We don’t get too much melodrama in the business section of our morning newspapers, but one recent storyline seemed to be lifted right out of an old Dudley Do-Right cartoon.
Bucyrus International (BUCY) a Milwaukee mining equipment manufacturer, played the role of the innocent victim – along with nearly 1,000 current and prospective Bucyrus employees whose jobs were about to go up in smoke.
The bad guy in our story was the U.S. Export-Import Bank. It was poised with a lighted match, ready to torch a $600 million trade deal that would have helped Bucyrus and its workers get through these hard economic times.
But at the last minute the handsome leading man, played by none other than President Obama, rode into town. He stood around looking handsome, somehow saving the day without actually saying or doing very much. All’s well that ends well. Which is why melodramas, silly as they are, have been popular for a very long time.
Our story began when Bucyrus won that $600 million contract to provide mining equipment to Reliance Power Ltd. of India. The deal was contingent on Bucyrus obtaining loan guarantees on Reliant’s behalf from the Export-Import Bank. But, to the exporter’s surprise, the bank nixed the deal.
The reason? The American-made mining equipment would have supplied coal to a proposed power plant in India that would emit carbon dioxide, the most widespread, though not the most potent, greenhouse gas.
There were a few problems with the bank’s logic, the most glaring of which was that stopping the Bucyrus deal would not have prevented the power plant from being built or the coal from being burned. It would simply have sent Reliance to another country, with China a prime candidate, to buy the mining equipment it needed.
Another odd aspect of the bank’s refusal was that the Indian power plant’s anticipated emissions of 830 grams of carbon dioxide per kilowatt hour are below the bank’s own cap of 850 grams. A bank representative said the margin of error was such that the plant could exceed the guideline.
The decision left Bucyrus’ workers frustrated and bemused, and it came at an awkward time for Obama. Unemployment and the economy loom as critical issues in the upcoming congressional elections, in which the president is eager to help his Democratic Party keep its legislative majorities. The last thing the administration needed was a set of headlines trumpeting how the U.S. government pointlessly killed 1,000 good American jobs.
Yet, while these events were playing out in June, the administration was simultaneously trying to show that it was coping with the uncontrolled oil spill in the Gulf of Mexico. In the wake of his now-embarrassing call for more offshore oil drilling just prior to the BP disaster, Obama may have been understandably reluctant to risk the scorn of environmentalists by supporting projects like coal-fired power plants in India.
As luck would have it, the president was scheduled to visit Wisconsin on a tour touting his administration’s job-promotion efforts, just days after the Ex-Im Bank announced its puzzling decision.
Obama literally had nothing to say, at least in public, about the Bucyrus drama. His Wisconsin speech focused on the continuing need for jobs and the failings of the GOP, and made no mention of the bank’s ruling. Yet miraculously, and on the very day the president spoke in Wisconsin, the bank’s board changed its position.
Suddenly the bank was urging Bucyrus to reapply for the financing, which was to be approved on the condition that the Indian buyer, Reliance, move ahead with renewable energy projects, also using U.S. equipment. Reliance went along with the proviso, which allowed the U.S. government to save face while it did its about-face.
Bucyrus CEO Tim Sullivan appeared embarrassed but relieved, saying,
“This is not the way that we want to portray ourselves in the international market. To the credit of Reliance, we put those people through so much, and they hung in there with us. It has been a complete mess.”
It was a convoluted and silly process, but somehow we got to the right answer. Our silent, handsome hero somehow saved the day. And as we said, all’s well that ends well.
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