Donald Trump may not like it, but Carrier's Mexico move is one of the many cost-cutting measures helping United Technologies (UTX) improve its bottom line.
The Farmington, Conn.-based company reported first-quarter earnings Wednesday of $1.47 per share beating Wall Street's estimate of $1.39, on sales of $13.36 billion. Results included 5 cents per share in restructuring charges, bringing adjusted earnings to $1.47.
The results were largely lauded as a win for United Technologies and its CEO, Gregory Hayes, who in December announced a $1.5 billion multi-year restructuring plan focused on structural cost reductions in high-cost locations in order to counter slow global growth and headwinds in several key businesses. One of the cost reductions was moving Carrier to Mexico. The move has come with political costs, however.
"Since Greg Hayes took the helm as CEO, he has really gone through the organization and really ferreted out where those opportunities lie, because it would appear for some time that wasn't such a priority, and when Hayes came aboard, he made it a priority," said Morningstar analyst Barbara Noverini.
United Technologies has looked across its various business units to gain efficiencies, streamline management layers and move manufacturing locations around the world. It has shifted operations to lower-cost countries like Poland and Mexico -- the latter of which has caught them quite a bit of heat.
Air-conditioner maker Carrier, which is owned by United Technologies, announced in February that it would be shipping more than 2,000 jobs from two Indiana plants to Mexico. A video posted on YouTube captured some of the workers' reactions as company president Chris Nelson delivered the news.
The move drew ire from local unions and politicians, with Indiana Governor saying he was "profoundly disappointed" by the decision and Indianapolis council member Zach Adamson saying the city should claw back the incentives and benefits Carrier had received to be in the city.
But it was billionaire businessman Trump who brought the issue to the national stage. He frequently rails against Carrier on the campaign trail and uses it as an example of American trade deals gone bad. At a February presidential debate, he said that if he were president, he would be tough in his dealings with the company.
"I'm going to tell them, 'Now I'm going to get consensus from Congress and we're going to tax you,'" Trump said. "'So stay where you are [in Mexico] or build in the United States.' Because we are killing ourselves with trade pacts that are no good for us and no good for our workers."
He also mentioned the video, calling it a "sad situation."
With the Indiana primary approaching on May 3, Trump has continued his Carrier offensive, at a rally in Indianapolis saying he would "tax the hell" out of the company. Competitor Ted Cruz has given his two cents as well, telling the IndyStar it's a bad idea and blaming the current situation on Democrats. "It is responding to the disaster that is the Obama-Clinton economy. It is the federal government that has driven Carrier out of Indiana and is driving jobs away from America all across the country," he said.
Carrier has responded to criticism on multiple occasions, on Tuesday in a statement saying the move "wasn't an easy decision" and emphasizing a three-year transition timetable and an employee scholar program "to provide employees for both time and opportunity for a smooth transition."
Carrier representatives did not respond to request for further comment. United Technologies responded by saying it did not have anything to add beyond a statement already posted on its website.
Despite the regretful sentiments, given Wednesday's earnings results, the Carrier move and those like it are boding well for United Technologies' balance sheet.
"We are off to a solid start in 2016," said Hayes in a statement announcing first-quarter earnings. "UTC delivered strong operational performance in the first quarter with organic sales growth of 2%. We are also making progress on our strategic priorities, particularly our ability to invest in innovation as we continue to focus on structural cost reduction."
"It's always unfortunate when people lose their jobs. It's one of the realities, unfortunately, of running a global operation," said Noverini.