Inside Trump's Carrier Deal and Indiana's Offer

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United Technologies Corp. is the parent of Carrier Corp. United Technologies Corp. is the parent of Carrier Corp.
INDIANAPOLIS -

So how did President-elect Donald Trump persuade Carrier Corp. to make a stunning change of course and keep more than 1,000 jobs in Indianapolis? It all started with a phone call.

A source familiar with the deal says a few weeks ago the president-elect called Gregory Hayes, chairman and chief executive officer of Carrier parent United Technologies Corp. (NYSE: UTX), and in the course of the conversation outlined his vision for corporate tax and regulatory reforms, suggesting the U.S. will become a more business-friendly environment in a Trump administration. He asked Hayes to reconsider the decision to move 1,400 jobs from Indianapolis to Monterrey, Mexico.

And it worked.

The call persuaded Hayes to connect UTC Climate, Controls and Security President Robert McDonough with Vice President-elect Governor Mike Pence to explore a deal that could keep Carrier manufacturing in Indiana.  It set off a whirlwind of meetings and conference calls that culminated with the framework of an agreement being confirmed Thanksgiving morning between McDonough and Indiana Secretary of Commerce Victor Smith, who then set a meeting with the principles to seal the deal.

On Monday afternoon at Trump Tower in New York, in a meeting that included Pence, Hayes and Smith, agreement was reached to move forward.

The deal will keep more than 1,000 of the 1,400 Carrier jobs in Indianapolis and key elements include performance-based state incentives and a belief by the company that regulatory relief is on the way.

According to a source, United Technologies has indicated that since 2013, there have been 260 new federal regulations enacted and 53 of them have had "significant, negative impact" on the heating and air conditioning industry, so regulatory relief is viewed as a big issue for the company.

In terms of incentives, the state package is said to include EDGE tax credits, in which the state will refund a "minority portion" of employee state tax withholdings over a ten year period. EDGE credits, common in attraction and expansion deals, are rare in retention deals like Carrier, but are in play here.

The incentive package also includes training dollars and could expand with a potential major capital investment by the company, which appears to be under consideration. 

In a statement released late Wednesday by Carrier, the company said it will "designate its Indianapolis manufacturing facility as a Center of Excellence for gas furnace production, with a commitment to making significant investments to continue to maintain a world-class furnace factory."

All of the incentives being offered by the state are performance-based, and subject to an audit that demonstrates the company is keeping its side of the deal.

It is unclear if the company will ask workers for any concessions when they meet Thursday.  

The incentive deal is based on head count over a ten-year period. The length of the deal and Carrier's interest in a potential major investment at the plant are encouraging signs, say economic development insiders.

Others are concerned about Carrier's long-term competitive position as suppliers and competitors continue to move to Mexico in the face of industry pricing pressures.

Full details of the deal will come out at a 2 p.m. event Thursday at Carrier's west side plant, with Trump, Pence, Hayes, McDonough and state and local leaders in attendance.

Reaction is sure to follow.

For his part, United Steelworkers Local 1999 President Chuck Jones, a frequently outspoken Trump critic, is impressed and changing his tune a bit. "I've hammered him pretty good," Jones told Inside INdiana Business Wednesday. However, "I'm going to give the man credit. The man promised he'd keep these jobs and he delivered."

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      "Problems cannot be solved by the level of thinking that created them," is attributed to Einstein over 75 years ago. This still holds true, particularly in challenging communications. Many people address conflict at the level it was created by rehashing and building more evidence for their ‘side’ of an argument. Repeating a position tends to intensify the separation of people.

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