The Carrier Deal: The Devil's in the Details
This is my second and final article with political commentary on the 2016 presidential election and subsequent events.
A few days ago, a friend confided to me that she was pleased with the way in which President-elect Donald Trump "bullied the CEO of United Technologies Corporation (Carrier's parent company), into keeping over 1,000 jobs in Indiana and not relocating them to Mexico. Two business titans coming head to head, and Trump won," she said. Because of my background in business, she asked for my opinion.
I'm hardly an expert on the types of business incentives that involved Carrier. But after researching a couple of details about the deal and giving the matter some thought, I came up with the following:
First of all, comparing The Trump Organization to UTC is like comparing a Toyota to a Ferrari. Moreover, it is doubtful that a CEO like Gregory Hayes could be intimidated by Donald Trump, regardless of his winning the election. Pushing the smoke and mirrors aside, in all likelihood it was the other way around.
Carrier was purchased by UTC in the late 70's in a hostile takeover. It is a wholly owned subsidiary. UTC is a global corporation, not privately held, and trades on a US stock exchange; meaning, stockholders want a healthy return on their investment. This American conglomerate enjoys substantial profits, and affords platinum parachutes and millions in salaries/bonuses to their executives. In light of the recent Carrier decision, we can't help but wonder if those with such vested interests are willing to take a few pennies less on every dollar out of the goodness of their hearts in order to keep 800 jobs north of the border. UTC still plans to relocate 1,300 other jobs from Indiana to Mexico, where the pay scale is infinitely lower. Will this move help defray the tens of millions in costs of keeping the 800 at the Carrier furnace plant? Will any of these remaining jobs be moved, after all, in the "not too distant future"? Unquestionably, their accountants have already crunched the numbers utilizing the various scenarios. And UTC execs would recognize in a nanosecond the positive PR bump by keeping jobs in Indy -- if only temporarily.
Here are a few points surrounding the alleged Carrier deal to consider:
The 7 Million Dollar Incentive Package
We understand Indiana's economic development agency has yet to actually approve the deal, which grants $7 million in taxpayer money to Carrier over a period of ten years. It appears Trump and Pence afforded "corporate welfare" to a corporation that doesn't need it. According to Tedd Man of the Wall Street Journal, "In exchange for the tax breaks, Carrier will invest $16 million in its facilities in the state." This is interesting since tax incentives often take the form of investments in technology/manufacturing equipment to automate the assembly process, as long as the organization isn't required to maintain a certain level of their work force. (It would be nice to see the details of this agreement in writing.) Whether we like it or not, advances in automation are the hallmarks of the 21st century in replacing human labor.
Trump's Campaign Promises
Did Trump/Pence guarantee the easement of environmental and other regulations which would boost UTC's bottom line? (In the past, UTC has come under scrutiny concerning the level of toxic emissions released into the atmosphere during production.) What about Trump's pledge of lowering the corporate tax rate as part of his pricey reform plan -- a proposal that will not pass through the Republican-controlled Congress without substantial modifications? In the final analysis, both of these questions are irrelevant. These highly touted, oft repeated campaign promises will either come to full fruition over the next few years, or not. They were scarcely intended, solely, for the benefit of UTC.
The Call for Tariffs
During his campaign, the President-elect promised the electorate that Carrier (UTC) and other exporters of American jobs would be hit with hefty tariffs. Barring an Act of Congress, Mr. Trump is somewhat handcuffed by certain laws already in place involving percentages, timeframes, industries, circumstances, etc. UTC could pass tariff costs down to consumers, and/or be "forced" to send even more jobs south of the border or to other LCC's (lower cost countries). Imposing tariffs on countries such as China, Mexico and the shredding NAFTA, would induce a trade war. Further, it would damage the net inflow of billions of dollars of foreign investments into the US.
This brings us to one of UTC's biggest customers: The Pentagon. Were billions of dollars in future defense contracts (either directly or implied), threatened or sweetened as part of the deal offered by someone who has yet to set foot in the Oval Office? Here is where the troubling, intrusive reality of the so-called "deal" truly comes into play. That is one powerful ace-in-the-hole for UTC to use should this be the case. And they can play it whenever they wish. Mr. Trump assures us the subject of military contracts never came up during his discussion with Hayes. In light of the facts and some of Trump's wildly disingenuous assertions in the past, I have my doubts.
All politicians lie; some, far more stridently than others. Vice President-elect Pence recently attended the Broadway theater production of "Hamilton" with his daughter and her cousins. Upon hearing some boos and cheers directed at him, he remarked to the kids, "That's what freedom sounds like." I could have hugged the man for his Lincolnesque comment. But freedom also demands facts. Unless we want the truth, demand it, and take the time to run it through the tires, we run the risk of losing sight of it altogether...and our freedom in the bargain.
Source Quotation
Mann, T. (2016, December 2). Carrier Will Receive $7 Million in Tax Breaks to Keep Jobs in Indiana. The Wall Street Journal
Questions & Answers
Comments
It is not what you say, but how you say it. trump took a fact that Carrier was going to do what they intended do and took the credit.
Everyone should do the research just as you did, then they would know the truth.
You did a fantastic job on this hub.
Blessings and hugs
Thank you! All we can do is wait and see happens next.
Eye opening and well-presented conversation, Genna.
I don't know much about American politics, but I do know that I was angry about those guys on stage harassing him. funnily enough I was on stage that week myself so could see it from that point of view. the idea of going to the front of the stage and having a go at someone was appalling! Entertainment and politics should not mix. interesting stuff though, nell
A recent study by McKinsey & Co. said that 45% of the tasks that U.S. workers are currently paid to perform can be automated by existing technology. That represents about $2 trillion in annual wages.
OK Alternative! I will be watching!!!
Not a MIRACLE diane, OUR Founders Created the "ELECTORAL College" as a built in "SAFEGUARD" to protect us AGAINST Deranged, Unfit Candidates like Trump & those Electors are already Beginning to REJECT him as the REALITY of his Unstable, Unpredictable UNLAWFUL, Un-Constitutional & CHAOTIC Presidency Laced with WAR looms closer to REALITY ~
In stark contrast, Hillary is a RATIONAL Sane Individual who would avoid WAR with CHINA & Iran, Understands the Presidency, would NOT Violate the CONSTITUTION from day one as Trump would, and unlike Trump, she's HIGHLY Qualified to do this ENORMOUS Job ~ She'd STUDY Daily Briefings as well, unlike Trump who wallows in PERVERTED Pleasure" by TWEETING Insults & ATTACKING American Workers ~ NOT Good, he's already a DISASTER ~
Let's see what happens on December 19, 2016 ~ If the Electoral COLLEGE Safeguard" works as INTENDED, Trump will swiftly be REJECTED by Electors in about 10 days ~
Alternative, you are hoping for a miracle of Godly proportions! If it happens, I'd like for the other choice to not be HRC. We will have to learn to deal with whomever it is!
Well diane, if Trump does become President, a prospect which is looking "DIMMER" for him by the hour as the "Electoral COLLEGE" Votes on December 19, 2016, and many are REJECTING him which is EXACTLY what the U.S. Constitutions REQUIREs that they do, the ONLY Legal Remedy is for Trump to "DIVEST", which means SELL ALL Assets including RE Holdings, then deposit the proceeds into a Real "BLIND Trust" ~
But let's see who the "Electoral COLLEGE" Votes for in about 10 days ~ If they VOTE 4 Hillary there will be no Legal or CONSTITUTIONAL Conflicts ~ If GOD Forbid they VOTE Trump, In CONFLICT of what the Constitution Requires, we will have LEGAL / Constitutional CRISIS Beginning Inauguration Day ~ The ELECTORAL COLLEGE was Specifically Created to "STOP" a Psychologically Deranged Immensly UNFIT & Unqualified individual like Trump from entering OUR White House ~ Let's see if the "SAFEGUARD" our Founders Established to PROTECT "WE the PEOPLE" is implemented ~
I heard a suggestion this morning that Trump "lead by example." He should pull ALL of his businesses back into the US. So should Ivanka.
It looks like the government is getting into the taxing of free enterprise. It looks like Ryan and Trump are at odds on the 35% excise tax.
A guy from Indiana was on CNN. He's ticked becaue the Carrier deal was not all it was purported to be. It seems Trump gets everyone to agree to let him take credit for his contribution without telling what people are giving up. He is also known to appropriation others' accomplishments to himself.
Hello Genna. Here is another cup of coffee. I popped the cap on a 12 year old scotch and added a splash.
It's not the "Status Quo" right now Genna, but if GOD Forbid Trump is Elected President on December 19, 2016 it will be if the Corporate Tax Rate is SLASHED from 35% DOWN to 15% which is Paul Ryan's SCHEME ~
Guess who gets to "PICK Up" that MASSIVE Tab ?? Yup, U guessed it, "WE the PEOPLE" ~ BTW, the number JOBs Saved if indeed they do stay here has already been REDUCED to about 700 from 1,100 ~
Hello again Genna. It looks like Japan will be a major player in the near future. What's your take on that? I sure wish our little café in Emerald Wells was open, we could sit and talk over the prospect of the election count changing the outcome....Smiling..
Good morning Genna. Happy Wednesday. Just stopped by to bring you a cup of coffee. You are going to need it, as you contemplate answers to all the issues that face America.
Well Genna, I only have a few questions ~ How Many BILLIONs does United Technologies want before it finally "CONVERTs" from a GREED Driven Enterprise to a Patriotic Company that cares about American Workers ?? ~ When does "SHIFTING OUR Wealth" to WALL Street END ?? It already "OWNs & Controls" nearly ALL of OUR Assets ~ When does the "CORPORATE Extortion" END ??
The Corporate Mantra ~ "GIVE US MORE MILLIONS / BILLIONs of Tax-Payer Money or we'll PUNISH U by Ex-Patriating JOBS & Assets ~ In REALITY, Many Corporations Act more like HOSTILE Foreign Enemies of the United States than Patriotic Entities ~
EVERYONE should go checkout United Technologies most recent Balance SHEETs & Accounting DOCs & then comment on whether or not they deserve MORE of OUR Taxpayer Dollars ~ I think you'll swiflty DISCOVER they should be PAYING the United States MILLIONs for the Distinct Priviledge & Unique Opportunity to RAKE In Millions / BILLIONs while their employees barely survive ~
Genna, I definitely agree with you regarding the 35% tariff on products sold to the US. The consumers would end up flipping the bill. Trump's tax incentives really need to be more balanced, over-all, if he is going to successfully level the playing field for everyone. Furthermore, I like the idea of a good severance package, at least for the older workers who have been with Carrier most of their lives. (I have not checked into that particular issue yet.) Anyway, we will all wait and see what happens next.
And Diane, I hear what you are saying!
Merry Christmas to you too!
HLN News - Amazon is working on a new checkout system for grocery stores. Pick up your groceries and walk out. No lines. News flash: Checkers will not be necessary. Predicted loss in income of over 3 milliono dollars.
There are already driverless cars. What will that do for transportation jobs?
Savvy, I'm sorry I was not trying to be pessimistic. I was speaking to the reality of the nature of job needed for the current climate. Those who lost jobs feel they knew their jobs well and they did. The requirements these days are for people to be open to doing different things in a variety of ways. A good friend of mine lost a job running a mainframe for Sara Lee. She described the process. I told her that they obviously don't want batch processing anymore. We went from computer systems that covered large, ice cold rooms to desktops to conducting business from cellphones. I'm 66 but I want to learn something new every day. I'm dangerous since I've learned to tweet. Smiling over here Savvy!
Hi Genna ~ No, U didn't UPSET me at all ~ I enjoyed reading your well structured article & simply decided to comment ~ NO Doubt, I do get MOTIVATED when I Write or TALK ~
And I'll take this opportunity to enhance my previous thought if I could ~ My main point is how ill-conceived & juvenile Trump approached Carrier, which as U know is a Subsidiary of American TITAN United Technologies ~ This is EXACTLY what Bernie Sanders, & Jill Stein among others have WARNED us about, a MASSIVE Shift or "TRANSFER" of OUR WEALTH from the Middle Class, Workers, Poverty Stricken, Income Challenged, Students & our Precious Senior Citizens, into the hands of GREED Driven WALL Street Corporations that are already Filthy RICH ~ It's UNNACCEPTABLE ~
Giving Special Tax BREAKs & other Monetary Incentives to this kind of company that already RAKEs in BILLIONs is an Obscene Abuse of their POWER, while the same Republicans like Mike Pence & Medicare "BUTCHER" Paul Ryan OBSTRUCT Minimum Wage Increases & will soon begin to PESTER Trump if GOD Forbid he makes it into our WHITE House, for him to start DISMANTLING Medicare & Social Security & of course STRIP Millions of their essential health care ~ UNACCEPTABLE ~
P.S. ~ To the Commentor that mentioned President Obama "SAVING the Auto-INDUSTRY ~ YES, he and fellow DEMOCRATs did fight hard to "SAVE Auto WORKERs" because most were on the verge of "BANKRUPTCY" & OUT of Business which would have "Negatively IMPACTED" MILIONs of American Jobs ~ This DIRE Situation was the END Result of George W BUSHS" Failed "TRICKLE Down" Economic Policies which we are about to get SLAPPED with once again ~ No Comparison to United Technologies which is a THRIVING Profitable American Company that decided to EXPORT Jobs for the sole purpose of GREED ~ They don't need TAX Breaks or Incentives, they need to somehow someway become "PROUD Patriotic Americans" instead of ANTI-American "WEALTH Hoarders" ~
It was a propaganda victory and nothing else. 3 out of 4 jobs at carrier will still be in Mexico, The 7 million dollars could be way more then that in 10 years. Is it out of the tax payers pocket, or paying no taxes at all? No one knows the details. Never even asked are the details on those who work there. Is it minimum wage? Is it full time? Even if they saved their jobs it could be most of them are looking for a better job somewhere else and could careless if carrier went to Mexico. Keeping jobs here is only a band aid. This is no victory for anyone but exercise for those who enjoy clapping.
This man is so corrupt and such a puffed up buffoon. Carrier is one company. You've highlighted well how the deal wasn't artful or advantageous for America at all. Now what will he do about Ford, then the next company? He's already way over his head.
You're a good man, Mike. Thank you treating me like a human being. I appreciate it.
Savvy, I stand corrected. You did not say there was outrage in the article. We are all watching to see how, 'America is moved in a different direction.'
Mike, just to clarify, I did not say the article expressed outrage. I stayed that the article is good. I was actually referring to some of the comments. I should have said, some comments here express cynicism and some outrage. Alternative Prime, for example. Diane, by now you know that I have had my own reservations about Trump. I will be watching too, but I do not share your pessimism. I prefer to see what happens in the future. Finally, my wishes for you to have a Merry Christmas celebration were and are sincere.
mckbirdbks, Thank you! savvy, DT wants to run America like he runs his business. I know that becaue he tells us all the time. He's rich. He knows how to make deals. He is the only one that can save America. He (without any congressional approval) is going to levy 35% tariffs on good coming back into the US. He is going to take us back to the stone ages of assembly line work to say he got jobs for people. Technology is the current (not even new) frontier and that's where the labor force should be focused and trained.
I didn't really see any outrage in this presentation. Some facts, yes, that I had not heard elsewhere. (Makes me question my source of news. As we all should.)
President Obama did think it wise to save the auto industry.
You don't know that, Diane and Genna. Deals are made all the time. Have you forgotten about the Wall Steet, GM and main stream media bailouts? Where was your outrage then?
Carrier could still make greater profits if they moved to Mexico. $754 per worker in Indiana is not particularly lucrative. Clinton would have sent even more companies abroad, which means less work for Americans.
Seriously, you guys should get a heart and have some goodwill for Christmas. Okay, I'm done. I am the odd man out, but I'm good with that. It builds character. Merry Christmas, ladies!
always exploring, It may be worth keeping Carrier as a loser as long as they get lucrative Pentagon contracts.
Genna, I'm so glad you researched this ' deal. ' Since I live on the In. and Il. line, I've watched this faithfully. And its on the nightly news. The talking heads are saying that Carrier per se, is peanuts compared to the federal contracts awarded to UTC, plus other companies in In. are going to use the same tactic to line their pockets if not given the same ' deal ' I fear it will explode in every state. The only way you can make the greedy happy is to pile on more incentives. Our only salvation is for the recounting process to show more votes were cast for Hillary, thus the Electoral College would declare her winner. I seriously doubt that will happen. Thank you for this most informative hub. Hugs...
dianetrotter ~ "Delusional Donald" is not president yet ~ He has several LEGAL Obstacles which could conceivably BLOCK him from entering our White House ~ His "CONFLICTs" are Innumerable, his Corruption is Unprecedented, his ANTI-American behavior Illegal & his Ineptitude is ASTOUNDINGLY Disturbing ~
Considering the "Electoral COLLEGE" was designed explicitly to PREVENT a Deranged, Psychologically Disturbed Meglomaniac like Trump from getting the keys to OUR Oval Office, it might be considered "Gross Negligence" for the "EC" to actually vote for him so don't be surprised if he's REJECTED on December 19, 2016 ~ Let's see what happens with this & Jill Stein's Patriotic RECOUNTs which could conceivably UNCOVER even more Trump Atrocities ~
This "Special Person" hasn't even begun his tenure and he's already REFUSED Essential TASKs such as READING Daily Briefings, he continues "Juvenile WHINING & Crying" via Twitter, & believe it or not, CHINA has Filed a FORMAL Complaint against Trump for his Indefensible "Mal-Feasance & Negligence" by accepting a call from Taiwan where he has Personal Business DEALINGs ~ UNACCEPTIBLE to AMERICANs ~
We here in the WESTERN Region of the U.S. will always make it perfectly understandable that we REJECT this CON-Man & his Radical ANTI-American Agenda, and if CHINA is Proded by this ANGRY Old Man into a RESPONSE against the USA, we'd like to think they would bypass the Western Region which Denounces him ~
Good article. I doubt that Trump will strong arm every company who practices free trade. It really isn't feasible. More importantly, he will lower tax rates for small businesses and make an effort to incentivize companies to stay in the United States through reasonable means. At least, I hope so.
I personally believe the Carrier deal was about keeping an election promise. That promise means a great deal to those workers who can breathe easy, and enjoy a Happy Christmas. Furthermore, the reason this was accomplished was because Pence is the governor of Indiana. In any event, Carrier will still move oversees whenever they choose, but not in Indiana, unless they want to lose the incentives.
All of that being said, Trump is a business man. He does know what creates incentives for businesses and what does not. I cannot imagine that he does not also understand free trade since he has utilized foreign companies in his own businesses. If he makes life too difficult for large business, they will sue. Our legal system provides more checks and balances than does our government sometimes.
Anyway, my point is, let's wait and see about Predident Elect Trump. That is not to say we should not remain vigilant. And we should not forget that Obama offered zero reasons for companies to remain in the United States. A concerted effort on the part of a new president would help all American workers, but I do pray these " deals" will be done properly.
Outstanding and insightful!
Cyndi10, if everyone had researched a year ago, Trump would not be president! Oh well!
Here's all I know about this deal, and you summed it up perfectly when you said "all politicians lie: Trump will make this look like he spearheaded it and he's the great savior. I suspect what we have heard is only about 10% truth and 90% bull, and I'm not siding against Trump. I would have said the same thing about Clinton.
Thank you for the research into this. Everyone should do at least some research and fact checking before lauding something or someone as good or bad. Thoughtfully well written. Take care.
Thanks for your insight.
Hello Genna - You note 'the accountants' would have penciled this all out. It occurred to me that 'the people' do not have an accountant at the table during these types of deals. We are supposed to, but only business is represented now. I suspect we are in for many bad deals to come.
For many reasons thanks for publishing this commentary. As the media is in the cross hairs of the new administration.
(I sense at least one of your commenters is angry.)
It's simply AMAZING what can be accomplished when the most "CROOKED, Corrupt & Ingnorant" Perspective President of the U.S. throws "Buckets of OUR Tax Money" in the face of a Greedy Corporate CEO who is already "WALLOWING in Billions" ~ What happened to Trump's "BIG Winning DEALz 4 America" because this is a Gigantic LOSER & "WE the PEOPLE" get stuck with his Monsterous TAX Bill of MILLIONs as the consequence ~
United Technologies is a MULTI-Billion Corporation with BILLIONs in Sales, BILLIONs in Revenues & BILLIONs in NET Profit, they should be PAYING the United States for the Priviledge of using this country to become filthy rich not the other way around, the last thing on this endangered planet they need is MORE MONEY ~ But unfortunately if GOD Forbid Trump does become OUR President, & he is able to actually keep his PROMISES of Corporate Enrichment, what a Terrible & Perhaps Unlawful Precedent he's setting ~
BRIBERY, Extortion, REWARDING GREED, call it what U will but this is Appalling but expected from an incompetent failed negotiator ~
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