Thursday, September 24, 2009

Pratt’s Bye Bye


Pratt&Whitney is moving some of its operations out of Connecticut because it is more cost effective for the parent company, United Technologies, to have the work done elsewhere, in this case in Georgia, Singapore and Japan.

A far flung enterprise, UTC also has a research facility in China. The bad news is that China is now selling to Iran products that may, over the course of time, enable it to blow up Israel . Iran -- whose undemocratically installed president, Mahmoud Amadinijad, is busy making new and improved explosive devises that blow up American soldiers in Iraq and Afghanistan -- used to be considered part of the axis of evil; now it is simply yet another member in good standing at the ineptly named United Nations.

The good news is that Georgia is in the United States . There is another Georgia , formerly a satellite of the Soviet Union , that has been attempting, without much aid and succor from president of the United States Barack Obama, to fend off the grasping Prime Minister of Russia Vladimir Putin and his gang of ex-KGB agents.

If Pratt&Whitney’s business relationship with China has ever caused a rough night’s sleep to any member of Connecticut’s wall-to-wall Democratic congressional delegation, the discomfort is not obvious from any of their press releases.

Both the state of Connecticut and union representatives at the company offered what might be called reparations, inducements for the company to continue to do business in Connecticut . Those offers fell short, the company said. And yet those who offered the tax reduction incentives doffed their hats to an important economic principle: Whatever you tax tends to disappear, including large companies like UTC and smaller companies that do not have governors and political leaders tripping over each other to provide them with tax benefits.

There were discussions between figure crunchers on both sides. The state and the union leadership no doubt felt they had made a substantial offer. But the company, reading the fine print, decided that the offer would not save UTC enough money in sustainable future costs to warrant staying in Connecticut . The Obama administration has not yet nationalized Pratt&Whitney, so the negotiators who wanted to save Connecticut ’s jobs had little leverage. It is, after all, still a free country, in part. Some consider it a hopeful sign that Attorney General Richard Blumenthal is contemplating a suit intended to force the company from closing operations in Connecticut .

Others see the writing on the wall and will interpret such interventions as yet another reason to move to Georgia .

UTC’s decision to relocate operations to save costs, which appears to be final, has been attributed, by some members of Connecticut’s wall-to-wall Democratic US congressional delegation, to company greed and a lack of local patriotism. It is a pleasing fantasy to supposed that had Harry Grey retained the helm as CEO of UTC, the company would not have disappointed Gov. Jodi Rell, Speaker of the state House Chris Dovovan, President Pro Tem of the Senate Don Williams, U.S. Reps. John Larson and Rosa DeLauro, and U.S. Senators Chris Dodd and Joe Lieberman by moving to areas where the cost of labor is less punishing and the political climate more favorable to Connecticut based companies both old and new.

Is it not within the realm of possibility that when Donovan and Williams were urging upon the legislature a budget raising corporation taxes a whopping 30%, some of the decision makers at UTC were taking notes? One must assume newspapers are still read in the Gold Building .

The legislature and the governor this fiscal year have patched a $2.5 billion hole in the budget with the equivalent of chewing gum: rainy day fund money, temporary revenue enhancers, and a progressive income tax fathered by Donovan and Williams. The budget is light on spending decreases. Unions were able to prevail on the governor and Democratic legislators to keep union give-backs to a minimum. Perhaps union leaders negotiating with UTC thought they were deliberating with Donovan, a former union chief himself.

The negotiations didn’t work because the CEO of UTC knows that if he does not find a way to cut costs, the company will not be able to compete with other businesses that provide similar products and services. Luckily for everyone but taxpayers and workers who in the future will find fewer jobs in the state, Connecticut -- thanks to the intervention of Donovan, Williams and Blumenthal -- is a non-competitive operation.

The state, now on crutches and hobbling towards an uncertain future, will remain non-competitive for as long as it does not cut spending.
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