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IEDC responds to Donnelly's comments on Carrier

Posted at 5:19 PM, Mar 04, 2016

INDIANAPOLIS -- The head of the Indiana Economic Development Corporation is responding to U.S. Senator Joe Donnelly's comments on RTV6 about Carrier and UTEC blaming federal regulations as the reason for relocating 2,100 jobs to Mexico. 

On Wednesday, Gov. Pence met with Robert McDonough, president and chief executive officer of UTC Climate, Controls & Security.

After the meeting, Pence told the media McDonough told him the decision to relocate had nothing to do with the business climate in Indiana, but that they were frustrated with the "rising red tape" in Washington D.C. 

PREVIOUS | Pence on Carrier meeting: 'I don't want to create any false hope for people'

He also mentioned 260 new federal regulations, 53 of which have a direct impact on the residential heating and cooling systems and equipment industry. 

Wednesday, Sen. Donnelly released the following statement regarding the meeting: 

“I read closely Governor Pence’s comments that Carrier told him that red tape and regulations are why it’s moving these Hoosier jobs to Mexico. Carrier previously told me it will still be subject to the same exact regulations in Mexico if the company intends to continue selling products in the U.S. Because the truth always matters, I’m going to press the Carrier executives on this very point when I meet with them.

“What is also true is that responsibility for the decision to move jobs to Mexico ultimately lies with Carrier’s parent company United Technologies—a very profitable corporation. It’s disappointing to see Governor Pence once again simply blame someone else for something bad that has happened to our state and its citizens. That’s not leadership and Hoosiers deserve better.”

And in an interview with RTV6 on Thursday, Donnelly said the company never cited a single regulation as reason for the move. 

"It’s real clear what this is about. This is about Carrier chasing Mexican wages at $3 an hour, that’s what this is about," he said. 

MORE | Sen. Donnelly: Carrier never cited federal regulations as reason for move | WATCH: Sen. Donnelly discusses Carrier move 

Friday, James Schellinger, head of the IEDC, sent Donnelly a letter because he thought it was "imperative to set the record straight." The letter, exclusively obtained by RTV6, said McDonough stated several times that extensive federal regulations were the leading factor of the decision to relocate the jobs to Mexico. 

The letter also listed several proposals that Gov. Pence and McDonough agreed on. 

Read the entire letter below: 

Dear Senator Donnelly,

It was good talking to you Wednesday night. Pursuant to our conversation, I want to tell you exactly what Robert McDonough, president and chief executive officer of UTC Climate, Controls & Security, told the Governor in our meeting yesterday. I will assure you, I am in no way defending the company’s decision to relocate Hoosier jobs to Mexico, but I think it’s imperative to set the record straight. The main point about regulations affecting UTC’s decision to move was also articulated in a statement issued by the company on Wednesday.

Mr. McDonough began his comments by telling the Governor that federal regulations were the significant driver of the board’s decision to relocate 2,100 jobs to Mexico. Mr. McDonough expressed that Indiana’s business environment played no role in this decision. In fact, he noted that both Carrier Corporation and United Technologies Electronic Controls (UTEC) will continue to have a significant presence in Indiana as they consider Indiana home.

Mr. McDonough noted that the federal government has passed 260 new federal regulations since 2013, and that 53 of those have a direct and significant impact on the manufacturers of residential heating and cooling systems and equipment. With these stringent regulations and the ever-increasing cost of commodities, including copper, aluminum, etc., the company must make changes in the only aspect that they control – manufacturing and labor costs.

As discussed, I did remind Mr. McDonough that they would still be required to meet federal regulations for their equipment coming to the United States, and Mr. McDonough acknowledged this as a fact. As such, he noted that labor costs must be reduced.

Mr. McDonough noted the cost of skilled labor in Mexico is $3 per hour for wages and $3 per hour for benefits, totaling $6 per hour per employee. And while the United Steel Workers (USW) have had meetings with Carrier and UTEC representatives, there is little to no expectation that any offer for wage reductions from the USW would compete with the wages in Mexico as previously noted.

Please forgive me for being redundant but Mr. McDonough stated several times that, in fact, extensive federal regulations were the leading factor of the decision to relocate 2,100 manufacturing jobs to Mexico. The Governor emphatically expressed, on behalf of all Hoosiers, his extreme disappointment with not only their decision but, moreover, the manner in which it was communicated and announced. He noted that his number one hope and expectation was for the company to reverse this decision. Mr. McDonough apologized, but reiterated that the company plans to move forward with relocating its Indianapolis and Huntington manufacturing operations to Mexico.

The Governor told Mr. McDonough that he views this decision as not only disappointing, but unacceptable, most notably to the hardworking Hoosiers, their families and their communities who will be impacted by this loss. He then proceeded to outline the state’s expectations of the company to ensure support for Carrier and UTEC employees and their loved ones and to protect Hoosier taxpayers. Mr. McDonough agreed to each item proposed, which include the following:

1. The state's primary focus has been and will continue to be on the hardworking Hoosiers and their families who will be impacted by UTC Climate, Controls & Security’s decision to relocate Carrier and UTEC manufacturing jobs to Mexico. The state has agreed to assist in any way possible with the final negotiations between Carrier/UTEC and the USW. The company has asked the USW to come back with an offer as a part of their collective bargaining agreements. While there is little to no expectation that they will be able to compete with jobs that pay $3.00 per hour in wages plus $3.00 per hour in benefits, our main message is that the Governor and his administration are 100-percent behind Hoosier workers and will assist in any way possible.

2. Carrier will maintain its corporate headquarters for residential heating and air conditioning in Indianapolis with a concentration on corporate and R&D operations. They expect to increase investment in R&D resulting in additional jobs, but no commitment made at this time.

3. UTEC will maintain its corporate headquarters for residential heating and air conditioning in Huntington with a concentration on corporate and R&D operations. They expect to increase investment in R&D resulting in additional jobs, but no commitment made at this time.

4. Between Indianapolis and Huntington, 400 jobs will be retained in Indiana. These are high-wage, white collar jobs in excess of $100,000 per year.

5. Carrier/UTEC agreed to reimburse the state of Indiana for all active Skills Enhancement Fund (SEF), also referred to as training grants, agreements.

6. The total SEF credits Carrier/UTEC will reimburse to the state of Indiana are $200,000 and $182,500 respectively, for a total of $382,500.

7. Based on the state's request, Carrier/UTEC agreed to reimburse all tax abatements they have received from the cities of Indianapolis and Huntington. The total reimbursement amount is forthcoming.

8. Carrier/UTEC indicated that they would remain in operation at or near their current employee levels for the next three years. During this time, they will likely offer generous severance packages as well as education stipends to all displaced USW employees in Indianapolis and IBEW employees in Huntington. These stipends could include a fully-paid, four-year college education from the college of their choice, a fully-paid associate’s degree from a community college, or a $5,000 stipend to be used to further vocational education.

9. The Indiana Department of Workforce Development and the Indiana Department of Education will be tasked to work with all employees who will be displaced to ensure they understand the significance of and take full advantage of the educational opportunities presented. Carrier/UTEC also agreed to leave the door open for the state to advise additional training offerings for their employees.

Immediately subsequent to the meeting and the press conference, the Governor met with USW leader Chuck Jones and several other members of the USW to personally commit to assisting them in any way possible and pledged the full support from any and all state agencies that may be of assistance to them and their families.

Senator, you know that I hold you in high regard and am continually grateful for all you do in your service to Indiana and to Hoosiers every day. In keeping with this, and in light of recent statements released from your office, I feel obligated to share this detailed information to set the record straight relative to Mr. McDonough’s statement that federal regulations were the significant driver of their decision to relocate manufacturing jobs to Mexico.

Last, contrary to the beliefs of some, the Governor’s leadership dealing with these difficult circumstances, having been notified after the fact, has been outstanding and exemplary. Please do not hesitate to contact me if you have questions, comments, or if I can be of any further assistance. Until then, be well.

“I’ve said all along that this is a case of a very profitable company with extremely well compensated executives chasing cheap wages in Mexico. The letter supports that assertion when Schellinger writes that UTC told the governor that ‘labor costs must be reduced," Sen. Donnelly said in response to the letter. 

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