Behind Trump’s Deal With Carrier
INDIANAPOLIS — By the time the Rust Belt turned red on election night, Carrier had to know the call was coming.
After all, Donald J. Trump had been vowing for months on the campaign trail to call the head of Carrier from the Oval Office and hit the company with huge tariffs if it followed through on its decision to close two Indiana factories and move more than 2,000 jobs to Mexico.
”This is so easy,” he told cheering crowds last spring. “It’s not presidential when the president calls up the head of a damn air-conditioning company, but it’s so much fun for me.”
In the end, it wasn’t that easy. The deal with Carrier that Mr. Trump came here Thursday to claim credit for will save only 1,000 jobs, with Carrier receiving state economic incentives negotiated by Mike Pence, Indiana’s governor and soon to be vice president.
Since the deal was disclosed on Tuesday, critics have pounced on Carrier’s receipt of $700,000 a year in incentives from the state of Indiana — just the kind of corporate giveaways Mr. Trump knocked as he slammed Carrier on the campaign trail last spring. Carrier officials confirmed that the state of Indiana has offered the company a multiyear $7 million incentive package.
“He has signaled to every corporation in America that they can threaten to offshore jobs in exchange for business-friendly tax benefits and incentives,” Senator Bernie Sanders of Vermont wrote in an op-ed on Thursday for The Washington Post.
Mr. Trump, while offering a carrot through the state incentives, also held an implicit stick: the threat of pulling $5 billion to $6 billion in federal contracts from Carrier’s parent, United Technologies. Mr. Trump and his team were well aware that the amount United Technologies stood to lose in those contracts dwarfed the estimated $65 million Carrier sought to save by moving to Monterrey from Indiana.
Thousands of manufacturing jobs continue to disappear in the United States, lost not just because of outsourcing to other countries but also because of the relentless quest to remain competitive by improving efficiency and productivity through automation.
But after Mr. Trump sent a Twitter post on Thanksgiving about negotiating with Carrier, disclosed a deal on Tuesday and took a victory lap on Thursday, Mr. Trump insisted that the agreement was a real accomplishment, not just a combination of political showmanship and tax breaks. And others suggested that Mr. Trump’s appeal could lead to a more fundamental shift in the way Washington approaches dealing with corporate decisions on where to locate jobs.
“Contrary to early reactions from the left and the right, the Carrier deal opens the door to a new approach to U.S. economic growth policy that is sorely needed,” the Information Technology and Innovation Foundation, a research and advocacy group, said in a statement.
“It sets the precedent that growing, attracting, and retaining globally traded, innovation-based industries that are both high-value and pay high wages is central to U.S. economic growth,’” the group added. “But to achieve that, we must go beyond individual deals and focus on creating an overall economic ecosystem that incentivizes these companies to call the United States home.”
Mr. Trump placed his first call to Carrier not long after winning the election. After that call, Mr. Pence worked with Indiana officials, as well as executives at Carrier and United Technologies, to negotiate the details of the agreement to keep 1,000 jobs.
Initially, Mr. Pence was quieter than other Indiana politicians, like Senator Joe Donnelly, a Democrat, let alone Mr. Trump, after Carrier’s initial decision to move a substantial portion of its operations in February.
While the standoff loomed large in the lives of its employees in Indiana, for United Technologies the forgone savings is tiny — equivalent to about 2 cents a share in earnings.
“Every penny counts, but if we step back and I’m looking at earnings of $6.60 per share this year, 2 cents is an easy concession if the president-elect listens to some of the company’s bigger concerns,” said Howard Rubel, a senior equity analyst with Jefferies, an investment banking firm in New York.
When Carrier announced that the two Indiana factories would close, it did offer benefits to employees facing layoffs, including paying for them to go back to school and retrain for other careers. Even with that, however, once the layoffs were to begin in mid-2017, most of the workers would have had a hard time finding jobs that paid anywhere near the $20 to $25 an hour that veteran line workers earn.
Carrier is best known for its air-conditioners, but it also sells a variety of other heating and cooling equipment for homes and businesses, like the gas furnaces and fan coils for electric furnaces made at the Indianapolis factory. The jobs in Indiana Mr. Trump has referred to are in two separate sites: the Carrier plant in Indianapolis, with 1,400 employees, and a United Technologies factory in Huntington, with 700.
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