The company Dematic hasn’t been singled out by Donald Trump. At least not yet.
Dematic has operations in the Michigan manufacturing hub city of Grand Rapids, where Trump visits Friday. The company, which in Michigan makes warehouse conveyor systems, announced earlier in 2016 plans to shift some 300 jobs to Mexico. It got tax breaks from the state, then decided to move some jobs anyway.
Dematic is illustrative of the challenges of Trump’s emerging industrial policy. It shows the limits to government intervention in the marketplace of the sort that Trump has engaged in. Market forces and global strategy often are more important than the tax incentives offered to companies.
One study by Michigan’s free-market think tank Mackinac Center for Public Policy even found that companies created about 29 percent of the jobs they promised in exchange for the tax breaks they received.
Trump heralded the Nov. 29 announcement that Carrier would not shift all 2,100 jobs it had planned for its Mexico operations. It agreed to keep between 700 and 800 in Indiana in exchange for state tax breaks.
Those tax breaks, as Dematic shows in Grand Rapids, have been used in Michigan with limited effect. They haven’t stopped companies from expanding their foreign operations
Dematic, a logistics company headquartered in Atlanta, that also operates as a third-party supplier of parts, was purchased by Germany’s Kion Group. The deal was completed last month. In February, Dematic had announced it would shift about 300 production jobs to Mexico. Dematic accepted healthy tax incentives to stay in Michigan. It got a $3.2 million tax break in October 2010, at the recommendation of the Michigan Economic Development Corp., and for that pledged to invest more than $10 million and create at least 505 company jobs.
The tax break ended last year, though, and Dematic said it met all of its obligations under the agreement. It later announced it would close some local production facilities and move jobs to Mexico, where it operates a plant south of the border in the industrial city of Monterrey.
“As we announced earlier this year, Dematic has expanded its manufacturing capabilities to facilities in Monterrey, Mexico,” the company said in a statement Wednesday to McClatchy. “This move will help to further increase our global competitiveness and secure highly-skilled engineering jobs based in Grand Rapids.”
The statement, which seemed to imply that it was moving some jobs to save others, didn’t directly answer the question from McClatchy about how many jobs would be transferred to Mexico, and whether Trump’s threats are making the company rethink options.
Dematic President John Baysore told local media on Nov. 28, a day before Trump’s Carrier announcement, that the Grand Rapids plant would continue to operate through fall of 2017. He cited new orders, not Trump’s threats, for the delayed closure. This too was not confirmed in the statement, which instead offered a general commitment to the city and manufacturing in the United States.
“With thriving operations in 14 states, we remain committed to the U.S. and to Grand Rapids, where our company was founded more than 75 years ago,” the Dematic statement said.
Philadelphia auto parts maker Cardone also announced earlier this year that it would build its brake calipers in Mexico, eventually leaving more than 1,300 men and women without a job.
“That plan hasn’t changed,” said Kevin Feeley, a spokesman, who said manufacturing in Pennsylvania of other products would continue. The layoffs began last year, he said, and will run through spring of 2018.
And that threat by Trump to go after companies that move production to Mexico?
“We would respectfully decline to offer an opinion,” said Feeley.
Trump hasn’t mentioned Cardone and Dematic. The only company he has mentioned since the Carrier announcement is Rexnord Corp., a maker of industrial bearings.
Trump criticized the Milwaukee-based company, which manufactures for the auto and aerospace sectors among others, for plans to move operations from Indianapolis to Mexico, “viciously firing” 300 workers in the process.
Rexnord officials did not return a request for comment.
Cardone and Dematic underscore why the issue of where companies manufacture is not black and white.
Both manufacture in the United States and Mexico. They also supply manufacturers in both countries and in Canada, something that the North American Free Trade Agreement intended.
Trump has railed against Ford Motor Corp. for what he said were plans to shift production from a Kentucky factory to Mexico. Ford never intended to close a Kentucky plant and actually pioneered auto manufacturing in Mexico decades ago. The auto sector alone now accounts for more than 6 percent of the broader Mexican economy.
Both Ford and Chrysler are in the process of shifting much of their small car production to Mexico, where they also sell more of these smaller, less-expensive vehicles. At the same time, executives have said they are relocating some pickup truck manufacturing in the United States, where sales are better.
Vice President-elect Mike Pence has said Trump will make decisions on a day-by-day basis as to whether he spotlights a company looking to shift production.
What’s clear is that companies are now afraid of advertising what their plans are, fearing unwanted attention from Trump.
“I don’t think you’re going to get a lot of names now, because people are trying to stay out of the papers,” said Olivia Varela, executive director of the Laredo Development Foundation at the Texas-Mexico border.
She’s working with auto parts makers and health care companies on production relocations that will operate at and across the Texas border. But Varela said she’s bound by confidentiality agreements from disclosing company names.
Given that NAFTA took effect more than two decades ago, Varela said, there aren’t many U.S. manufacturers contemplating a first-time move to Mexico. Most have been there for some time and looking to grow their presence.
“It’s more expansions than real start-ups,” she said. “We’re seeing expansion from companies that have been in Mexico for quite a number of years, and are either shifting lines, adding lines or just moving them around.”