President-elect Donald Trump scored a victory Tuesday night when Carrier, an Indiana-based manufacturing company that had announced plans to move 1,400 jobs to Mexico, said it would keep 1,000 jobs in the state.
Trump and his vice president-elect, Indiana Gov. Mike Pence, will travel to the state this week to celebrate the decision, a Trump transition official said. “We are pleased to have reached a deal with President-elect Trump & VP-elect Pence to keep close to 1,000 jobs in Indy,” the company said in a Twitter post.
While Trump is certain to celebrate the announcement as fulfilling his promise to keep jobs in the U.S. and rebuild American manufacturing, many questions remained open about the deal Tuesday night. It was unclear whether 1,000 new jobs were being saved in the U.S. or whether that figure included 400 jobs the company agreed to preserve earlier this year under pressure from Indiana officials.
It’s also not clear how much personal involvement Trump had in the deal, versus Pence or other officials — or whether any incentives were offered to keep the jobs in the state.
CNBC reported the deal includes new inducements from the State of Indiana, the sort of package typically negotiated by a governor and not a president or president-elect. The New York Times reported that Trump was planning to reiterate his campaign plan to lower taxes and reduce regulation on businesses while toning down his threats of tariffs on imported products from companies who move jobs out of the United States.
Chuck Jones, president of the United Steelworkers 1999, which represents Carrier employees, said neither Trump nor Carrier involved the union in the process.
“We’re trying to figure out what the hell is going on,” he said.
About 1,400 Carrier employees work at the Indianapolis plant, which builds furnaces. United Technologies has also planned to shutter a plant in Huntington, Ind. and transfer 700 jobs south of the border. It was also unclear Tuesday whether they still intend to do so.
The planned closures are part of United’s wider strategy to slash costs. Representatives have told state officials that the company will save about $65 million annually by shifting production from Indiana to Mexico.
This is the second time since his election that Trump has claimed credit for a company’s decision not to move production to Mexico.
In the first instance, which involved a Ford plant in Louisville, Ky., the automaker said it had chosen not to move sport-utility vehicle production to a Mexico facility – a move that would not have resulted in any lost American jobs.
Analysts have pointed to several reasons that United Technologies might have been persuaded to keep its Carrier plant in Indianapolis.
One is that while the annual savings of $65 million are substantial in the context of any single facility, United is a massive international conglomerate that reported $56 billion in sales last year. The company’s managers might have decided that maintaining its plant in Indianapolis was worth the additional cost in order to maintain good relations with Trump and possibly win concessions of some kind from him when he takes office next year.
For instance, United Technologies owns Pratt & Whitney, a major supplier of jet engines used in military aircraft. Some observers have been doubtful that Trump could make a credible threat to deny United contracts for the Pentagon’s jets, however, arguing the company is indispensable to military procurement.
Pratt & Whitney manufactures the engine used in the costly — and controversial — F-35 Joint Strike Fighter. While the company has had some problems producing the engine, it is unclear what other supplier could fill their place.
On the stump, Trump also promised to renegotiate the North American Free Trade Agreement, threatening to impose punitive tariffs on goods imported from Mexico. These actions could make it uneconomical for Carrier to shift production to Mexico and bring the completed furnaces back across the border.
It remains unclear whether Trump will deliver on these promises, as he and his allies have been quieter about them since the election.
Economists are likely to view the deal with skepticism.
Every savvy CEO will now threaten to ship jobs to Mexico, and demand a payment to stay. Great economic policy. https://t.co/t2WAJOgh8F
— Justin Wolfers (@JustinWolfers) November 30, 2016
While it is common practice for governors and local officials to offer special treatment to companies that locate facilities in their jurisdictions, many economists say that doing so amounts to government interference in the free market.
These deals, they say, discourage companies from making the most productive and efficient decisions from a business point of view, while draining public coffers through tax breaks and other favors.
Whether Carrier received such perquisites from Trump remained unknown Tuesday, but it was clear that he had made a rare presidential intervention in the nuts and bolts of a specific company’s business.
Philip Rucker contributed to this story.