Trump Threatened Carrier With Loss of Federal Contracts If They Left US
The company did not specify on what the incentives were, but such deals with state and local governments typically include tax breaks the governments believe will be offset by the additions to the workforce brought by the company.
Late Wednesday, a former Indiana official told Politico that the deal was about lucrative federal contracts.
The agreement includes $700,000 in state tax breaks offered by the Indiana Economic Development Corporation, a quasi-public entity that doesn't require legislative approval for its deals.
The state official, John Mutz, a former Indiana lieutenant governor who sits on the agency’s 12-member board, told Politico that he believed that Carrier turned down a previous offer from IEDC before the election. "He said he thinks the choice is driven by concerns from Carrier’s parent company, United Technologies, that it could lose a portion of its roughly $6.7 billion in federal contracts," Politico reported.
“This deal is no different than other deals that we put together at the IEDC to retain jobs, but the fact is that the difference is that United Technologies depends on the federal government for lots of business,” Mutz said.
Carrier said in its statement released Wednesday night it will "continue to manufacture gas furnaces in Indianapolis, in addition to retaining engineering and headquarters staff, preserving more than 1,000 jobs."
Carrier announced earlier this year it would be moving those jobs from its Indiana plant to Mexico where it could pay workers less. Trump slammed the company on the campaign trail, threatening a 35 percent tariff on imported goods.
Critics said that would violate the North American Free Trade Agreement between the United States, Mexico and Canada, but Trump countered NAFTA and other trade deals were up for renegotiation if he won the White House.
When he did win the presidency, Carrier decided to talk.
"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," Carrier said in its statement.
Trump's Vice President-elect Mike Pence is currently Indiana's governor.
"The incentives offered by the state were an important consideration," Carrier said, but added, "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."
Trump will be in Indiana on Thursday to talk more about the deal.
The Carrier plant employs 1,400, but a nearby plant owned by its parent company, United Technologies Electronic Controls, which has 700 employees slated to lose their jobs to Mexico, was not part of this week's announcement, CNN Money reported.
But tax incentives might not have been Trump's only negotiation card, ABC News reported.
Professor Mohan Tatikonda of Indiana University's Kelley School of Business said Trump also could have used his next four or eight years in office badmouthing the company, which would hurt its brand.
"That would mean just massive reduction in brand value and goodwill," he said. "It's hard to quantify, but it isn't small."