Carrier Corp. is an American company that specializes in making furnaces. It has two plants in Indiana. One is in the capital, Indianapolis, and the other is in Huntington, (near Fort Wayne). Back in November 2016, when Donald Trump had just won the elections, his team mobilized quickly to strike a deal with the company to forestall any layoffs at the plants. It moved with urgency because Trump used Carrier so prominently during the campaign as vivid proof of how free trade deals have harmed the American manufacturing workers. Trump said he would make sure any company shipping jobs outside of the country will face a steep cost. A skeptical Carrier worker told the NYT that even though he didn’t like his treatment of immigrants, but “if Trump will kick Carrier’s ass, then I’ll vote for him.”
On November 29, rumors swirled that the Trump team struck a deal with Carrier. The tentative deal would include a $7-million in tax breaks, to be approved by the Indiana legislature, in return for keeping some 1,000 jobs in the state. A day later, Trump held a press conference pronouncing the deal as a template of how he will handle the economy once in power. It turned out to be a lofty goal. As the IndyStar noted, six months later “to the day,” Carrier announced its two-part plan to close down the Indianapolis plant, and move 338 jobs there to Monterrey, Mexico. Eventually, all of the 630 jobs would be gone by the end of 2017. Most, if not all, came from the manufacturing division.
It is important to understand the nature of making a heater. The competitive edge lies not in any innovation or patented technologies, but rather, labor cost. Deciding which one to buy often depends on which seller provides the cheapest price. To stay ahead is to figure out how to keep the manufacturing cost below the competition. Early on, automation was the driving force of boosting productivity. When that was not enough, move the manufacturing process to another country. There are other pressures too. For a while, Carrier’s parent company, United Technology Corp., were seeing slowdowns in other parts of its portfolio, like Otis in the elevator market, and Sikorsky in the jet engine sector. According to Bloomberg, UTC mollified its investors by selling and consolidating its businesses so it could use some of the money to buy back its stocks after a persistent decline. Soon enough, Carrier became just one more expendable component UTC needed to keep Wall Street happy.
What happened at the corporate level befuddled the worker union representing the plant. How can there be a lay-off when Carrier posted $3-billion operational profit in 2016? What about the huge tax cut bill Trump signed last December? If giant companies like Apple, AT&T and Boeing promised pay raise and bonuses to their employees, why the silence at UTC? Democratic Senator Joe Donnelly told Bloomberg that it is all about squeezing more profits at the expense of the American workers. It’s about choosing between $22 in Indiana or $3-an-hour in Mexico.
During the campaign, Trump often portrayed as the singular savior of the middle-class, or the “forgotten man” as he would like to say. But reversing the tide of globalization has been a best-seller fantasy of every modern populist politician. One of the Carrier workers, who voted for Trump, reflected on his vote with the New Yorker, “Financially, I thought he’s a genius. I said, ‘Well, America’s in debt; maybe he can do something and turn the economy around.’ Obviously, it’s not looking that way. Mr. Trump didn’t do his research and made himself look silly in front of the nation when these layoffs and early retirements began.” If could, he would go back and vote for Bernie Sanders instead.
It is fair to say that Trump exploited the plight of the Carrier’s workers for their votes. When Carrier finally closed the plant in January, the White House stayed predictably silent. Trump is as likely at saving those jobs as Mexico paying for the southern border wall. The former TV showman and his team probably knew it too. They also had bigger problems at hand: the federal budget stalemate could trigger the first government shutdown in five years. In a week, what happened to the Indiana plant would be forgotten when Trump triggered a new national debate on his racist remarks. ♦