Why Trump's Mexican standoff won't work
Donald Trump's vow to stop jobs from heading across the Mexican border might sound good, but it's not the grand plan to save jobs that some hope.
The number of companies shifting production from the U.S. to Mexico is far from the epidemic implied by the president-elect. Just six U.S. companies out of a universe of thousands trading on a major exchange, including United Technologies (UTX), medical technology firm Becton, Dickinson (BDX) and motion control parts maker Rexnord (RXN) have indicated over the past 12 months plans to shift production from the U.S. to Mexico, according to a USA TODAY analysis of S&P Global Market Intelligence, which compiles a database of discontinued operations. Trump has already targeted two of these firms: United Technologies' Carrier unit and Rexnord. No companies have announced plans to move plants to China during that same period, according to the S&P Global database.
It's not a complete list, to be sure, as many companies don't go out of their way to broadcast plans to relocate south of the border. But a review of company conference call transcripts, earnings reports and news reports show the trend to move jobs to Mexico isn't growing, but one that happened years ago largely in the automotive sector. U.S. consumers and businesses are now reaping the benefits of these past moves.
At the same time, skilled workers with the ability to work in highly automated plants are retained or even see expanded opportunity in the U.S.
The data supports as much. About 65,000 U.S. factory jobs were offshored to all foreign countries in 2014 and 2015, each. Those lost jobs were offset by a roughly equal number created in the U.S as American manufacturers moved production back home or foreign firms built plants here to tap the U.S. market, says Harry Moser, head of the Reshoring Initiative. The group serves as a consultant for companies looking to “reshore,” or bring factories back to the U.S.
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Some companies that are moving jobs to Mexico are boosting jobs requiring more skill in the U.S. Take Merit Medical. Bernard Birkett, chief financial officer at the company said in September it is "focusing on moving high-volume, labor-intensive products to our Mexico facility where we can benefit from lower cost environment." But here's the important offset: "Then in turn, filling that capacity that's been created in our U.S. facilities, with products coming through from (research and development) and also through acquiring new products."
Trump, though, continues to pressure the few U.S. companies considering a move with threats of tariffs and other vows of protectionism, perhaps threatening higher paid jobs. "Companies are not going to leave the United States anymore without consequences. It's not gonna happen," Trump announced as he celebrated the decision of United Technologies, a large government contractor, to partially halt plans to move production of its Carrier air conditioning and refrigeration unit to Mexico, where labor costs are lower.
NO SIGN OF AN EXODUS
Just how many companies are actually moving production south is a challenging question to answer. The Alliance for American Manufacturing says there have been 1,600 incidents of parties making Trade Adjustment Assistance claims to the Department of Labor since 2015. These are claims where workers are shown to suffer financial hardship due to production being outsourced overseas or competition from imports. But these aren't just companies making claims, but also individuals, unions or state agencies so there could be overlap. The Alliance says it doesn't have a list of companies that have moved. There isn't a central repository for companies to file their plans to move production to Mexico. Relocation plans aren't recorded in financial statements, either, making generating a list difficult.
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But evidence is scant there's an exodus. Just seven companies in the broad Standard & Poor's 1500 discussed plans to move to Mexico in conference calls and investment conferences, according to S&P Global data, including Merit Medical (MMSI) and Standard Motor (SMP). There have been additional moves by companies such as Ford (F), which plans to move some of its small car production to Mexico and casket maker Hillenbrand (HI), which plans to close a U.S. plant that makes wooden caskets and move production to an existing plant south of the border.
Oreo cookie maker Mondelez (MDLZ) cut 600 positions from its Chicago bakery after a July 2015 investment in more automated production lines in Mexico. Much of the job loss was due to technology, says Laurie Guzzinati, spokeswoman at Mondelez. Even if the investments were made in Chicago, 300 positions would have still been lost, she said. She says the company still makes Oreo cookies in three other U.S. plants and has invested $450 million in other U.S. plants since 2012.
FOR GRAPHIC:
MEXICO OR BUST
The number of publicly traded U.S. companies that have talked about plans the past 12 months to move U.S. operations to Mexico is a relatively small.
Company, symbol, corporate headquarters, Development
Becton Dickinson, BDX, Franklin Lakes, N.J., Closing Creedmoor, N.C. plant and moving some production to two plants in Mexico as well as other plants in the U.S.
LMI Aerospace, LMIA, St. Charles, Missouri, Plans to close Wichita operations, affecting 36 jobs, and moving work to Mexico.
Manitowoc Foodservice, MFS, New Pork Richey, Fla., Plans to closeSellerburg, Ind. facility, affecting 84 employees and shifting work to Mexico.
Commercial Vehicle, CVGI, New Albany, Oh., Closing Monona, Iowa wire harness plant and moving 146 jobs to Mexico.
United Technologies (Carrier), UTX,Framington, Conn., Plans to relocate Carrier heating and ventilating parts plants to Mexico were halted after intervention by President-elect Trump.
Rexnord, RXN, Milwaukee, Wisc., Announced plans to move production from plant employing 290 United Steelworkers members to Monterrey, Mexico.
Standard Motor, SMP, Long Island City, N.Y., Announced plans in early 2016 to move production in Grapevine, Texas to Reynosa, Mexico.
Merit Medical, MMSI, South Jordan, Utah, Company has set goals to move high-volume, labor-intensive products to Mexico facility and mentioned it in October quarterly conference call.
Regal Beloit, RBC, Beloit, Wisc., No immediate plans for a move, but company's CFO said at a late November industry conference the company has successfully been moving production to other parts of the world for 20 years. 40% of production is in Mexico.
MKS Instruments, MKSI, Andover, Mass. Company CFO says the company is looking to move more production to plants in Mexico and China at an Oct. 27 conference call.
Lennox, LII, Richardson, Texas, Company CEO says the company is still looking to move additional production to Mexico in an Oct. 17 conference call.
Kaman, KAMN, Bloomfield, Conn., The company is committed to a plan to move some production to Mexico despite some early snags, the company's CEO said in a July earnings call.
Esterline Technologies, ESL, Bellevue, Wash., CEO said in May earnings call the company's move of production to Tijuana, Mexico was progressing well.
Ford, F, Dearborn, Mich., Plans to move production of its small Focus car toMexico, while adding new product lines to its Michigan plant
Hillenbrand, HI, Batesville, Ind., Company plans to close a U.S. facility that makes wooden caskets, shifting production demand on a plant in Mexico.
Mondelez, MDLZ, Deerfield, Ill., Technological upgrades were made to a plant in Mexico instead of in Chicago. 600 positions were lost in Chicago, although 300 positions would have been lost there even if Chicago was chosen since the lines are more automated, a company spokeswoman says.
Sources: S&P Global Market Intelligence database of discontinued operations events, mentions on meetings with analysts and anecdotal examples over the past 12 months