Carrier’s announcement that it has reached a deal with President-elect Donald Trump to keep 1,000 manufacturing jobs from moving from Indiana to Mexico represents the first recognition by multi-national CEOs that the United States is forecast to be the top manufacturing location on the planet by 2020.
As a candidate for the Republican presidential nomination, Donald Trump caused a national sensation when he said on Valentine’s Day (February 14) that if elected President, he would impose a 35 percent tax on United Technology’s (UTX:NYSE) Carrier air conditioning unit, which had just announced plans to move 1,400 jobs to Monterrey, Mexico.
Trump’s “get-tough” demand to stop the offshoring of high-skilled American jobs complemented a viral video of Carrier employees hearing the bad news that they were being laid off and that their jobs were being offshored. To date, the YouTube video has nearly 4 million views.
Despite bad publicity, United Technologies refused to back down. With 196,200 employees worldwide, UTX had just launched a $1.5 billion multi-year restructuring plan that focused on achieving expense reductions in high-cost locations, such as the United States.
United Technologies emphasized that it was determined to counter slow global growth and headwinds in several key businesses. Two months after announcing the Indiana outsourcing, United Technologies beat Wall Street’s earnings estimates for the March 31 quarter, with a $1.47 a share in earnings and $13.36 billion in sales.
The odds in early 2016 against Donald Trump winning the Republican nomination were 5-to-1 and his odds against winning the presidency were 20-to-1. Most corporate executives at the time were preparing for President Hillary Clinton to launch a blizzard of progressive policies that would be much worse for manufacturers than the eight years under President Obama.
However, changes were already afoot. And Trump’s stunning campaign on an “America First” policy seems to have flipped the corporate script. His policies jibe with the closely-watched 2016 Global Manufacturing Competitiveness Index released earlier this year by the accounting firm of Deloitte Touche.
The multi-year analysis based, on opinions of 550 top global manufacturing CEOs, found:
The United States is expected to take over the number one position from China by the end of the decade while Germany holds firm at number three: The US continues to improve its ranking from 4th in 2010 to 3rd in 2013 to 2nd in this year’s study. Moreover, executives expect the US to assume the top position before the end of the decade while Germany holds strong and steady at the number three position now through the end of the decade.
Surveyed executives indicated they are seeing “the digital and physical worlds converge within manufacturing.” They see this move toward advanced manufacturing tilting comparative advantage back toward the developed nations. The CEOs perceive that “the United States, Germany, Japan, and the United Kingdom are back toward the very top of the 10 most competitive nations in 2016.”
Of the once high-growth developing economies of Brazil, Russia, India and China, referred to as “BRIC” economies, only China is viewed by international corporate leaders as still occupying a place in the top tier of competitive manufacturing nations in 2016.
By 2020, the CEOs expect the top 10 manufacturing platforms, in order of competitiveness, will be the United States, China, Germany, Japan, India, South Korea, Mexico, United Kingdom, Taiwan and Canada.
The rising attractiveness of the United States is a dramatic reversal from Deloitte’s 2013 Global Manufacturing Competitiveness Index, which was negative about prospects in the U.S. due to “disadvantageous policies associated with corporate tax rates, healthcare, labor, and taxation of foreign earnings.”
But the election of Trump and his bold new pro-growth agenda is already creating huge upside opportunities for the U.S. economy and American workers.
By canceling Carrier’s planned move to Mexico, United Technologies is one of the first major multi-national corporations to restructure its corporate planning toward embracing the United States as the top manufacturing location for the future.