Under Pence, state gave incentives to companies that offshored jobs

September 1, 2016


Tony Cook, The Indianapolis Star

As Donald Trump’s running mate, Gov. Mike Pence is campaigning for a man who has promised to penalize companies that ship jobs overseas.

But since Pence became governor in 2013, the state has awarded millions of dollars in economic development incentives to companies that have moved production to foreign countries such as Mexico and China. Those production shifts have cost thousands of Hoosiers their jobs during Pence’s time in office.

An IndyStar analysis found that the Indiana Economic Development Corporation — which Pence leads — has approved $24 million in incentives to 10 companies that sent work to foreign countries. Of those incentives, nearly $8.7 million has been paid out so far.

During that same period, those companies terminated or announced layoffs of more than 3,800 Hoosier workers while shifting production to other countries, where labor tends to be far less expensive.

The state has clawed back or put a hold on some or all of the incentives in four of those cases, returning $746,000 in taxpayer subsidies. But in the other six cases, the companies faced no consequences.

The primary reason: The job creation and retention requirements in the state’s incentive agreements are usually narrowly tailored to a single facility, leaving workers at other sites owned by the same company vulnerable to offshoring.

Take, for example, handbag maker Vera Bradley. The company was approved in December 2014 for a $1.75 million, 10-year tax break to assist with a $26.6 million expansion of its headquarters and distribution center in Roanoke, near Fort Wayne. In exchange, the company agreed to retain 567 employees and add 128 jobs by the end of 2017.

But the following year, the company closed its New Haven design center and moved production to factories in Asia to save money. The factory’s 250 employees, who worked just 15 miles from the Roanoke headquarters, lost their jobs.

Vera Bradley has claimed about $118,000 in tax credits so far and remains in compliance with its state incentive agreement, said Abby Gras, an IEDC spokeswoman, in an email. The company now employs slightly more than 600 workers in Roanoke, a spokeswoman for the company said. That’s a net loss of more than 200 jobs across the company’s Fort Wayne area operations.

Pence, who has been campaigning for Trump across the country since accepting the Republican vice presidential nomination in July, did not respond to interview requests for this story left with his office and campaign staff.

But his commerce secretary, Victor Smith, sent a statement to IndyStar defending the state’s economic development record and noting that 150,000 jobs have been added since Pence took office.

“In Indiana, our economic development incentives are performance-based, meaning a company must create the jobs it committed to creating in order to receive any incentive, which is not the case in many other states,” Smith said. “Unforeseen circumstances can affect business plans, and in those times, we offer our support and counsel to job creators. However, if a company chooses to neglect its commitment to the state and to its Hoosier employees, we aggressively seek to claw back any incentives the company has received.”

But the success of the state’s incentive program is difficult to gauge. While the IEDC makes the job retention and creation requirements public, it keeps secret the actual number of jobs a company retains, creates or loses.

“As you know, I can’t give you employment figures for specific companies,” Gras said, “but collectively these companies have added hundreds of new jobs in Indiana.”

She said the IEDC’s transparency website, which was set up under Pence, includes information about how much money or tax breaks companies have received, “which is a reflection of the companies’ performance.”

The 10 companies that offshored jobs were supposed to create 1,087 new jobs, according to their incentive agreements. Four fell short, as evidenced by the claw backs. The other six are in compliance with their incentive agreements, the IEDC said.

But those job growth figures pale in comparison to the jobs lost to offshoring, an IndyStar review of layoff announcements and trade adjustment filings with the U.S. Department of Labor found.

Those records show that the same 10 companies or their related subsidiaries have laid off or plan to layoff more than 3,820 workers in Indiana because work has been shifted to other countries since 2013.

Those losses are more than three times larger than the number of jobs that would have been created under the state’s incentive agreements, even if they had all came to fruition.

The highest-profile case involved heating and air conditioning manufacturer Carrier and its parent company, United Technologies Electronic Controls.

In 2013 and 2015, the Pence administration approved training grants totaling $500,000 for the heating, ventilation and air conditioning companies. In exchange, the companies agreed to invest $19.4 million in facility upgrades, retain 2,239 jobs and add 116 jobs.

But all of that changed in February, when the companies announced they were shifting production to Monterrey, Mexico, and laying off 2,100 workers. A video of management announcing the layoffs at the plant went viral and Carrier quickly became a punching bag for Trump and other presidential candidates on the campaign trail.

At Pence’s urging, the company later refunded $380,000 in grants in April and revoked the remaining, still unpaid amount.

Trump has used the Carrier layoffs to highlight how his protectionist policies, including new tariffs, would save American jobs.

During an Indianapolis rally in April, for example, Trump said he would “tax the hell” out of companies like Carrier.

"You're looking at a situation where the jobs are being ripped out of our states, out of our country, like candy from a baby," he said, later adding, “You’re going to bring it across the border, and we’re going to charge you a 35-percent tax.”

But in at least two cases — including one this past week — the Pence administration has awarded incentives to companies shortly after they moved production out of the country.

Plastics company PendaForm shut down a plant in Pekin in late 2013 and shifted the work to a factory in Mexico, costing about 37 workers their jobs, according to filings with the U.S. Department of Labor.

The following year, the IEDC awarded the company $160,000 in tax credits to invest $4.9 million, retain 58 employees and add 42 employees to manufacture truck bed liners at its Bluffton plant.

Scott Miller, a shipping technician who lost his job after 14 years at the company’s Pekin plant, questioned why the state “would make it comfortable for them to take their jobs out of the country.”

“That’s totally unfair. If it’s coming from the taxpayer coffers, that just doesn’t make sense if you’re trying to keep jobs in Indiana,” said Miller, 60. “That’s a pretty big reward for putting us all out of work.”

The company did not respond to phone calls from IndyStar.

Gras defended the incentives, saying, “we are supporting the company’s decision to add jobs or bring jobs back to Indiana.”

The state has also awarded millions of dollars in incentives to General Motors since Pence took office, mostly to expand operations at its Bedford Powertrain and Fort Wayne Assembly plants. The automaker has received $4.6 million in incentives with promises to add 366 new jobs.

At the same time, GM and one of its subsidiaries slashed 70 jobs at facilities in Kokomo and Marion as production was shifted to foreign countries.

Gina Lancaster was laid off twice because of that offshoring. In 2013, she was among 35 workers who lost their jobs at General Motors Components Holding in Kokomo because “production in several departments will be shipped overseas,” according to a successful trade adjustment petition filed with the U.S. Department of Labor. (Trade adjustment assistance allows workers to tap into certain benefits if they lose their jobs because of foreign trade.)

After a year of unemployment, Lancaster landed work at GM’s Marion Metal Center, only to lose it four months later along with 34 other workers. The U.S. Office of Trade Adjustment Assistance found that the layoffs were due to a “shift in production of sheet metal parts for light duty motor vehicles to a foreign country.”

She was out of work for two years until getting called back to the Kokomo factory in May. As a single mother with a daughter starting college this year at Vincennes University, Lancaster said the layoffs have set her back years financially.

Then she learned that on Tuesday, the state awarded the company $100,000 in job training grants for $90 million in new equipment and machinery at GM’s Marion facility — just two years after the company outsourced jobs at the same plant. The new incentive agreement does not require the company to add any new jobs.

“You have this company making billions and you don’t have job security,” Lancaster said. “Then, when you hear about the state giving this company money to upgrade their equipment but there’s no new job creation, that’s a little disheartening. It doesn’t do anything for me and my family.”

Laura Toole, a spokeswoman for GM, said all employees impacted by layoffs in Marion and Kokomo were offered alternative employment opportunities within GM.

“GM has invested $1.9 billion in Indiana manufacturing facilities since 2009, which translates to more than 3,900 jobs created or retained, including adding a third shift at Fort Wayne Assembly and upgrading other Indiana facilities,” she said.

Experts on economic development incentives say Indiana is not unusual in awarding grants and tax credits to companies that move jobs overseas. And previous Indiana governors have done the same.

"Indiana is far from alone in awarding incentives to large, multinational companies," said Ron Starner, executive vice president of Site Selection magazine, which follows state business climates.