ($17.641 billion).
Added-value is the value contributed by Vale workers
transforming raw material into use-value. Added-value is the additional
value generated by the work-time of workers from which workers can
claim their wages, benefits and pensions, owners of capital can claim
profit of enterprise, interest, fees
and rent, and governments can claim taxes.
Added-value claimed by Vale workers = $2.139 billion.
To review added-value claimed by owners of capital and government see
Vale's 2008 report.
Transferred-value is the already produced use-value
that is consumed in the production process. The use-value is
transferred to the new social product and recouped when the new social
product is realized (sold). Transferred-value does not represent new
value and consequently cannot be the object of
claims. Capital-centred accounting has no categories for
transferred-value and added-value.
A partial view of Vale's transferred-value can be
obtained by deducting workers' claim on added-value (personnel) from
COGS: $17.641 billion minus $2.139 billion = $15.502 billion.
This shows the enormous amount of capital employed to
activate the working class and generate added-value from which owners
of capital can claim profit. This is a major cause of crisis within the
capitalist system as the rate of return on invested capital trends in
inverse direction to the development
of industrial productivity. Monopolies try to overcome this trend in
many ways such as pressuring workers to make concessions, directing the
state to give them public funds, setting market prices for their social
product above prices of production, forcing down market prices of those
products and services consumed
during the production process and using the pooled savings of workers
as a source of investment capital and credit under the control of
monopoly capital. All these monopoly practices contribute to causing
recurring economic crises.
To gain a feel for how capital-intensive mining and
refining has become compare workers' 2008 claims on added-value with
Vale's gross annual income of $38.509 billion. Workers' claim of $2.139
billion out of a gross income of $38.509 billion is but 5.6 percent.
However, it is important to keep
in mind that Vale's 2008 gross income is distorted upwards by the
wildly inflated market prices for basic commodities, which continued
for most of 2008 based on prior sales contracts. Those inflated prices
have caused economic disruption and extreme friction around the world
as can be seen in the bitter dispute
between China and Rio Tinto, the Anglo-U.S. global mining and financial
monopoly.
Squeezing that 5.6 percent or 12.1 percent relative to
Vale's COGS is not going to solve the problem of a falling rate of
return on invested capital. But importantly for owners of capital,
lowering workers' claims does transfer revenue from workers' pockets to
profit of enterprise, and for owners of
capital that is a big deal. It does not solve any problem related to
the economic crisis or the problem of a trend towards a lower rate of
return on invested capital but for owners of Vale capital it would
transfer workers' money directly into their already bulging pockets and
that is good even though it will have a negative
effect on the socialized economy generally.
Workers' claims of $2.139 billion in 2008 comes
directly out of realized added-value which is the only source of claims
for workers, profit of enterprise, interest, fees, rent and taxes. (See
Table 4 in attached Vale 2008 Report for itemized claims)
Reducing the actual costs of production
(transferred-value) may be considered important at times but generally,
a reduction in transferred-value only results in an equivalent
reduction in the value of production. Better productivity can reduce
costs per unit of production, which helps a monopoly compete,
but results in an accelerated lowering of the rate of return on
investment. The trend of rising relative costs of production (the
percentage of transferred-value per unit of production compared with
added-value from workers) through increased productivity is a well
established capitalist trend, which results in fewer
workers producing an equivalent social product and the unintended
consequence of less added-value per unit of investment. The relative
size of added-value is reduced compared with the actual costs of
production resulting in a drop in the rate of return on invested
capital even if workers' wages and benefits were
slashed to near zero.
Note also that under capital-centred accounting costs
for fixed capital other than repair work that is contracted out is not
reported in the total of "costs of goods sold." The transfer of value
from machines and buildings to the social product and returned as a
realized cost of production is listed under
"income" not as an expenditure returned.
"Depreciation, amortization & exhaustion = $2.807
billion for 2008."
This is the amount (of transferred-value) returned to
the monopoly when social product is sold to compensate for the original
purchase of machines etc. Fixed means of production are consumed little
by little and their original purchase price is returned as the machines
transfer their value to the new
social product. The transfer of value is income only in the sense of
being part of the gross income but should not be considered income in
the same sense as realized added-value, which is new value contributed
by the work-time of Vale workers. Fixed transferred-value does not
represent anything in addition to the
value of plants and machines transferred to the social product.
The original purchase price of fixed capital goods such
as machines is reported as "Cash flows from investing activities --
Item: Additions to property, plant and equipment (2008) = $8.972
billion." The total amount is listed as a deduction from gross income
and as it is transferred to new production
in coming years, it is listed as "income."
Note that the 2008 reported total of depreciation,
amortization & exhaustion of fixed capital (fixed transferred-value
of $2.807 billion) is greater than the claims of personnel on
added-value ($2.139 billion).
In its 2008 report, Vale describes the "miracle" of the
explosive growth of its empire and "Net cash provided by operating
activities" (almost $20 billion) with these self-serving words:
"During the expansionary cycle, maximization of
production was key to maximizing value and we had managed to grow our
aggregate output of bulk and non-ferrous mineral products by a compound
annual average rate of 11.2% since 2003."
Vale here fails to mention that most of the "compound
average rate of" growth resulted from leveraged acquisitions (Inco
etc.) and the spike in basic commodity prices. Vale partially hints at
these phenomena admitting that remarkably high market prices
contributed to its positive cash flow in 2008:
"In 2008, our gross operating revenues [gross income]
achieved a historical high of US$38.509 billion, 16.3% up on the
US$33.115 billion reached in 2007.
"Higher prices of products contributed with US$4.932
billion, 91.4% of the total increase of US$5.394 billion over 2007,
while sales volume growth added US$462 million."
The power of positive pricing! Of course, those
monopoly prices played a significant role in wrecking the socialized
economies of many countries and other sectors but all is for the best
when it serves the empire and its drive to be "cash-flow positive."
The "expansionary cycle" has ended and Vale has changed
its tactics to meet the economic crisis, which it helped create. Market
prices have come down considerably but not to previous lows but still
that way of achieving a positive cash-flow is now temporarily blocked.
The expansionary cycle left
Vale with a stupendous positive cash-flow but also with a large debt.
The big positive cash flow is now gone but the debt must be serviced
whatever the prices of basic commodities may be in the coming years.
And word from Vale is that it is going to use its cash reserves as
collateral to borrow more to acquire
even more properties to grow its empire (e.g., its planned acquisition
of U.S. fertilizer monopoly Mosaic Co. for $20 billion now controlled
by Cargill).
During what Vale calls the current "contractionary"
period, the report says: "The priority has moved to cost minimization
as an important tool for value creation [sic] and we are seeking that
goal through several initiatives to reduce operational and investment
costs."
"Value creation" for owners of Vale equity will come
from reducing the claims of Vale workers on the added-value they
produce during this "contractionary" period. Interesting conception of
creating value by stealing the claims of workers on the added-value
they have produced. This parasitic idea
comes from the same monopoly capitalist minds that think money can be
expanded in the financial sector without going back into the goods
producing sectors or that something can be consumed without having been
produced.
Also, "value creation" is impossible through reducing
the costs of production unless monopoly control of market prices forces
them above the prices of production. "Value creation" by stealing
workers' claims on added-value is what is behind Vale's insistence on
all business units being "cash-flow positive"
during all business cycles. It is propaganda to fool workers and middle
strata that do not consciously unite and defend their rights and the
rights of all in the class struggle against monopoly right. This
propaganda ties in with the unscientific insistence that concessions
are somehow solutions to the economic crisis,
which they are not. An opening round in this battle is Vale's demand
for concessions from Vale-Inco miners and refiners. Defeating Vale's
anti-worker anti-social campaign for concessions under the hoax of
"being cash-flow positive" is extremely important not just for
Vale-Inco workers but all Canadians and their
socialized economy.
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Website: www.cpcml.ca
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