In his efforts to stop U.S. jobs from moving to Mexico, President-elect Donald Trump seems to have come up against the brick wall of the Twitterverse. His tweet-fueled campaign to keep Carrier’s Indiana factory running turned out to be a taxpayer bailout. The deal will also support a job-killing automation plan. Now it looks like another batch of 140-character declarations from @realDonaldTrump will not be enough to save 350 jobs at a nearby Rexnord manufacturing facility.
As with Carrier, the Rexnord case illustrates how automation and globalization are driving upheavals in the U.S. labor market of historic proportions.
Rexnord and automation
Rexnord Corp. is a global supplier of parts for transmissions and water systems, among other industrial fittings. Somewhat ironically, one of its main product families consists of parts for conveyor belts, rollers and related systems that boost factory throughput while trimming labor costs.
The company began life as the Chain Belt Co. in Wisconsin in 1892. Rexnord is now a wholly-owned subsidiary of the global holding company BTR PLC with almost two dozen facilities all over the world, including the U.S. and Mexico.
For the past 10 years, Rexnord adopted a fast-paced, mergers-and-acquisitions business model. One of the four driving principles of that strategy is creating “an opportunity to innovate faster.”
“Mergers and acquisitions (M&A) are a critical part of the Rexnord growth strategy,” the company says. “We continually look to expand our portfolio through M&A activities. Our strategy is to build around multiple, global strategic platforms that participate in end-markets with sustainable growth characteristics where we are, or have the opportunity to become, the industry leader.”
A growing focus on automation also became evident last year, when Rexnord tapped the senior vice president and chief financial officer of Rockwell Automation Inc., Theodore Crandall, for a seat on its board of directors.
In a press release announcing the new board member, Rexnord made it clear that Crandall will play a key role in the company’s future:
Paul W. Jones, Rexnord’s non-executive chairman, stated: “Ted has extensive financial and management experience and possesses the skills and qualities that will make valuable contributions to Rexnord’s long-term growth plans and help drive shareholder value.”
Moving to Mexico
The future already looked dim for Rexnord’s Indiana bearings factory about four years ago, when the company demanded — and received — wage concessions in return for keeping the doors open.
However, the reprieve was temporary. As reported by USA Today’s IndyStar affiliate, last October the company installed security cameras in preparation for what was then a “tentative” move to Monterrey, Mexico.
Plans for the move to Mexico firmed up by November, when the Milwaukee Business Journal reported that the union representing Rexnord workers was unable to meet the company’s demands for concessions:
In a Nov. 14 update to members, the United Steelworkers said: “The representatives of Rexnord have told your committee that the cost saving measures offered are not near enough to change the tentative decision to relocate the plant. They informed your committee that we cannot make enough concessions to keep the plant here. The decision to move the plant is now final.”
In contrast to the Carrier case, in which Trump became personally involved, there was apparently no communication between Rexnord and the president-elect leading up to the decision.
That could be for any number of reasons, but the fact is that it would have been a lost cause.
As the Milwaukee Business Journal reported, back in May 2015 Rexnord was already firming up plans to trim its U.S. manufacturing footprint by 20 to 25 percent.
At the time, Rexnord President and CEO Todd Adams explained the move in terms of the company’s broader business strategy, aimed at a savings of $30 million per year:
“Number one, it’s to enhance our competitive advantage and improve upon our industry-leading service levels, quality and customer satisfaction with no customer disruption.
“Second, it’s to position Rexnord to produce permanently higher returns in whatever economic environment exists and over cycles by reducing our fixed costs and enhancing our free cash flow and being more nimble.”
That emphasis on reducing fixed costs and being more nimble leaves the door open to automation. After all, machines and automated systems can be bought, sold, reconfigured, shipped, and reclaimed for other uses, to a degree that human labor cannot possibly match.
So, by the middle of next year, 300 Indiana factory jobs will evaporate from the U.S. According to Rexnord, the remaining 50 jobs will be relocated to Texas.
A tweet, then silence
President-elect Trump responded to the Nov. 14 announcement about two weeks later, with this widely reported comment on Twitter:
“Rexnord of Indiana is moving to Mexico and rather viciously firing all of its 300 workers. This is happening all over our country. No more!”
The tweet, sent on Dec. 3, provided Rexnord employees with some hope that Trump would cut a deal to save at least some jobs, as he did for Carrier.
While that could have provided at least some short-term relief, such a piecemeal approach is not nearly up to the task of retaining U.S manufacturing jobs, unless Trump intends to provide for significant taxpayer support.
Even with support from the public till, the incoming Trump administration can do little to preserve conventional factory floor jobs. The Carrier episode provided one clear demonstration of how easily a company can manipulate the president-elect to provide financial support for automation.
The Rexnord case also demonstrates that an infusion of public cash does not stem the underlying tide of globalization. The company’s Indiana facility received $380,000 in tax abatements over five years to remain in Indianapolis, and local officials are now trying to figure out if they can claw at least some of that back.
Another related example is provided by Whirlpool. The company cut thousands of jobs several years ago and has begun to restore them — though in much smaller numbers — by leveraging automation, utility costs and other favorable factors.
As of this writing, President-elect Trump has apparently still not communicated directly with Rexnord or its workers, who are represented by United Steelworkers Local 1999. (The same local, headed up by Chuck Jones, represents Carrier workers.)
By mid-December, Rexnord negotiated a severance package with Local 1999, putting the official seal on the factory closure. Jones had this to say about Trump’s involvement:
“I’ve reached out to him numerous times through the media and said if he’s sincere about keeping the jobs here in this country, we’d be grateful to sit down and see if we could get it worked out,” Jones said. “We haven’t heard nothing. As far as we know, Rexnord and him haven’t talked about anything.”
Meanwhile, the Obama administration has been addressing those trends through collaborative advanced manufacturing initiatives that aim to prepare U.S. workers and employers for the next level of manufacturing technology, including robotics as well as 3-D printing and other emerging systems.
Many of those programs are run through the Department of Energy, which Trump has declared should no longer exist.
Perhaps he has a plan to replace those programs. Or, perhaps not.
In the case of Rexnord, it appears the president-elect has decided to rest on his Carrier laurels, and let history run its course.
Image (screenshot, p. 4): via Rexnord Corporation.