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IEDC: Mexico move to save Carrier's parent firm $65M per year

March 30, 2016

United Technologies Corp.'s decision to ship manufacturing jobs from Indiana to Mexico is expected to save the company $65 million a year, according to state economic development officials.

That’s less than 1 percent of the company’s total annual revenue in the heating and air conditioning section of its business, which is about $18 billion, according to the Indiana Economic Development Corp. That includes UTC's Carrier Corp. plant in Indianapolis.

“They’re going to move and take the hit they’re taking and do what they’re doing to Americans because of $65 million,” IEDC President Jim Schellinger told IBJ on Wednesday. “It doesn’t seem like a logical step. … I was kind of taken aback by those numbers.”

The information was revealed during an IEDC board meeting Tuesday. The group had learned of the company’s savings during a recent meeting with UTC executives and Gov. Mike Pence’s office. It came on the heels of the surprising announcement in February that the company would move its Indiana-based heating, ventilation and air conditioning machinery production to Monterrey, Mexico.

The news meant staggering job losses: Carrier employs 1,400 workers on Indianapolis’ west side, and United Technologies Electronic Controls, another subsidiary of UTC, employs 700 in Huntington.

Asked to confirm the figures, Carrier spokeswoman Michelle Caldwell said she could not share the company’s financial information.

UTC, a Fortune 500 company, had $56 billion in revenue in 2015.

In a meeting with UTC officials, Gov. Mike Pence’s office and IEDC, Schellinger said he tried to appeal to the executives using a story from his own days in business at CSO Architects on Indianapolis’ north side.

“I had a buddy tell me I’m saving a boatload … by sending my technical drafting documents to China,” Schellinger said. “I decided that I’m not doing that. I’ve always believed that as a taxpayer and an employer that I’m being patriotic. I threw that out there. [UTC's] interest is shareholder wealth and protecting the wealth that’s there.”

UTC will retain 400 high-paying jobs in Indiana, including engineering, marketing and research and development jobs.

But executives said that 53 federal regulations affecting the heating and air conditioning business factored into their decision to leave, according to Schellinger.

Schellinger said the company specifically mentioned new energy efficiency rules, but didn’t mention other regulations they were upset about.

Pence said the company’s decision “speaks volumes” about the need for changes in Washington, D.C.

“It’s very frustrating,” Pence said. “I hope it’s a wake-up call to policymakers in D.C.”

Schellinger said the best outcome of Pence’s meeting with the company was the promise that UTC would return all economic development incentives the state had given over the years. Pence also requested that the company return tax abatements given by Indianapolis and Huntington.

“We basically clawed back everything,” Schellinger said.

The company will also pay for a “fairly generous severance package” for its employees, Schellinger said, including higher-education benefits.

“Under that program, employees may receive tuition, books and fees at a UTC-approved educational institution for up to four years to pursue coursework in degree programs of their choice,” Caldwell told IBJ in an email.

Pence said he was proud of UTC workers for continuing to be productive in the midst of the transition.

“Even with this heartbreaking news, productivity continues to be very high at the factories in Indianapolis and Huntington,” Pence said. “That says everything you need to know about Hoosiers. We’re leaning into it.”

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