The Washington Post is standing by its
reporting on Bain Capital’s outsourcing under Mitt Romney, and will not retract a recent story despite complaints from the Romney campaign.
“We are very confident in our reporting,” Post spokeswoman Kris
Coratti told TPM, adding that meetings with people concerned about
coverage are common.
Romney campaign officials on Wednesday met with top editors at
the Post to request the paper retract the story. According to Politico’s
Dylan Byers,
who broke the news
of the meeting, Romney staffers intended to argue that the article’s
charges were incomplete or inaccurate. The Romney campaign did not
respond to TPM’s request for comment.
The Obama campaign picked up the Post’s report as evidence that the campaign’s point about Romney has been made. David Axelrod
told reporters
last week that “[p]eople really have a fundamental choice in this
election. The question is, do they want an outsourcer-in-chief in the
Oval Office or do they want a president who’s going to fight for
American jobs and American manufacturing and the American middle class.”
The Romney campaign insists that the Post doesn’t make the
distinction between “outsourcing” and “off-shoring” — the latter being
when American firms are replaced by workers in off-shore locations. The
Post
reported that, according to SEC filings, Bain Capital under Romney owned companies that were “pioneers” in shipping jobs oversees.
Bill Burton, the head of the super PAC backing President Obama’s
reelection campaign, said it’s uncommon for campaign officials to seek a
retraction almost a week after publication. He said the Romney
campaign’s efforts were too little, too late.
“Their response came a week after the story ran, provided no factual
basis for their complaints and failed miserably because they had
repeatedly denied requests for comment on the front end,” Burton told
TPM in an email. “So basically, their response was neither rapid nor an
actual response.”
The Obama campaign did not immediately respond to TPM’s request for comment.
David Taintor
David Taintor is the Front Page Editor at TPM, where he contributes
to TPM's Livewire coverage, among other areas. David is from Chanhassen,
Minnesota, where, yes, it gets very cold. Reach him at taintor [at]
talkingpointsmemo.com
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.
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