Dean Barber

Offshoring Announcements “Yuge” Gifts to Trump

In Corporate Site Selection and Economic Development on February 16, 2016 at 4:17 pm

It was absolutely gutwrenching to watch – a cell phone video made by of one of the 1,400 workers at a Carrier Air Conditioner plant in Indianapolis on being told this past week that their jobs were being moved to Mexico.

Now I am not sure that there is a good way for a company to do this. I do know that Chris Nelson, the company’s president, came off every bit like a stiff in a suit in delivering the bad news to his employees.

Upon reading a prepared statement, he was met with derision and anger from the gathered plant workers, which I think is totally understandable and even proper.

“I want to be clear, this is strictly a business decision,” Nelson told the workers, and “does not reflect on the facility or any individuals in it.”

I’m sure that made them feel a whole lot better.

Then Nelson urged the workers to calm down and remain committed to manufacturing high quality products, to which to which a voice rang out from the audience, “Hey, f—k you!”

How Would You Feel?

I would urge you to watch this painful video and then think long and hard on how you might have reacted if you had been on the receiving end.

Sadly, I know some business people out there, a minority to be sure, who do not empathize with their workers or any workers for that matter. They may watch this video and think the plant workers had it coming, that it was their fault.

I come across this mindset occasionally, business people who believe that American workers are overpaid (as if they are supposed to accept Mexican or Chinese wage levels) and under motivated.

Nothing I can say will change their minds.

Blue-Collar Appeal

But I can tell you someone who is changing minds, and please understand that this is NOT an endorsement.

The Carrier announcement to move operations to Mexico will only play well in the hands of Donald Trump and his bid for the presidency. Whatever you think of him, Trump has repeatedly pledged to crack down on the offshoring of American jobs, which gives him a blue-collar appeal.

When he first announced his candidacy last year, Trump immediately slammed Ford and Nabisco for moving manufacturing operations from the U.S. to Mexico.

“Ford announced a few weeks ago that Ford is going to build a $2.5 billion car and truck and parts manufacturing plant in Mexico. $2.5 billion, it’s going to be one of the largest in the world. Ford.”

Trump said that if he were president, he would put the screws to Ford.

“I would call up the head of Ford… I would say, ‘Congratulations. That’s the good news. Let me give you the bad news. Every car and every truck and every part manufactured in this plant that comes across the border, we’re going to charge you a 35-percent tax, and that tax is going to be paid simultaneously with the transaction,’ and that’s it…”

A Perfectly-Timed Gift

While Ford has not confirmed it, word leaked out last week that it is indeed planning to build a big, new assembly plant south of the border, while expanding a plant that’s already there.

Together, the projects will more than double Ford’s production capacity in Mexico. Within a few years, Mexico could account for more than 30 percent of Ford’s North American vehicle production, up from 14 percent last year.

Mind you, Ford is not so different from many companies that have made mad dashes to Mexico and other low-wage countries to get larger margins on their products.

Is that wrong? I’ll let you be the judge. Certainly it has had a detrimental effect on communities throughout this country.

After Ford spent months saying that his criticism was off base, don’t you know that announcing a big expansion in Mexico during the heart of the primary season would be a perfectly timed gift to Trump.

Tapping Into the Angst and Anger

Forget for a moment that Trump too often engages in simplistic bravado devoid of specifics, and some of which borders on hate speech. Most of his supporters would probably fully acknowledge that.

And they know that Trump cannot rule like a dictator, but would need Congress to make any major changes to U.S. trade policy.  No president can slap on a 35 percent tariff.

Still, it is clear that he has tapped into an angst and anger of a middle class that has been decimated, part of which is due to bad trade deals, which he rails upon, and which has contributed to the gutting of manufacturing jobs in this country.

It should be noted that U.S. manufacturing, while having taken some big hits, is far from being at death’s door. Total number of workers in U.S. manufacturing is now at about 12.4 million, a seven-year high. So all is far from being lost.

Nevertheless, corporate offshoring, as in the case of Carrier, and corporate tax inversions, as in the recent case of Johnson Controls, continues to happen with great regularity.

Tax Inversions

Earlier this month, Wisconsin-based Johnson Controls and Tyco International, based in Ireland, merged, with the new company to be headquartered Ireland, where the corporate tax rate is 12.5 percent, compared with 39 percent in the U.S.

The U.S. corporate tax rate is among the highest in the world. In a bid to lower their tax bills, more U.S. firms (about 50 in the past 10 years) are making merger deals with foreign companies. In short, moving their legal corporate headquarters out of the U.S. to another country cuts their tax bill.

American companies are sitting on $2.10 trillion in profits earned overseas, according to a 2015 Bloomberg News review of the securities filings of 304 corporations. That is money that could be invested in the U.S. if conditions were only ripe for it.

Trump advocates cutting the U.S. corporate tax rate to 15 percent, thereby eliminating the need for corporate tax inversions to happen. I believe this is a problem that could be solved with bi-partisan support.

I Don’t Care

Trump asserts that the other presidential candidates do not have the courage or ability to “make America great again.” Having taken money from special interests, they would be beholden to the will of special interests once elected.

But by self-funding his campaign, Trump says he is essentially inoculating himself from a donor class and special interests,

Again, more bravado talk from a billionaire, but it still touches a nerve with working people who believe that Trump will stand up for them.

“So under President Trump, here’s what would happen: the head of Ford will call me back, I would say within an hour after I told them the bad news… And he’ll say, ‘Please, please, please.’ He’ll beg for a little while, and I’ll say, ‘No interest.’ Then he’ll call all sorts of political people, and I’ll say, “Sorry, fellas. No interest,” because I don’t need anybody’s money … I don’t need anybody’s money.

“I’m using my own money. I’m not using the lobbyists. I’m not using donors. I don’t care.”

But Wait, There’s More

Also Wednesday, and also in Indiana, United Technologies Electronic Controls announced that it will move its Huntington manufacturing operations to a new plant in Mexico, costing the northeastern Indiana city 700 jobs by 2018.

Carrier Corp. and UTEC are units of Hartford, Conn.-based United Technologies Corp.

Again, I want you to know that I am not an advocate for Trump (or anyone else for that matter) to be our next president. That is your personal decision when the time comes.

What I am saying is that Trump understands that speaking harshly (and sometimes with vulgarities) about bad trade deals and offshoring is a message that will resonate.

I believe there are more than a few plant workers at Carrier who think of this billionaire real estate mogul as an anti-establishment tough guy and “one of us.”

This presidential campaign could be one for the history books, possibly pitting Trump, the nationalist, against Bernie Sanders, the  avowed socialist. As both of these New Yorkers would say, this will be “yuge.”

Ron’s Road Show

Ron Kitchens and his Consultant Connect road show came to Dallas this past week, hooking up economic developers from around the country to Texas-based site selection consultants.

I was one of the chosen consultants to bloviate on matters that I thought economic developers should know or consider.

My message was a bit heretical: Do not consider the consultants the end-all to your business development efforts.

The overwhelming majority of companies, sadly from my point of view, will not use consultants in choosing a location to expand operations, but rather do it themselves. They are wrong in doing that, but that’s another story for another time.

The point I was trying to make to my economic development friends is that they should engage in systematic and continuous business development, targeting companies and decision makers within those companies, and not just rely on developing relationships with consultants.

The consultants are the low-hanging fruit, but there is so much more out there if you only look.

Business development was the subject of last week’s blog, “Why Don’t He Write? What is Wrong With Us?”  Business development, which should be a systematic and continuous outreach effort to develop contacts and mine sources for information, is something that you will never be perfect at it.

But you can get better at it the more you do it. My suggestion: Do it.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. He can be reached at dbarber@barberadvisors.com or at 972-890-3733.

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