He made the company a punchbag during his anti-globalisation election crusade, and now takes credit for saving jobs. But how did it happen, and who really won? Photograph Evan Vucci/AP
David Smith – The Guardian: Saturday, December 3, 2016: Donald Trump scored an early public relations win this week as he took the credit for persuading a US firm not to outsource jobs to Mexico. But the case – and its implications – are more complex than they first appeared.
How did an air conditioner manufacturer become a big political story?
In February, United Technologies, parent company of Carrier Corporation, a furnace and air conditioner maker, announced the closure of a plant in Indianapolis with the loss of 1,400 jobs, along with a factory in the northeastern Indiana city of Huntington with a further 700 casualties. A video of angry workers being informed about the decision soon went viral.
Carrier told Indiana officials that it would save $65m a year by shifting production to a 645,000-sq foot factory under construction outside Monterrey, Mexico, where wages are much cheaper. Carrier rejected a tax incentive package from the state.
Enter Republican candidate Donald Trump, who sued Carrier over a malfunctioning air-cooling system at the Trump International Hotel in New York in 2007. On Twitter he condemned the company and said such closures would not happen if he was president. Indiana governor Mike Pence blamed federal regulations as a factor, but Democratic senator Joe Donnelly blamed the action on the company seeking to cut labour costs.
Why didn’t the issue go away?
Trump turned Carrier into a punchbag during his election campaign crusade against globalisation, trade deals and outsourcing to Mexico, promising to restore manufacturing and “put America first” in his appeal to blue collar workers in the midwest. Since 2000, Indiana has lost 150,000 manufacturing jobs; 5m disappeared nationally over the same period.
In April, Trump was cheered at an Indianapolis campaign rally when he said he would impose a stiff import tariff on goods made by American manufacturers that moved jobs offshore. He essentially clinched the Republican nomination by winning the Indiana primary election on 3 May.
But Carrier and the United Steelworkers Local 1999 union reached a severance package deal for the Indianapolis plant workers, including reimbursement for education and technical training. Job cuts were scheduled over three years starting in 2017.
What changed?
Trump stunned the world with his 8 November election win. On 24 November, Thanksgiving Day, he tweeted: “I am working hard, even on Thanksgiving, trying to get Carrier A.C. Company to stay in the U.S. (Indiana). MAKING PROGRESS – Will know soon!”
Donald Trump and Mike Pence talk with factory workers during visit to the Carrier factory. Photograph: Evan Vucci/AP
Union leaders admitted they were not optimistic about success. But then, on 29 November, Carrier said it had reached an agreement with Trump, who promised on Twitter: “Great deal for workers!”
Trump personally called Greg Hayes, the CEO of United Technologies, to seal the agreement and this week jokingly asked Hayes: “If I lost, would you have picked up the phone?”
What was that deal and who really won?
Carrier will keep 1,100 jobs at the Indianapolis plant, although that includes 300 positions that never were scheduled to leave the country. But it still plans to send 1,300 jobs to Mexico and shutdown the factory in Huntington, Indiana. Trump’s boasting did not acknowledge that.
For him, however, it was low hanging fruit in PR terms before he even takes office. Washington Post columnist James Hohmann wrote: “The vast majority of Americans will see nothing more than the headline that just says Trump saved 1,000 jobs. For the president-elect, that is mission accomplished.”
Why did Carrier change its plan?
Officially because Indiana agreed to give the company $7m in tax incentives over 10 years, while the company has agreed to invest $16m in the state, where Pence remains governor until 20 January, when he becomes vice-president. Carrier said the deal depends on employment, job retention and capital investment.
The vast majority of Americans will see nothing more than the headline that just says Trump saved 1,000 jobs James Hohmann, Washington Post columnist
But there was also speculation that parent company United Technologies had been threatened with the loss of defense contracts. A Washington Post report suggested not, however, quoting defense analysts as saying Trump could not legally steer contracts or punish the company through the Pentagon’s highly regulated acquisition system.
“The Federal Acquisition Regulations are thousands of pages long and run through an often stifling bureaucracy that determines requirements, puts out requests for proposals from industry, then embarks on a lengthy selection process that can take months, if not years,” the paper wrote.
How has the news gone down?
Trump toured the plant in Indianapolis on Thursday and shook hands with workers on an assembly line. Some yelled, “Thank you Mr Trump!” and “Thanks, Donald,” as he greeted them, Reuters reported.
Trump with a Carrier worker. Trump sued the company in 2007 over a faulty air-cooling system in his New York hotel. Photograph: Mike Segar/Reuters
Pence, also present, exulted: “When Donald Trump was running for president he said that if he was elected president of the United States America would start winning again. Well today, America won and we have Donald Trump to thank. I got a feeling, working beside this extraordinary man, this is just the beginning.”
Trump admitted he didn’t mean it when he first pledged to stop Carrier moving jobs; he claimed that Carrier was initially only a “euphemism” for his wider message. He thought it was too late to change the company’s plans and it wasn’t until a week ago that he took his promise seriously, after watching a report about Carrier on the nightly news.
Trump, who styles himself as a deal maker, claimed his talks with Carrier as a shining example of how he will approach other US companies threatening to shift jobs abroad. “These companies aren’t going to be leaving any more,” he told workers. “They’re not going to be taking people’s hearts out. They’re not going to be announcing, like they did at Carrier, that they’re closing up and they’re moving to Mexico.”
So an unmitigated triumph for Trump?
No. Some accused the president-elect of meddling and social engineering. Although Obama stepped in to rescue car manufacturers after the 2008 financial crisis, that was an entire industry, not a specific plant.
Republican congressman Justin Amash of Michigan tweeted: “Not the president(elect)’s job. We live in a constitutional republic, not an autocracy. Business-specific meddling shouldn’t be normalized.”
It’s terrible if businesses make decisions to please politicians rather than customers and shareholders James Pethokoukis, conservative thinktank fellow
To critics, deals like the one at Carrier are unlikely to stem the job losses caused by automation and cheap foreign competition. They say the agreement is unsustainable on a big scale and could set a worrying precedent for companies looking for tax concessions.
Senator Bernie Sanders, of Vermont, who lost the Democratic nominating race to Hillary Clinton but won in Indiana, wrote scathingly in an op-ed for the Washington Post: “Trump has endangered the jobs of workers who were previously safe in the United States. Why? Because he has signaled to every corporation in America that they can threaten to offshore jobs in exchange for business-friendly tax benefits and incentives.”
James Pethokoukis, the DeWitt Wallace Fellow at the conservative thinktank American Enterprise Institute, wrote in The Week magazine: “This is all terrible for a nation’s economic vitality if businesses make decisions to please politicians rather than customers and shareholders. Yet America’s private sector has just been sent a strong signal that playing ball with Trump might be part of what it now means to run an American company.”
What’s the view in the White House about Trump acting like he’s in charge already?
The Obama administration did not criticise Trump but could not resist trying to pop the balloon. “That’s obviously good news and an announcement that we would welcome,” said press secretary Josh Earnest, adding pointedly: “Mr Trump would have to make 804 more announcements just like that to equal the standard of jobs in the manufacturing sector that were created in this country under President Obama’s watch.
“Just a little rough math would indicate that if President Trump is fortunate enough to serve two terms in office for eight years, he’s probably going to have to average two of these announcements a week, every week of his eight-year presidency in order to meet the same standard. So the bar’s high.”