Businesses brace for change

ANDREW EDER

Business groups in Delaware are casting a wary eye on the arrival of President-elect Barack Obama and the expansion of the Democratic majority in Congress.

"We have seen that one-party control typically doesn't seem to work out the way it should," said Scott Kidner, Delaware state director for the National Federation of Independent Business, a small-business lobby. "It doesn't matter whether you're an 'R' or a 'D.' You do need checks and balances."

Atop the list of concerns for a number of industries is Democratic-supported legislation that would make it easier for workers to form unions.

Some of Delaware's signature industries, including credit cards and pharmaceuticals, face potentially punitive legislation from a more consumer-oriented Congress.

And businesses are looking at a murky picture on tax policy complicated by the ongoing financial crisis and economic downturn.

Obama's tax plan calls for raising taxes on those earning more than $250,000, which would affect a number of so-called Subchapter S corporations, where profits flow through to the business owner's tax returns.

Some analysts and business leaders think the economic situation will push Obama and congressional Democrats to hold off on any tax increases, but the public officials have yet to say so publicly.

"The concern and the question here is whether ideology trumps reality," said Bob Prybutok, president of Newark manufacturing firm Polymer Technologies. "Ideology appears to have trumped reality through most of the campaign."

Prybutok, whose business employs 110 workers in Delaware, is among those closely tracking a piece of legislation known as the Employee Free Choice Act.

The bill would change the method by which a union can organize a workplace. Under current rules, companies can dictate that workers vote in a secret-ballot election on whether to unionize. The Employee Free Choice Act would allow workers to unionize by collecting signed authorization cards from a majority of workers.

Unions say the bill would remove unfair barriers to union representation and help stem coercive practices by employers leading up to union votes. But the bill faces fierce opposition from a range of business groups, who say the "card check" provision would stir widespread harassment of workers by unions.

"My personal view is that it's a tool for unions to increase their control and increase their membership by abusing workers' rights and abusing the system," said Prybutok, who chairs the leadership council of the National Federation of Independent Business in Delaware.

Prybutok said the U.S. manufacturing sector has benefited from the concept of "lean" manufacturing, a philosophy that calls for flexibility in how to utilize workers. Such a system is nearly impossible to implement in a union workplace, with its rigid work rules and protocols, he said.

Unions are optimistic about the bill's prospects in the next Congress. Obama has said he would sign the bill, which died in the Senate last year amid a Republican filibuster. Vice president-elect Joe Biden is also a supporter.

Congress also is expected to take up legislation that targets purported abuses by the credit card industry, including offering "teaser" interest rates that reset to higher levels and maximizing interest charges by requiring consumers to pay off balances with lower interest rates first.

The bill also would limit fees and control big rate hikes when a cardholder has a payment glitch on an account with a different provider.

William Keenan, chairman and CEO of Hockessin-based credit card consultancy De Novo Corp., said Delaware's financial services industry is seeing "opposing forces" from the next Congress and administration.

On the one hand, he said, government intervention is helping to shore up the parent banks of Delaware credit card issuers, and any economic stimulus package for consumers would benefit the credit card industry.

On the other hand, some of the proposed legislation puts credit card reward programs and offers to less creditworthy consumers at risk, Keenan said.

"While many of the legislators' hearts may be in the right place, a lot of it's not thought through because the ultimate impact will be felt by the consumer," he said.

The pharmaceutical industry also faces a potentially adversarial relationship with the new federal government. Obama targeted drug companies on the campaign trail, and some members of Congress are eager to give the government the right to negotiate prices for drugs covered by Medicare with drug makers.

AstraZeneca is likely to have a central role in the upcoming discussion on health-care reform; the company's chief executive, David Brennan, is in line to be the next chairman of the drug industry's trade group. That group, the Pharmaceutical Research and Manufacturers of America, is launching a public-relations campaign in support of free-market health care.

Rich Buckley, AstraZeneca's vice president of government affairs, said the company has actively lobbied for a strong and well-funded Food and Drug Administration, the agency that regulates prescription drugs.

Buckley said AstraZeneca also supports reauthorizing the State Children's Health Insurance Program, a Democratic priority and one of the first major health-care issues the next Congress is likely to address.

But Buckley said private insurance plans are already effectively negotiating Medicare prescription prices with drug companies, and policymakers shouldn't tinker with the market.

"Once you go down the road of a monolithic federal plan with monolithic federal pricing, you're going to end up with a program that Americans don't like very much," Buckley said.

All businesses are watching to see what the Obama administration will do to stimulate the moribund U.S. economy. That's the No. 1 issue DuPont Co. will be watching next year, company spokeswoman Michelle Reardon said.

DuPont and other polluters could face more onerous environmental regulations in an Obama administration. But the Wilmington-based industrial giant, an early corporate advocate of addressing climate change, has worked to stay ahead of potential regulations.

DuPont already participates in a voluntary trading program to reduce greenhouse-gas emissions; a mandatory "cap and trade" program is expected under the new administration.

Obama even mentioned DuPont in an August speech as having a model energy-efficiency program. The president-elect has proposed spending $150 billion over 10 years on renewable energy, including solar power and second-generation biofuels -- areas where DuPont is investing research dollars and forecasting rapid growth.

In a speech earlier this month, DuPont Chairman and CEO Chad Holliday, in his role as chairman of the Council on Competitiveness, called for the new administration and Congress to enact a four-part plan including worker retraining, new investments in applied research and infrastructure, and a comprehensive energy plan.

"To compete, we need to ensure that every American has the skills to make it in the global economy, that America remains the innovation laboratory of the world, that our infrastructure continues to keep us moving and that we have an action agenda on energy," Holliday said.

Additional Facts

ISSUES OF INTEREST

Some of the major issues local business leaders are watching, by sector:

Credit cards: Congress is mulling several pieces of legislation to correct what some consider the abuses of credit card issuers, such as high fees, abrupt rate changes and "teaser" raters. Executives worry the measures will wreak havoc on the industry's business model, with a crackdown shriveling offers to all but the most creditworthy consumers.

Construction: The industry is front and center among those worried about legislation that would make it easier to unionize workplaces. As private-sector construction slows, Delaware companies are closely watching the state budget situation in the hope that capital spending will hold steady.

Manufacturing: Delaware's auto sector has been decimated of late with more than 1,500 layoffs this year, but the state's dealers, suppliers and remaining workers at the General Motors plant near Newport could stand to benefit if the government bails out domestic automakers. Tougher environmental regulations are likely under Obama, including a "cap and trade" program to cut down on greenhouse-gas emissions.

Health care: Obama railed against prescription-drug costs on the campaign trail, and pharmaceutical companies are gearing up for a battle with members of Congress looking to control prices of drugs covered by Medicare. Businesses, already beset by rising health-care costs, are watching to see how new federal and state insurance reform policies will affect their bottom line.

Agriculture: Obama is in favor of continued subsidies for ethanol and other biofuels, a developing business for DuPont Co. that's dependent on government support. His criticism of the North American Free Trade Agreement during a primary campaign worried some farm groups, who depend on a liberal trade environment to sell commodities overseas.