Iowa Public Television


Corps of Engineers under fire from Pentagon; IBP Bidders abound

posted on December 8, 2000

As the year nears its end, evidence is mounting that the economy is in fact slowing. Orders to factories have fallen sharply. Personal income is reported to be ebbing. And on Wall Street, time is running out for the arrival of a Santa Claus rally. Indeed the Grinchs in accounting are reporting markedly lower earnings for many of the street's favorites. Even Federal Reserve Chairman Alan Greenspan has expressed worries about the economy cooling too quickly, and indicated to a group of bankers the Fed stands ready to ease interest rates to ward off recession.

In other parts of official Washington this week regulators were beginning to stir over the possible merger of agri-giants. While on the river the Army Corps of Engineers was on the receiving end of a scathing report from the Pentagon.

Corps of Engineers under fire from Pentagon; IBP Bidders abound According to the report, top level officials with the Corps of Engineers ordered changes to statistical data measuring traffic on the Mississippi and Illinois rivers. The skewed numbers made a one billion dollar lock and dam expansion project appear to be more worthwhile than it really was.

The Pentagon report also found an institutional bias in the Corps toward the approval of construction projects, a tendency to treat shipping companies as customers, and a general disregard for environmental studies when making recommendations.

The report concludes a ten month investigation that started when an Army Corps economist came forward and reported the statistical doctoring.

Another event destined for intense scrutiny is the merger between meat packer I-B-P and whichever company actually ends up buying the Midwest-based packer. There are currently three bidders: Tyson Foods, Smithfield Foods, and a group from within I-B-P itself. Each of the proposals are worth roughly four billion dollars and each carries some baggage, either with current shareholders or anti-trust regulators.

Currently, I-B-P is the county's number one beef processor and the number two pork processor. A merger with the number one chicken processor Tyson Foods would create the world's largest processor of meat products. Tyson claims its proposal creates no anti-trust problems, though farm state senators ARE concerned.

An I-B-P merger with Smithfield raises all kinds of red flags. That union would bring together the largest and second-largest pork processors, creating a company that essentially owns the pork AND beef processing market. Smithfield already owns a six percent share of I-B-P.

The third option is a buyout by a conglomerate consisting of I-B-P executives, investment bankers, and food giant Archer Daniels Midland. The internal bid would NOT cause anti-trust anxiety, but would cause problems with I-B-P shareholders who have criticized the proposal for its low price, 300 million less than the offer made by Smithfield.

Tags: engineers government news