By: Brian Schutt
On Wednesday, Carrier Corporation and its parent company United Technologies announced the move of an estimated 2,100 jobs out of Indiana. Reactions have been mixed and details have been limited. Personally, it’s been a complex piece of news to digest.
Thoughts from a Carrier Dealer
I am in heating and cooling in Indianapolis. I am a Carrier brand dealer.
I also believe in the freedom of businesses to act in their best interest, and I understand how high labor costs can eat up profitability.
I’m no reflexive proponent of organized labor. Nor am I an anti-corporate populist.
Nevertheless, while legally and morally there may be no issue with what Carrier did, it’s still wrong. For both Carrier and the City of Indianapolis, it’s a bad move.
My first thought upon hearing the news was of H. Ross Perot—who famously predicted a “giant sucking sound” of jobs going south upon the passing of NAFTA.
In a macro sense, Perot was hyperbolic. With regards to Carrier, he was spot on. High labor costs in a very competitive HVAC manufacturing market finally weighed heavily enough, and some senior VP or CFO at Carrier finally pushed the move that’s probably been in discussion for two decades.
Tone Deaf to a Changing Market
What may be celebrated on Wall Street as a shrewd move—and may boost some short-term quarterly returns—is tone deaf to a changing buyer mentality.
You see it in the beer industry, as Anheuser-Busch InBev continues to lose market share in the United States. Budweiser isn’t an anomaly. It’s the canary in the mine that all businesses in established markets would be wise to turn their ears to listen.
Mass production in itself isn’t viewed as bad. However, if quality is poor and corporate engagement in community is worse, consumer loyalty is limited. I see it every day being on the ground meeting with homeowners and businesses. These buyers just don’t care about the Carrier brand. They’re not making their buying decision based on who’s making their HVAC system. They care about us…the local companies doing the work.
Furthermore, research on millennial buying behavior gives conclusive evidence how this move will be received: Badly.
Why? Millennials value authenticity. They want to engage with brands. They want to co-create products with companies, and most importantly they expect brands to give back to society. That final point is worth noting.
A survey by Forbes and Elite Daily found that:
“75% said that it’s either fairly or very important that a company gives back to society instead of just making a profit. They are sick and tired of corporate greed and are still recovering in the aftermath of the financial crisis. Millennials love brands that support their local communities and would rather purchase from them than competitors.”
Because it seems there was limited to no community involvement in the decision, large questions linger:
- Did they even engage with labor leadership before making this move? Did the labor union negotiate?
- Did Carrier engage with leaders in the City of Indianapolis? What, if any, ideas were discussed?
- How will quality be maintained as soon-to-be unemployed line workers assemble product over the coming years?
Ultimately, Carrier’s brand won’t go away anytime soon. New Ivy League MBA-ers will come along with new cost-cutting measures celebrated by Wall Street. Everyone in the C-suite will profit handsomely as the company Willis Carrier created over a century ago will electively take a corporate version of the Bataan Death March toward irrelevance and eventual bankruptcy.
They’d be wise to listen to this canary, pick up a copy of Start with Why, and re-evaluate their short term choice to put profit over people.
Carrier officials have claimed that federal regulations, not labor costs, are the cause of the move to Mexico. When pressed, Carrier official did not specify which regulation was the cause.