Carrier Workers See Costs, Not Benefits, of Global Trade

INDIANAPOLIS — The fuzzy video, shot by a worker on the floor of a Carrier factory here in the American heartland last month, captured the raging national debate over trade and the future of the working class in 3 minutes 32 seconds.

“This is strictly a business decision,” a Carrier executive tells employees, describing how their 1,400 jobs making furnaces and heating equipment will be sent to Mexico. Workers there typically earn about $19 a day — less than what many on the assembly line here make in an hour. As boos and curses erupt from the crowd, the executive says, “Please quiet down.”

What came next was nothing of the kind.

Within hours of being posted on Facebook, the video went viral. Three days after Carrier’s Feb. 10 announcement, Donald J. Trump seized on the video in a Republican presidential debate and made Carrier’s move to Mexico a centerpiece of his stump speeches attacking free trade.

Carrier Air Conditioner (part of United Technologies) Moving 1,400 Jobs to Mexico. | Video by Joe Brunner

Jennifer Shanklin-Hawkins is one of those Carrier workers who listened to the announcement on the factory floor. After 14 years on the assembly line, she earns $21.22 an hour, enough to put her oldest son through college while raising two other children with her husband, a truck driver.

And when she saw Mr. Trump talking about Carrier on the news, all she could do was shout “Yessss!” at the TV. “I loved it,” she said. “I was so happy Trump noticed us.”

Related: Carrier Outsources 2100 Jobs Out of USA[p][/p]

In living rooms and barrooms across Indianapolis, conversations with Carrier workers like Ms. Shanklin-Hawkins crystallize what has become an extraordinary moment in the American political and economic debate. As both political parties belatedly recognize the anxiety and deep-seated anger of blue-collar workers nationwide, the more-trade-is-good bipartisan consensus that has long held sway in Washington is being sundered.

What isn’t evident in the video — or in the furious debate it has spawned — is that both the company and its soon-to-be former employees are reacting to the same transformative quarter-century of American economic policy aimed at lowering trade barriers and staying globally competitive.

“We have to look around the corner and see how this market will change in order to invest and stay in business for another 100 years,” said Robert McDonough, a senior executive at Carrier’s parent company, United Technologies. “You can blink and see your market position erode.”

The rub is that the costs and benefits aren’t distributed equally. Global trade has produced big gains for Americans, like more affordable goods — clothes, computers, even air-conditioners — and led to a more advanced economy.

At the same time, a chronic trade deficit and an overvalued dollar have caused factory jobs to dry up, contributing to a deep divide between the political and economic elite and the rest of the nation. Perhaps a clash was inevitable.

Consider the case of Ms. Shanklin-Hawkins. While she says she won’t be voting for Mr. Trump and considers him a racist, she applauds his message on trade. She says she plans to vote for Senator Bernie Sanders of Vermont, who similarly blasts free trade, but from the left. The two populist candidates may be political opposites, but when it comes to the downside of globalization, Mr. Sanders and Mr. Trump are speaking to her with one voice.

In fact, many Carrier workers here say that it was not so much Mr. Trump’s nativist talk on illegal immigrants or his anti-Muslim statements that has fired them up. Instead, it was hearing a leading presidential candidate acknowledging just how much economic ground they’ve lost — and promising to do something about it.

Mr. Trump has repudiated decades of G.O.P. support for free trade, calling for heavy tariffs on Mexican-made goods from the likes of Carrier. This has helped put him within arm’s reach of the Republican nomination.

Opposition to trade deals has also galvanized supporters of Mr. Sanders, helping him unexpectedly win the Michigan Democratic primary this month. At the same time, it has forced his rival Hillary Clinton to distance herself from trade agreements she once supported, like the proposed 12-nation Trans-Pacific Partnership and the North American Free Trade Agreement, the 1994 deal with Mexico that is an important part of President Bill Clinton’s political legacy.

Exit polls after the Michigan primary , for example, showed that a clear majority of both Republican and Democratic voters believe international trade costs the American economy more jobs than it creates.

Nicole Hargrove, a 14-year Carrier worker, said she was an undecided voter and was uncomfortable with Mr. Trump’s attacks on immigrants, particularly Mexicans. “But I’d like to turn him loose on the financial world,” she said. “Maybe if Carrier had to pay more to bring stuff in, they’d think twice about moving jobs out.”

Disappearing Jobs and Stagnant Wages

The number of manufacturing jobs in the United States has fallen by nearly a third since 1990, while the median wage for workers in all sectors has hardly increased over the same period, after adjusting for inflation.

Mark Weddle, 55, started work at Carrier 24 years ago and earns $21 an hour running a machine that makes heat exchangers. “I have two brothers-in-law from Mexico,” he said, explaining why he disagrees with Mr. Trump’s anti-immigrant stance.

But when it comes to Carrier, “we’ve all worked our butts off,” he said. “And now they’re going to throw us under the bus? If Trump will kick Carrier’s ass, then I’ll vote for him.”

That’s pretty much what Mr. Trump has threatened to do. At rally after rally, to rapturous crowds, he vows to impose a 35 percent tax on Carrier products from Mexico. Then, the laugh line: “I want to do this myself, but it is so unpresidential to call up Carrier.”

And Mr. Trump vows not to take Carrier’s calls until it agrees to change course. “As sure as you’re here, they will call me up within 24 hours,” he promises, and say to him, “‘Sir, we’ve decided to stay in the United States.’”

It is powerful talk.

The relentless loss of American manufacturing jobs, however, goes back nearly half a century, driven largely by forces beyond the control of any president. The advances of technology, the diffusion of industrial expertise around the world, the availability of cheap labor and the rise of China as a manufacturing powerhouse would have disrupted the nation’s industrial heartland even without new trade deals.

Nor are tariffs likely to bring many of these jobs back, said David Autor, a professor of economics at M.I.T., who is one of the country’s foremost specialists on the pluses and minuses of free trade. “We don’t have silver bullets,” he said.

“When I learned about the impact of trade agreements, the theory was that workers would be ‘released’ into the labor market and hired back at slightly lower salaries,” Mr. Autor said. “That’s not what happened. And no amount of cheaper air-conditioners will make these workers whole.”

‘Pretty Cool Working There’

On a rainy Thursday afternoon this month, after their 6 a.m.-to-4:30 p.m. shift, a dozen Carrier workers gathered at Sully’s Bar & Grill to talk about the decades they had spent at the low-slung, beige-and-white factory across the street.

The group was diverse: black and white, male and female, old and young. And until the announcement of the eventual shutdown, most of them said they had loved working for Carrier, assembling furnaces and fan coils, hard as the work could be.

The workers in the Indianapolis factory are represented by the United Steelworkers union. As has been the case in the auto industry, the union agreed in 2011 to a two-tier wage system in which new hires were paid less than veteran employees.

“I’m more skilled with my hands than I am with my brain,” said Robin Maynard, half joking. He holds two associate degrees, oversees a team of 15 and has worked at Carrier almost 24 years. “But I like working with my hands.”

Ms. Shanklin-Hawkins emphasized that she, too, enjoyed her work, despite having little flexibility when it came to setting hours. “I missed football games, graduations, you name it,” she said.

Her shifts can run 10 hours a day, six days in a row during summer and fall, when her line is busy, and mandatory overtime can total 20 hours a week. The pay, benefits and pension plan are all good, but it wasn’t just the money that kept her on the assembly line, Ms. Shanklin-Hawkins said.

“It’s pretty cool working there,” she said, describing how she carefully puts together “tubular mixers,” batches of rods that control the air flow in Carrier furnaces. “And when you do it for 60 hours a week, people are like family.”

It is painstaking work: Bend the rods, or force them into place, and the line can come to a halt, prompting a tongue-lashing from a supervisor. Despite that, like many of the 12 million American factory workers, Ms. Shanklin-Hawkins says the nation’s leaders have simply lost respect for people who make things.

“They didn’t even thank us for our work,” she said. “It was wrong.”

Related: Carrier: Anger, Resignation as Massive Pay Gap Prompts Mexico Move[p][/p]

Indianapolis is far better off than many other cities in and around the Rust Belt. For the most part, it has successfully made the transition to an economy powered by services like health care, logistics and banking. The city’s unemployment rate is 4.6 percent, below the national average of 4.9 percent.

But many of the new jobs don’t pay nearly as well as Carrier does. Next to the 49-year-old Carrier plant is an Amazon warehouse that opened in 2011, but with salaries there averaging just over $15 an hour, that’s a lot less than the $20 or more an hour Carrier workers typically earn.

Indiana politicians, who granted Carrier tax breaks and other incentives, are furious at the company and want their money back. They are also angry because Carrier’s parent, United Technologies, is a major military contractor that receives $5.6 billion annually from the federal government.

“That’s financed by the taxpayers they just fired,” said Senator Joe Donnelly, Democrat of Indiana. “They are trying to be the ultimate free rider.”

Carrier has said it will return public money in cases where the company has not kept its commitments to invest. But that’s small change for United Technologies, a company with sales of $56 billion annually, more than Walt Disney, Coca-Cola or Goldman Sachs. And, in any case, it won’t bring the jobs back.

Related: House Votes to Penalize Corporations Like Carrier for Leaving Indiana for Mexico[p][/p]

Carol Bigbee, 59, has worked at Carrier for 13 years. Her 32-year-old daughter has a college degree and the kind of job that many economists say is the future in postindustrial America — she works in a medical lab. The only problem, Ms. Bigbee said, is that her daughter’s hourly pay is one-third less than her own pay at Carrier.

“I think it will be extremely hard to find a job that pays $22 an hour,” Ms. Bigbee said. “You have to be really blessed to find a job that pays that kind of money.” The few manufacturing jobs left require math tests, something she says she worries she could not pass.

The first layoffs won’t begin until 2017, and the final shuttering of the factory isn’t expected to happen until 2019, giving employees time to prepare. In addition, United Technologies has offered to cover the cost of at least four years of additional schooling for Carrier workers. But that’s cold comfort to people who can’t afford not to work or those, like Ms. Bigbee, who are near retirement.

She will be 60 in May, making retraining impractical. “If I were in my 40s, I’d go back to school,” she said.

‘A Really Tough Decision’

As Ms. Bigbee and her co-workers were talking over beers and Tequila Sunrises at Sully’s in Indianapolis, executives from United Technologies were hosting a gathering of their own in New York City — at the Plaza Hotel, a property that was once owned, as it happens, by Donald Trump.

That meeting was part of “investor day,” an annual ritual for many Fortune 500 companies in which management sits down with analysts and shareholders and tells them why their company’s stock is a good buy. Carrier’s message: Moving jobs south of the border is a major part of the company’s strategy to increase profits.

“We’ve shifted an abundant part of our manufacturing footprint to relatively lower cost countries, about two-thirds,” said Mr. McDonough, president of the climate, controls and security division of United Technologies. “Still, there’s some opportunity there.”

Manufacturing products in lower-cost locales isn’t new for Carrier, which has had operations in Monterrey, Mexico, since 1969, decades before Nafta’s passage.

But Akhil Johri, the chief financial officer, noted that recent factory consolidation was among the reasons Carrier’s management is eyeing a list of targets for future cuts. “They are painful” but are necessary “for the long-term, competitive nature of the business and shareholder value creation,” he said. “We feel good about being able to execute on that.”

United Technologies faces pressure from investors hungry for earnings growth in an economy that’s only modestly growing at home, and falling in important overseas markets like China and the Middle East. Although the company’s stock has vastly outperformed benchmarks in the last few decades, the shares have badly trailed the Standard & Poor’s 500-stock index over the most recent five years.

Wall Street is looking for United Technologies to post a 17 percent increase in earnings per share over the next two years, even though sales are expected to rise only 8 percent. Bridging that gap means cutting costs wherever savings can be found, as Mr. McDonough suggested at the meeting with analysts.

Still he rejected the notion that pressure from Wall Street, or corporate greed, or even trade policy, had prompted the factory move to Monterrey. “This was a really tough decision,” he said. “This will have a real impact on folks we care about and this community. We’re an American company, but we compete globally.”

Staying competitive, raising profits and investing are among the reasons 400 white-collar jobs in areas like engineering and marketing will remain in Indiana.

“Our company, with American workers,” he added, “builds a heck of a lot of stuff in the U.S.”

‘A Healthy Environment’

Less than a three-hour drive south of Laredo, Tex., where the mountains meet the desert scrub near Monterrey, lies one industrial park after another. That’s where Carrier and many other American manufacturers have built gleaming factories.

Outside Carrier’s plant on Hermenegildo Galeana Street in the suburb of Santa Catarina, a worker named Antonio Arroyo has nothing but positive things to say about his job, much like his colleagues in Indianapolis until last month. “The atmosphere is relaxed, a healthy environment,” he said. “Even the temporary workers are constantly trained.”

As in the United States, the day shift starts around 6 a.m. and finishes about 4 p.m., with a break for lunch. Temporary workers, who have contracts lasting from three to six months, earn 163 pesos a day, or $9.40. Permanent workers make 330 pesos for a day’s work, or $19.

Hourly salaries in Indianapolis range from $15 to $26 an hour, as they do up the road in Huntington, Ind., where an additional 700 United Technologies jobs will be transferred to Mexico as well.

United Technologies is not hurting like the American automakers or steel giants who lost billions when they were caught short by up-and-coming Japanese and South Korean competitors in the 1970s and 1980s. But the company says it fears it could end up in a similar situation if it doesn’t make sure it is among the most efficient manufacturers in the world.

Over all, United Technologies earned nearly $7.6 billion last year, and $2.9 billion of that came from the climate, controls and security division that includes Carrier. Those profits aren’t under pressure; in fact, margins in the unit have steadily expanded in recent years.

But that’s not good enough, said Howard Rubel, a senior analyst at Jefferies, who notes that United Technologies has vowed to cut at least a half-billion dollars in costs annually for the next few years. “The stock hasn’t done well,” Mr. Rubel pointed out.

United Technologies’ board cut the bonus of its chief executive, Gregory J. Hayes, by nearly half for 2015. Still, with a total compensation package of $5.7 million, he made more last year than Carrier’s factory workers could earn in several lifetimes. But in corporate boardrooms and country clubs, that’s not the point.

“It’s embarrassing,” said Mr. Rubel. “The stock didn’t do well, and he got dinged. And whether it’s the board or personal pride, no one wants that.”

Back in Indiana, smaller bonuses for top executives are the last thing state Representative Karlee Macer wants to hear about these days. Her district includes the Carrier plant, and for all their grit and noise and physical strain, manufacturing jobs aren’t like many other positions available to Americans who lack a college degree, she said. For one thing, they pay more, giving the children of factory workers other options if they so choose.

“My family has all been factory workers, including my grandmother, who came home with burn marks from welding,” she said over breakfast across the street from the Indiana Statehouse. “Is everybody who is not a white-collar worker supposed to earn $12 an hour?”

SOURCE: New York Times