Keeping Carrier in U.S. Is Ground for Common Cause for Trump, Sanders - TheStreet

Donald Trump and Bernie Sanders don't agree on a lot of things, but keeping Carrier in the United States is one of them.

Both the president-elect and the Vermont Senator are pressuring Carrier Corporation, the air conditioning and heating systems maker owned by United Technologies , to halt plans to move two of its plants to Mexico from Indiana. Sanders upped the ante over the weekend, calling for Trump to use United Technologies' defense contracts as leverage in negotiations.

"I call on Mr. Trump to make it clear to the CEO of United Technologies that if his firm wants to receive another defense contract from the taxpayers of this country, it must not move these plants to Mexico," Sanders wrote in a statement on Saturday.

He made a similar plea via Twitter:

The Hartford, Connecticut-based company saw $6.8 billion in U.S. federal government contract obligations in 2015, $6.7 billion of which came through the Department of Defense. Sanders quoted the amount in his statement, though he did not note that included in it is helicopter-maker Sikorsky, which United Technologies no longer owns. It sold the company to Lockheed Martin (LMT) - Get Report for $9 billion in late 2015, taking a chunk out of its government contract obligations.

The Pentagon may not be eager to go along with Sanders' proposal to play hardball on defense contracting with companies whose products and services are unique and necessary to national defense. United Technologies owns Pratt & Whitney, which makes fighter jet engines, and has an aerospace systems unit that makes parts for commercial and military aircraft. Many of those are sole-sourced, and some are patent protected. In other words, finding another contractor to replicate what United Technologies is already providing could take years.

Trump has not responded to Sanders' prodding on using defense contracts as leverage, and his camp did not return a request for comment on the matter. Despite his silence on the Vermont Senator's involvement, the Carrier issue is one he has paid attention to for some time.

Carrier became a regular talking point for Trump on the campaign trail after a video posted on YouTube captured Indiana workers being delivered the news of the plant closures, and it has remained part of his agenda ever since.

The president-elect tweeted about the issue on Thanksgiving Day, saying he was "making progress:"

Carrier confirmed that it has had discussions with the incoming administration in a tweet. A spokesman for the company declined to comment further on the matter.

Trump spokesman Jason Miller said on a press call on Tuesday that both Trump and Vice President-elect Mike Pence have been "very hands-on" with the issue but due to certain sensitivities will wait until the parties involved arrange to make announcement. "This is something both the president-elect and vice-president elect are very passionate about," he said.

United Technologies announced a $1.5 billion restructuring plan, including cost reductions in high-cost locations, in December 2015. Carrier representatives have told Indiana state officials it expects to save about $65 million a year by moving production to Mexico.

Ivan Feinseth, director of research at Tigress Financial Partners in New York, said Carrier may not be looking at the bigger picture in its estimate. Energy costs are higher in Mexico, as are shipping costs when it comes to moving bigger, more expensive items. There's also Trump's tough stance on trade to take into consideration.

"The changes in NAFTA could totally negate any savings they may think they have [in moving to Mexico]," he said. Trump has said he will renegotiate or withdraw from the 1990s trade agreement between the U.S., Mexico and Canada.

Sanders and Trump have similar ideas on trade and, at times, similar approaches. Sanders over the weekend announced plans to introduce the Outsourcing Prevention Act, legislation aimed at preventing companies from sending jobs abroad. It includes a 35% tax on profits or what it saves through outsourcing. Trump while campaigning often called on a 35% tax on imported goods from companies that send jobs abroad.

To be sure, Sanders and Trump aren't the first to use such tactics.

Representative Rosa DeLauro from Connecticut and other Congressional Democrats have pushed the No Federal Contracts for Corporate Deserters Act, which prohibits executive agencies from awarding government contracts to companies that take part in corporate inversions. In 2004, then-Democratic presidential candidate John Kerry branded CEOs who outsource "Benedict Arnold CEOs," referring to the American Revolutionary War general who defected to the British Army.

There's no silver bullet for keeping companies from shipping jobs elsewhere, said Ron Hira, research associate at Washington, D.C.-based think tank the Economic Policy Institute and associate professor of public policy at Howard University. Government has to take a broader approach and adjust the economic and business incentives for outsourcing.

"You have to do a lot of different things to tilt the playing field towards keeping work here in the U.S.," he said. "You have to use both carrots and sticks on the policy side to make it profitable."

The company-by-company approach isn't the best one, especially once Trump's in the Oval Office.

"The president doesn't have enough time to deal with each and every individual case," said Hira.