Everyone has heard the news. Carrier announced February 10th they will be moving their Indianapolis plant to Mexico, cutting roughly 1400 local jobs in the process. Carrier stated they would begin eliminating jobs in 2017 and eventually stop all manufacturing operations in Indianapolis by 2019. As a Carrier dealer in Indianapolis, Vital Heating & Air was as shocked and disappointed as everyone else.
Many people have shown their concern on social media and have began spreading word to boycott Carrier all together. It’s popular belief that boycotting Carrier would help the cause, send Carrier in a downward spiral and show them a lesson. We feel it’s important to make an informed decision, so here’s a few things to think about.
Let’s begin the boycott, hypothetically
Consumers turn their head on Carrier and production slows due to lost revenues. Slowed production means less workforce needed. Carrier begins making further cuts to stay alive. The workers that were guaranteed a job until at least 2017 will be prematurely laid off. Other Carrier facilities in the U.S. will also have to cut positions to stay alive. National distributors that sell Carrier equipment will soon feel the affect. The distributors will also lay off employees due to extensive overhead and low revenue. Many small distributors that only sell Carrier will cease to exist. Who brings in the money for the distributors? The dealers. Dealers will lose sales, many will lay off employees, many will go out of business.
Now let’s think about the investors, which may even be you whether you know it or not. United Technologies Corporation NYSE:UTX has roughly 80% of their stock owned by institutions or mutual funds. That means thousands of 401Ks could be affected if the share price drops. Boycotting Carrier will cost thousands of people their jobs and livelihood.
Here’s how other brands compare
Many will argue that you could boycott Carrier and buy another brand. If you take a look at some of the biggest players in the HVAC industry you’ll soon realize Carrier is not alone in Mexico. In fact, almost every HVAC manufacturer has some kind of operation in Mexico. Chances are the manufacturer of your equipment at home has some kind of business in Mexico, many of which have been there for decades. The map below shows some of the brands that have used Mexico for production.
So now that everyone understands the truth about American labor jobs and manufacturing in Mexico, let’s talk more than labor. Let’s talk about corporate profits and American tax dollars. Below is a graph showing common HVAC manufacturers and their role in Mexico. If you review the graph you’ll see some surprising facts, and it has nothing to do with Mexico. Looking at the first column, you’ll see the company and it’s ownership. Foreign ownership means corporate profits and tax are just that, foreign. When a company is based in America, taxes are collected on practically all income, whether the income was made in the U.S. or outside it. Carrier is a domestic HVAC company with global business. With a foreign based company, the United States only collects tax for the branches that are located within it’s borders. Taxes collected on a foreign based company doesn’t compare to a global company based in the U.S. Besides taxes, there’s a good chance those profit dollars aren’t coming back to the Unites States any time soon.
Understanding Carrier’s Decision
So now that we’ve covered the Who and the Where, lets cover the Why and How. Although Carrier is sending one of its locations to Mexico it’s important to realize Carrier isn’t leaving. Carrier has multiple locations across the United States and employs over 40 thousand people across 170 countries. They are by no means leaving on a jet plane. Not all of the factors have been made clear, but I’m sure this wasn’t an overnight decision. Many believe it’s all based on the cost of labor, but if you look at the big picture there’s a lot more that can affect a manufacturing process. EPA laws and manufacturing standards were more than likely the key factors in the decision. Government regulations on energy standards and pollution can make the equipment more expensive to manufacture, increasing the cost to the end user. I’m sure this was a long decision making process, but in Carrier’s eyes it may have been the only option.
How it May Affect You
If you take anything from this article, let it be this. Do Not let a salesman know your dislike for Carrier. Three months down the road, you’re going to slide that knob over to “Cool” on your thermostat. Several hours later you’ll realize something isn’t working and you’ll call the nearest contractor you can find. A salesman will arrive and you’ll make it absolutely clear you don’t want Carrier equipment. You’ve now just told this salesman you’re more worried about the brand then you are about the cost. You’ve created an opportunity to be overcharged. The quote you get for a new “other brand” system, could potentially be a lot higher now that price isn’t a factor. Let the salesman impress you with their equipment, without using Carrier as a selling tool.
On the Brighter Side
This news has made it’s way across the country. Presidential hopefuls have even given their two cents on the topic. What you won’t see in the news is how Carrier has prepared these 1400 employees for their future. They were generous enough to give the employees 1-3 years notice and Carrier has offered to pay for books, tuition and fees for up to four years through their Employee Scholar Program. With any luck, these workers will be able to find good paying jobs in the HVAC industry. Carrier-paid schooling may provide these workers with a job installing new furnaces, new air conditioners, or furnace and air conditioning repair in Indianapolis.
“Condensing units, heat pumps, air handling units, and furnaces are all components of the final system, which is custom assembled at the jobsite by the contractor. They are not plug and play, like refrigerators or window units. Just as a compressor is part of a condensing unit, a condensing unit is merely a part in a comfort system. The comfort system does not exist prior to the installation. Thus every comfort system in the country is American made.”