Carrier, the company that changed its plans to shutter a plant in Indianapolis and shift production to Mexico after talks with President-elect Donald Trump, confirmed Wednesday that it would receive financial assistance from the state of Indiana as part of the deal to keep the plant open.
“Today's announcement is possible because the incoming Trump-Pence administration has emphasized to us its commitment to support the business community and create an improved, more competitive U.S. business climate,” a statement from the company read. “The incentives offered by the state were an important consideration.”
Carrier, a subsidiary of Farmington, Conn.-based industrial conglomerate United Technologies, had planned to eliminate about 1,400 positions. Instead, the company will continue to build furnaces at its Indianapolis plant. Including engineers and headquarters staff, more than 1,000 employees will remain in the city, according to the statement.
Neither Carrier nor the Trump-Pence transition team released details about what financial incentives the company will receive. The Indiana Economic Development Corp., a state agency, will grant Carrier a tax break in exchange for keeping the plant open, said John Mutz, a member of the corporation's board and a former lieutenant governor.
Trump's running mate, Vice President-elect Mike Pence, is the governor of Indiana.
Carrier has built a new plant outside of Monterrey, Mexico. The mayor of Santa Catarina, the suburb where the plant is located, said he expects the factory to open.
“Carrier announced an important investment, to generate 2,000 jobs, and I expect the Carrier plant to continue working in a normal manner, and I hope soon to see some official communication from the company,” Mayor Hector Castillo Olivares told The Washington Post.
The deal does not affect another United Technologies facility in Huntington, Ind., which also is scheduled to close as production shifts to Mexico. That plant has about 700 employees.
Mutz said he had not reviewed the final terms of the agreement and could not provide details about how much money the company would receive or over what period.
“One of the key questions is how long will they be here,” he said.
Mutz said that the economic development agency offered United Technologies a similar deal this year, which the company rejected.
Although Mutz does not know why managers at United Technologies changed their minds, he suggested that the firm may be concerned about maintaining good relations with the new administration because of the company’s business with the federal government. Military contracts for aircraft components account for about 10 percent of the firm’s annual sales, company filings show.
“The dynamics of the situation changed,” Mutz said. “The government is a major customer of United Technologies. They have a bigger incentive to stay in a favorable situation with them.”
Observers have said that those federal contracts probably would be secure regardless of what happened at the Indianapolis plant. United Technologies is a crucial supplier for the Pentagon. In the years to come, however, a positive relationship with the new administration could have benefits for United Technologies that are difficult to predict.
“Goodwill is an asset,” said Jeff Schott, an expert on trade at the Peterson Institute for International Economics. “Companies all the time want to build goodwill with their governments.”
One of Trump's chief goals is to protect American workers in the manufacturing sector from international competition. He has promised to revise trade agreements with foreign countries and threatened punitive tariffs on imports, insisting that U.S. interests should come before the global economy.
In its public statement, Carrier said the deal with Trump did not signal a change in the company's views on free trade.
“This agreement in no way diminishes our belief in the benefits of free trade and that the forces of globalization will continue to require solutions for the long-term competitiveness of the U.S. and of American workers moving forward,” the statement read.
Still, economists in Mexico said the deal was alarming if it augured greater obstacles to Mexico's manufacturing sector during the Trump administration.
“This is worrying, without a doubt,” said Juan Carlos Moreno-Brid, an economist at the National Autonomous University of Mexico. “This suggests a very aggressive policy of the new government.”
He said the arrangement seemed to contradict the spirit of the North American Free Trade Agreement, which was intended to promote commercial integration across the continent.
“Now the rules of the game have changed. This is the first sign, and it's very worrying,” he said.
Although there was confusion as to what the deal would mean for the local economy in the Mexican town where Carrier's new facility stands, Castillo Olivares expressed optimism.
“You can’t forget that we are already a globalized world,” the mayor said. “I have received visitors from countries in Europe and Asia who are interested in investing here: Korea, Great Britain.”
Luigi Zingales, an economist at the University of Chicago, predicted that Trump’s economic policies would be “pro-business” rather than “pro-market,” offering favors to a few established firms but without encouraging competition and dynamism in ways that would improve the economy for everyone.
“Donald Trump has always emphasized the fact that he’s good at deals,” Zingales said. “Doing deals like this is clearly favoring existing business, but is not creating a better market environment.”
Joshua Partlow contributed reporting from Mexico City.