Under the Hood

Both Carrier and the Trump transition have confirmed that they are in talks about the fate of the Carrier air conditioner factory in Indianapolis which Carrier has said it plans to relocate to Mexico. This has sounds a lot like the Ford plant in Kentucky where Trump spun a minor but real change in one factory line into his saving a whole factory from being moved to Mexico. The factory was never slated to be moved to Mexico. But here’s the backstory which is important to understand.

Carrier is a subsidiary of United Technologies Corporation which is primarily an aerospace and defense contractor. The key divisions are Pratt & Whitney and UTC Aerospace Systems. Pratt & Whitney makes the engines for the F-35 jet fighter. Those are just a few headline examples of involvement in numerous other defense related contracting.

The key point being that UTC has a lot on the line in federal contracting. It is not in a position to get seriously crosswise with an incoming president.

This may be good news for the employees at the Carrier plant in Indianapolis. I don’t think we have any idea how that pans out. This also shows how many big defense contractors are diversified into non-defense or non-solely-defense industrial production. The US could certainly make domestic production at non-defense related factories a condition of doing government contracting or at least a qualification. I suspect that would lead to these companies divesting themselves of non-defense manufacturing subsidiaries. But who knows. Anyway, it’s worth watching closely the different levers that are in play here and whether they are used in a consistent or arbitrary way.

Late Update: The original version of this post listed Sikorsky as one of UTC’s defense and aerospace subsidiaries. In fact, UTC sold Sikorsky to Lockheed Martin in 2015. Thanks to TPM Reader JT for the update/catch.