Carrier, UTEC out of step with manufacturing industry, experts say

The decision by two Indiana manufacturers to shift operations to Mexico and eliminate 2,100 local jobs is no doubt a gut punch to a state that is disproportionately reliant on manufacturing.

That said, industry and economic experts stressed Thursday the moves do not reflect any larger trend or suggest more bad news to come.

Carrier, a heating, ventilating and air-conditioning manufacturer based on the west side of Indianapolis, announced Wednesday it is eliminating 1,400 jobs and moving its facility. United Technologies Electronic Controls, a Huntington-based maker of microprocessor controls for HVAC equipment, also announced it was moving its operation and eliminating 700 jobs by 2018.

Both companies are branches of Hartford, Conn.-based United Technologies Corp.

The decision to move the facilities to Mexico is out of sync with what other manufacturers have done, said Michael Hicks, an economic expert at Ball State University. Many have invested in their U.S. operations during the past few years, he said.

A slowdown is projected for manufacturing in 2016, but it’s highly unlikely, Hicks said, that other manufacturers will uproot their factories and leave the country.

"What happened yesterday, in my judgment," Hicks said, "is just a bad coincidence.”

Barry Bosworth, an economic expert at The Brookings Institution, a Washington, D.C.-based think tank, echoed Hicks’ comments. He said the days of companies fleeing for cheaper labor are mostly in the past.

Companies that moved into the U.S. in the past few years to produce goods aren’t likely to exit because they’re more diversified than businesses that fled in the early to mid-2000s, Bosworth said.

Carrier in Indy, UTEC in Huntington to move units to Mexico, costing 2,100 jobs

That’s good news for Indiana, which leads the nation in total manufacturing employment. About 17 percent of the state’s workforce is tied to manufacturing. More than 30 percent of the state’s gross product is manufacturing, again placing Indiana ahead of all other states.

Carrier and UTEC move to Mexico because  labor is cheaper there, and the dollar goes much farther, Hicks said.

Carrier’s workers are categorized into a two-tier wage system. A quarter of the workers make about $14 an hour — about $30,000 a year — and the rest make about $26 an hour, or about $55,000 a year. The higher-wage workers, however, can earn more than $70,000 a year with overtime.

Carrier spokeswoman Michelle Caldwell wrote in a statement that “relocating our operations to a region where we have existing infrastructure will allow us to operate more cost effectively, so that we can continue to produce high-quality HVAC products that are competitively positioned and meet customer needs.”

Caldwell declined to answer how much money the company will save by producing equipment in Monterrey, Mexico.

Chuck Jones, president of United Steelworkers Local 1999, which represents the 1,400 Carrier employees who will lose their jobs, said his union brethren can compete with any manufacturer across the globe, but that comes with paying a fair, living wage.

Carrier employees react to layoff news in raw video

“When you’re talking about $6 an hour, we can’t compete wagewise,” he said.

Carrier declined to say how much it would pay workers in Mexico.

The announcement came as a shock to workers at Carrier, said Robert James, a forklift operator who has spent 18 years at Carrier’s Indianapolis facility, which opened in the early 1950s.

“It’s going to dramatically affect my finances,” said James, 57, who plans to work until he’s 65. “After I come out of the Carrier plant, I will be looking for a job to care for my family.”

James also is vice president of the Indianapolis chapter of the United Steelworkers.

Both the state and Mayor Joe Hogsett are taking action to help the displaced employees. The state is offering its free job training services through its WorkOne program, and the city of Indianapolis is amassing resources from local, state and federal resources to help the workers.

The city and state also are looking at whether Carrier and UTEC violated the terms of economic incentives they’ve received. In total, Carrier and UTEC have received $520,815 from the state. If the state can recoup any of the money that was disbursed to the firms, it will, said Abby Gras, a spokeswoman for the Indiana Economic Development Corp.

The city still is assessing whether Carrier received any incentives.

“The mayor is prepared, when possible, to aggressively claw back tax dollars provided to the company in light of their disappointing decision,” spokeswoman Taylor Schaffer said.

Carrier, in a written statement, said: "We will work with state and local officials to honor the terms of our agreements as we do everywhere."

Call IndyStar reporter Kris Turner at (317) 444-6047. Follow him on Twitter: @krisnturner.