Romney’s Bain Capital invested in companies that moved jobs overseas
By Tom Hamburger, Thursday, June 21, 2012 7:53 PM
Mitt Romney’s financial company, Bain Capital, invested in a series of firms that specialized in relocating jobs done by American workers to new facilities in low-wage countries like China and India.
During the nearly 15 years that Romney was actively involved in running Bain, a private equity firm that he founded, it owned companies that were pioneers in the practice of shipping work from the United States to overseas call centers and factories making computer components, according to filings with the Securities and Exchange Commission.
While economists debate whether the massive outsourcing of American jobs over the last generation was inevitable, Romney in recent months has lamented the toll it’s taken on the U.S. economy. He has repeatedly pledged he would protect American employment by getting tough on China.
“They’ve been able to put American businesses out of business and kill American jobs,” he told workers at a Toledo fence factory in February. “If I’m president of the United States, that’s going to end.”
Speaking at a metalworking factory in Cincinnati last week, Romney cited his experience as a businessman, saying he knows what it would take to bring employers back to the United States. “For me it’s all about good jobs for the American people and a bright and prosperous future,” he said.
For years, Romney’s political opponents have tried to tie him to the practice of outsourcing American jobs. These political attacks have often focused on Bain’s involvement in specific business deals that resulted in job losses.
But a Washington Post examination of securities filings shows the extent of Bain’s investment in firms that specialized in helping other companies move or expand operations overseas. While Bain was not the largest player in the outsourcing field, the private equity firm was involved early on, at a time when the departure of jobs from the United States was beginning to accelerate and new companies were emerging as handmaidens to this outflow of employment.
Bain played several roles in helping these outsourcing companies, such as investing venture capital so they could grow and providing management and strategic business advice as they navigated this rapidly developing field.
Over the past two decades, American companies have dramatically expanded their overseas operations and supply networks, especially in Asia, while shrinking their workforces at home. McKinsey Global Institute estimated in 2006 that $18.4 billion in global information technology work and $11.4 billion in business-process services have been moved abroad.
While the export of jobs has been disruptive for many workers and communities in the United States, outsourcing has been a powerful economic force. It has often helped lower the prices that American consumers pay for products and created a global supply chain that has made U.S. companies more nimble and profitable.
Romney campaign officials repeatedly declined requests to comment on Bain’s record of investing in outsourcing firms during the Romney era. Campaign officials have said it is unfair to criticize Romney for investments made by Bain after he left the firm but did not address those made on his watch. In response to detailed questions about outsourcing investments, Bain spokesman Alex Stanton said, “Bain Capital’s business model has always been to build great companies and improve their operations. We have helped the 350 companies in which we have invested, which include over 100 start-up businesses, produce $80 billion of revenue growth in the United States while growing their revenues well over twice as fast as both the S&P and the U.S. economy over the last 28 years.”
Until Romney left Bain Capital in 1999, he ran it with a proprietor’s zeal and attention to detail, earning a reputation for smart, hands-on management.
Bain’s foray into outsourcing began in 1993 when the private equity firm took a stake in Corporate Software Inc., or CSI, after helping to finance a $93 million buyout of the firm. CSI, which catered to technology companies like Microsoft, provided a range of services including outsourcing of customer support. Initially, CSI employed U.S. workers to provide these services but by the mid-1990s was setting up call centers outside the country.
Two years after Bain invested in the firm, CSI merged with another enterprise to form a new company called Stream International Inc. Stream immediately became active in the growing field of overseas calls centers. Bain was initially a minority shareholder in Stream and was active in running the company, providing “general executive and management services,” according to SEC filings.
By 1997, Stream was running three tech-support call centers in Europe and was part of a call center joint venture in Japan, an SEC filing shows. “The Company believes that the trend toward outsourcing technical support occurring in the U.S. is also occurring in international markets,” the SEC filing said.
Stream continued to expand its overseas call centers. And Bain’s role also grew with time. It ultimately became the majority shareholder in Stream in 1999 several months after Romney left Bain to run the Salt Lake City Olympics.
Bain sold its stake in Stream in 2001, after the company further expanded its call center operations across Europe and Asia.
The corporate merger that created Stream also gave birth to another, related business known as Modus Media Inc., which specialized in helping companies outsource their manufacturing. Modus Media was a subsidiary of Stream that became an independent company in early 1998. Bain was the largest shareholder, SEC filings show.
Modus Media grew rapidly. In December 1997, it announced it had contracted with Microsoft to produce software and training products at a center in Australia. Modus Media said it was already serving Microsoft from Asian locations in Singapore, South Korea, Japan and Taiwan and in Europe and the United States.
Two years later, Modus Media told the SEC it was performing outsource packaging and hardware assembly for IBM, Sun Microsystems, Hewlett-Packard Co. and Dell Computer Corp. The filing disclosed that Modus had operations on four continents, including Asian facilities in Singapore, Taiwan, China and South Korea, and European facilities in Ireland and France, and a center in Australia.
“Technology companies, in particular, have increasingly sought to outsource the business processes involved in their supply chains,” the filing said. “.?.?. We offer a range of services that provide our clients with a one-stop shop for their outsource requirements.”
According to a news release issued by Modus Media in 1997, its expansion of outsourcing services took place in close consultation with Bain. Terry Leahy, Modus’s chairman and chief executive, was quoted in the release as saying he would be “working closely with Bain on strategic expansion.” At the time, three Bain directors sat on the corporate board of Modus.
The global expansion that began while Romney was at Bain continued after he left. In 2000, the firm announced it was opening a new facility in Guadalajara, Mexico, and expanding in China, Malaysia, Taiwan and South Korea.
In addition to taking an interest in companies that specialized in outsourcing services, Bain also invested in firms that moved or expanded their own operations outside of the United States.
One of those was a California bicycle manufacturer called GT Bicycle Inc. that Bain bought in 1993. The growing company relied on Asian labor, according to SEC filings. Two years later, with the company continuing to expand, Bain helped take it public. In 1998, when Bain owned 22 percent of GT’s stock and had three members on the board, the bicycle maker was sold to Schwinn, which had also moved much of its manufacturing offshore as part of a wider trend in the bicycle industry of turning to Chinese labor.
Another Bain investment was electronics manufacturer SMTC Corp. In June 1998, during Romney’s last year at Bain, his private equity firm acquired a Colorado manufacturer that specialized in the assembly of printed circuit boards. That was one of several preliminary steps in 1998 that would culminate in a corporate merger a year later, five months after Romney left Bain. In July 1999, the Colorado firm acquired SMTC Corp., SEC filings show. Bain became the largest shareholder of SMTC and held three seats on its corporate board. Within a year of Bain taking over, SMTC told the SEC it was expanding production in Ireland and Mexico.
In its prospectus that year, SMTC explained that it was in a strong position to meet the swelling demand from other manufacturers for overseas production of circuit boards. The company said that communications and networking companies “are dramatically increasing the amount of manufacturing they are outsourcing and we believe our technological capabilities and global manufacturing platform are well suited to capitalize on this opportunity.”
Just as Romney was ending his tenure at Bain, it reached the culmination of negotiations with Hyundai Electronics Industry of South Korea for the $550 million purchase of its U.S. subsidiary, Chippac, which manufactured, tested and packaged computer chips in Asia. The deal was announced a month after Romney left Bain. Reports filed with the SEC in late 1999 showed that Chippac had plants in South Korea and China and was responsible for marketing and supplying the company’s Asian-made computer chips. An overwhelming majority of Chippac’s customers were U.S. firms, including Intel, IBM and Lucent Technologies.
A filing with the SEC revealed the promise that Chippac offered investors. “Historically, semiconductor companies primarily manufactured semiconductors in their own facilities,” the filing said. “Today, most major semiconductor manufacturers use independent packaging and test service providers for at least a portion of their .?.?. needs. We expect this outsourcing trend to continue.”
Research editor Alice Crites contributed to this article.
Democrats See a Shot at Retaking the House January 31, 2012, 12:34 pm
By JENNIFER STEINHAUER
Facing two large hills to climb in November — maintaining control of the Senate and winning back the House – some Democrats are saying that there’s new evidence that the second is in the realm of possibility.
Mark Gersh, a political statistician with a long history of crunching numbers for Democrats, argues in a memo to the Democratic Congressional Campaign Committee that the party’s support among voters in recent polls puts Democrats in a better position than Republicans enjoyed at this time in 2010, when they captured 63 seats and swept into control. In polls from January of that year, Republicans had a 4 point lead over the Democrats.
Mr. Gersh cites a recent NBC/Wall Street Journal poll, .. http://firstread.msnbc.msn.com/_news/2012/01/26/10243659-nbcwsj-poll-majority-would-vote-out-every-member-of-congress .. in which, when asked which party they prefer to control Congress, voters cited Democrats, 47 to 41 percent, as well as a recent National Journal poll that found that found 48 percent of voters prefer Democrats to take control of the House while 37 percent want Republicans to stay in control. In October, the same poll showed a statistical tie.
“There is no precedent for a party maintaining control of the majority of the House of Representatives if they lose the popular vote by 6 percent or more on Election Day,” Mr. Gersh wrote. Democrats need to recapture 25 seats to take the majority.
The dynamics of the 2012 Congressional races are complex. Voters appear to blame Republicans more for the various debacles on the Hill over the last year, and have pretty consistently favored Congressional Democrats over all in recent polls, even though approval ratings for Congress as a whole are historically low.
Further, while redistricting battles .. http://topics.nytimes.com/topics/reference/timestopics/subjects/r/reapportionment/index.html .. have yet to be ironed out in a few big states like Texas and Florida, Republican-led legislators in other states have shored up many incumbents in Congressional Districts where they enjoyed marginal or even significant disadvantages in 2010.
Lastly, an anti-incumbent mood among voters can hurt both parties.
Can the Democrats retake control of the House? .. Election 2012
Congressman Steve Israel says a net gain of 25 seats – what Democrats need to win back control of the House in Election 2012 – is 'in range.' The key, he says, is independents.
By Linda Feldmann, Staff writer / February 28, 2012
Washington
Steve Israel isn’t ready to predict that the Democrats will retake control of the House in 2012. But the New York .. http://www.csmonitor.com/tags/topic/New+York congressman in charge of his party’s House reelection effort promises it’s going to be “razor-close.”
Start with the proposition that it’s been only 16 months since the Democrats suffered the shellacking of 2010, when the Republicans .. http://www.csmonitor.com/tags/topic/U.S.+Republican+Party .. netted 63 seats, and that Congress’s popularity is at record low levels. To win back control, the Democrats need a net gain of 25 seats. After three straight “wave” elections – in which one party suffers a net loss of at least 20 seats – a fourth would be highly unusual. It hasn’t happened in 60 years.
But in Congressman Israel’s view, that goal is “in range.” Speaking at a press breakfast sponsored by the moderate Democratic think tank Third Way, Israel laid out his rationale: Some polls show Democrats leading Republicans in the “generic” ballot for Congress. Redistricting has given the Democrats opportunities to pick up seats. The party is recruiting some strong candidates. And the House Democrats beat the House Republicans in election committee fundraising last year.
The key, says Israel, is independent voters.
“You want to know why we lost the House in 2010? We lost 9 million independent voters,” says Israel, chairman of the Democratic Congressional Campaign Committee (DCCC). .. http://www.csmonitor.com/tags/topic/Democratic+Congressional+Campaign+Committee .. “They were with us in 2006. They were with us in 2008. They were frothing-at-the-mouth angry in 2010.”
Focus groups show that in 2010, Americans were voting against the Democrats, not for the Republicans, Israel says. The Democrats’ job now is to fill in the blanks in defining these newly elected Republicans, many of whom embraced the tea party.
Nonpartisan analysts maintain that the Democrats still face a steep climb in their effort to retake the House after just one term out of power. True, the DCCC outraised its Republican counterpart, the National Republican Campaign Committee, .. http://www.csmonitor.com/tags/topic/National+Republican+Congressional+Committee .. by $7 million in 2011. But outside spending by Republican super PACs is expected to wipe out that advantage.
Still, redistricting will cost the Democrats elsewhere, as Republican-controlled state legislatures redraw maps to favor GOP House .. http://www.csmonitor.com/tags/topic/U.S.+House+of+Representatives .. members. In addition, the Democrats are losing some of their more conservative members to retirement. According to the Cook Political Report, .. http://www.csmonitor.com/tags/topic/The+Cook+Political+Report .. five seats being vacated by Democrats are favored to go Republican. None of the open Republican seats are expected to go to Democrats.
Israel says that in recruiting, he looks for problem-solvers. And once recruited, he’s telling his candidates to “run like a mayor.” In other words, ideologues need not apply.
“If you knock on a door, and somebody says there’s a pothole outside, and you say, that’s not my job, my job is to figure out what to do about the European debt crisis, you will lose,” Israel says. “Get a shovel, get some asphalt, fill the pothole.”
Boehner: 1-in-3 Chance Democrats Could Take House .. April 23, 2012, 6:36 PM ..
“We have 50 of our members in tough races, 89 freshmen running for their first re-elections, and we have 32 districts that are in states where there is no presidential campaign going to be run, no big Senate race, and we call these orphan districts,” Mr. Boehner said. “You take 18 of them—[in] California, Illinois and New York—where you know we’re not likely to do well at the top of the ticket, and those districts are frankly pretty vulnerable.”
To some degree, this runs contrary to the message of other GOP leaders that they’re confident they will keep the House. Democrats need 25 seats to retake control, and some neutral analysts estimate that if the election were held today they’d win about 10.
So I don’t agree with other analysts who have termed the decision risky or puzzling. Mr. Obama has learned this year that being the incumbent at a time when most voters think the country is on the wrong track is not necessarily an advantageous position. But an incumbent president can still help himself at the margin with his policy and agenda-setting powers.
As Mr. Trende writes, “Latinos are underrepresented in swing states”.
Below is a table showing an estimate of Hispanic turnout in 2008. These figures were determined by multiplying a state’s overall turnout by the share of voters who described themselves as Hispanic or Latino in exit polls. In total, about 11 million Hispanics turned out to vote in 2008, according to these estimates.
However, almost 40 percent of the Hispanic vote was in one of just two states – California and Texas – that don’t look to be at all competitive this year. The fact that Democrats are winning clear majorities among Hispanics is one reason that California is no longer competitive, of course. And perhaps Texas will become more competitive in another 8 or 12 or 16 years. (Although note that many Hispanics in Texas have been there for generations and might not be thought of as immigrant communities.) But voters in these states just aren’t likely to sway the Electoral College outcome in 2012.
New York and Illinois, which also aren’t at all competitive, and New Jersey, which is only very marginally so, also have a decent number of Hispanic voters. You do see Florida up near the top of the list, however, and Arizona and Colorado not far down, so I will need to be a bit more precise about my analysis to defend my claim.
The list of tipping point states is narrower than you might expect. The relative order of the states just doesn’t change very much from election to election, especially when an incumbent is running again and we know what voters thought about him four years earlier.
Many states might be competitive, meaning that they might plausibly be won by either candidate, but most of their electoral votes would be superfluous in an election that truly came down to the last vote. The tipping point index accounts both for how close a state is relative to the national trend, and how many electoral votes it has.
Right now, the model thinks that the odds are about 50/50 that one of just two states, Virginia and Ohio, will play the tipping point role. Each of these has a below-average number of Hispanic voters.
Colorado is third on the tipping point list, and it has an above-average number of Hispanic voters. But Pennsylvania is fourth, and it has a below-average number again.
Nevada, with an above-average number of Hispanics, is fifth on the list, but it is followed by three very white-dominated states (Iowa, New Hampshire and Wisconsin).
Then comes Florida, which is lower on the list than you might expect, especially since it has 29 electoral votes. The model “thinks” about the different electoral combinations very carefully when it runs its simulations, and considers how the states might move in relationship to one another based on their demographics, as well as in comparison to the national trend.
Mr. Obama could certainly win Florida – we give him about a 35 percent chance of doing so — but these simulations find that he usually has easier paths to the victorious 270 electoral votes. The president’s polling and the “fundamentals” factors that the model considers are more favorable to Mr. Obama’s in each of the eight states that appear above Florida on the tipping point list. Most of the time that he wins states like Virginia, Ohio and Colorado, for instance, Mr. Obama will already have a winning map unless he takes some unexpected losses elsewhere.
Moreover, many of the Hispanics in Florida are Cuban-Americans, and they do not always behave like the predominantly Mexican-American population of the Southwest, or the Hispanic populations of the Northeast, which include many Puerto Ricans and Dominicans.
The model also doesn’t think much of New Mexico as a tipping point state. .. http://fivethirtyeight.blogs.nytimes.com/2012/06/15/presidential-geography-new-mexico/ .. It really wasn’t close at all in 2008, and polls there have shown Mr. Obama with a double-digit lead at a time when he is barely ahead of Mitt Romney nationally. Mr. Obama could lose New Mexico in a landslide, but it just doesn’t meet the definition of a tipping point state. Even the broader term “swing state” probably mischaracterizes it somewhat.
Nor does the model think that Arizona is a tipping point state. If has a fairly large Hispanic population, but the white population there is old and quite conservative. Arizona is something of the opposite of New Mexico – a state Mr. Obama could win this year, but probably only in a landslide where it does not provide the decisive electoral votes.
On the whole, if you take a weighted average of the Hispanic turnout in each state based on its tipping point index, it comes out to about 6 percent, less than the 9 percent Hispanic turnout throughout the country as a whole. That means a Hispanic voter is somewhat less likely to swing the Electoral College outcome than if they were evenly distributed (as a share of the population) throughout all 50 states.
How often the following situations occurred during repeated simulated elections.
Electoral College tie (269 electoral votes for each candidate) 0.2% Recount (one or more decisive states within 0.5 percentage points) 5.7% Obama wins popular vote 61.6% Romney wins popular vote 38.4% Obama wins popular vote but loses electoral college 2.1% Romney wins popular vote but loses electoral college 3.2% Obama landslide (double-digit popular vote margin) 9.6% Romney landslide (double-digit popular vote margin) 3.3% Map exactly the same as in 2008 0.9% Map exactly the same as in 2004 <0.1% Obama loses at least one state he carried in 2008 88.2% Obama wins at least one state he failed to carry in 2008 26.5%
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