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#93 - What We Must Do -- Part 5 Winning Corporate Strategies, 04-Sep-1988

Waste Management, Inc. (WMI), the nation's largest waste hauler, will
gross about $3.3 billion and net about $400 million this year. As of
Dec. 31, 1987, the company owned 772 subsidiaries, many of which are
former competitors of the waste giant. Clearly, this is a firm that has
developed winning corporate strategies.

Setting up hundreds of subsidiaries is a key part of Waste Management's
grand strategy for profiting from the nation's waste crisis. Creating
many subsidiaries has several advantages from Waste Management's
viewpoint. For one thing, it reduces the company's tax burden. But more
importantly, each subsidiary has only limited assets, so if they get
sued for harming people or the environment, they quickly become an
empty pocket. The parent company is shielded from liability.

Perhaps most important is Waste Management's pattern of buying leaking
landfills. It is increasingly difficult to site new landfills, so it
makes good business sense to buy existing landfills, many of which are
leaking, and expand them. Here, the small subsidiary serves a crucial
purpose. The subsidiary buys a leaking landfill and then says to the
local people, "If you let us expand this landfill, we'll clean up the
existing pollution and prevent it from harming you. If, on the other
hand, you won't let us expand the landfill, we will have to declare
bankruptcy and then we won't be able to prevent the landfill from
contaminating your town." Waste Management is saying to local people,
in effect, "It's your choice: let us expand the landfill in your town
or you may be harmed." It's an offer many towns can't refuse. At a time
when 1/3 of the nation's landfills are expected to close in the next 5
to 7 years, this strategy has made Waste Management the owner of 117
valuable municipal landfills across the country, plus eight landfills
for "hazardous" chemical wastes. As of May, 1988, WMI was "developing"
an additional 72 landfills, according to Drexel Burnham, Inc., a Wall
Street stock analyst.

The value of Waste Management's landfills is increasing. In spring,
1988, Waste Management formed a strategic partnership with the nation's
second-largest builder of municipal solid waste incinerators,
Wheelabrator Technologies. Waste Management owns 23% of the new
Wheelabrator firm, in return for which WMI will guarantee landfill
space for the toxic ash produced by Wheelabrator's incinerators. Ash
represents 30% of the volume of the solid waste going into an
incinerator and it is more toxic than the original solid waste. The
merger of WMI and Wheelabrator is an attempt to make Wheelabrator the
nation's most successful incinerator company.

People living near WMI landfills can expect their communities to be
selected as sites for Wheelabrator incinerators. At a time when siting
of incinerators has become politically difficult because of citizen
opposition to new ash landfills, the alliance between WMI and
Wheelabraror is intended to blunt citizen opposition and give
Wheelabrator an edge on the competition. It also serves WMI.

"The joint venture with Wheelabrator represents a new, very positive
addition to [Waste Management]. We believe the arrangement puts Waste
Management in the driver's seat, no matter which direction or which
technology the disposal market takes," says Drexel Burnham.

A key element in the success of this strategy will be pending federal
legislation to define incinerator ash as "non-hazardous." If
incinerator ash is defined as "hazardous waste," it will have to be
sent to special landfills; shipping and disposal costs will increase
dramatically, making the incineration of solid waste economically
doubtful. If incinerator ash is defined as "hazardous," Wheelabrator's
ash will not be able to go to Waste Management's landfills and both
firms will lose a tremendous business opportunity.

Luckily for Waste Management and Wheelabrator, a consortium of
Washington based environmental groups is supporting legislation that
would remove the "hazardous" label from incinerator ash, even though
much of the ash proves to be "hazardous" when subjected to chemical
tests by the U.S. Environmental Protection Agency (EPA). The
legislation [see HWN #85] was proposed by Congressman James Florio (D-
NJ), who reportedly has a substantial interest in two incineration
projects in southern New Jersey. Washington-based environmental groups
like Environmental Defense Fund, Sierra Club, and the National Wildlife
Federation are supporting Mr. Florio's legislation. The chairman of
WMI, Mr. Dean Buntrock, sits on the board of directors of National
Wildlife Federation.

Waste Management has been courting the environmental community for some
time now. A representative of Waste Management told us that WMI is now
funding "several" environmental groups. They declined to give many
details but confirmed that a well-known New York City environmental
organization recently received a $10,000 grant from Waste Management.
Groups wishing to apply for funding from WMI can contact Bill Brown,
who was formerly director of Environmental Defense Fund (EDF); Mr.
Brown can be reached at Waste Management's Washington, DC, office;
phone (202) 467-4480.

WMI's corporate strategy includes expansion of its visible recycling
efforts. As we reported earlier [HWN #81], siting experts say the
public is more likely to accept new waste disposal dumps and
incinerators if the projects are presented with a recycling component.

Drexel Burnham says recycling will never amount to much in the United
States. The U.S. produces 220 million tons of municipal solid waste
each year and 90% of it is currently landfilled. Recycling can cut
waste but only by 10 to 20%, says Drexel, and recycling is "uneconomic
and hard to sustain," they say. Nevertheless, running recycling
programs evidently has value to Waste Management. The cover of Waste
Management's 1987 annual report features a glossy photo of several
thousand cans and bottles awaiting pickup at a WMI-run "recycling"
station. Drexel Burnham says Waste Management runs "numerous recycling
programs," without naming any. We learned recently that the grass roots
group, Dumpbusters, in Spencerville, Ohio, followed Waste Management
trucks picking up bottles and cans at a "recycling" center. According
to eye witnesses we interviewed, WMI trucks picked up the recyclables
and hauled them directly to a landfill, where they were dumped like any
other garbage.

According to Drexel Burnham, Waste Management has identified 500 major
metropolitan markets where it could be active in the garbage business.
The firm is already working in 325 of these and intends to push its way
into all 500 by 1991. It also intends to expand aggressively in
nonmetropolitan areas.

Drexel Burnham's evaluation of Waste Management is available free from
the firm at 60 Broad St., NY, NY 10004; phone Leone Young at (212) 361-
7202. WMI's annual report is available free from Bill Brown at (202)
467-4480.

We have published the list of 772 WMI subsidiaries, by state, and
alphabetically by name, so you can tell whether your adversaries are
owned by WMI. The 36 page list is available for $5.

--Peter Montague

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Descriptor terms: wmi; waste hauling industry; strategies; bfi; msw;
taxation; corruption; landfilling; leaks; hazardous waste industry;
siting; drexel burnham; incineration; wheelabrator; ash; citizen
groups; legislation; environmentalists; epa; james florio; edf; sierra
club; nwf; dean buntrock; bill brown; revolving door; recycling; waste
treatment technologies; dumpbusters; oh;