A slap from the state’s largest employer over the high cost of doing business
With a public slap delivered on Wall Street, United Technologies Corp. has embarrassed Connecticut and given new force to old grievances about the state’s business environment.
Gov. M. Jodi Rell expressed a mix of disappointment and understanding as she publicly commented for the first time Tuesday on complaints by the state’s largest employer to stock analysts last week about the high cost of doing business in Connecticut.
But with the Rell administration winding down and the legislature struggling with a budget crisis, there seems little likelihood of a deeper self-examination by the state, which ranked 50th for job creation from 1989 through the recent recession.
“It’s a difficult place to do business. You can’t get people to respond. There is no urgency,” said Fred V. Carstensen, the director of the Connecticut Center for Economic Analysis. “We’re so parochial, so insular.”
Carstensen, who frequently consults with businesses in Connecticut, said the Democratic legislature and Republican governors are uniformly described as distant and unresponsive.
“I am completely bipartisan in my criticism,” he said. “I don’t see anybody in Hartford…who seems to get it.”
He said he was waiting to see Rell and the legislature act on recommendations made in December by the legislature’s Program Review and Investigations Committee on economic competitiveness.
Gregory Hayes, the chief financial officer for UTC, included Connecticut among the high-cost locations where the conglomerate does business in comments to analysts last week, then he singled out the corporation’s home state for special scorn.
As far as cheaper locales, he offered “anyplace outside of Connecticut.”
Sen. Gary D. LeBeau, D-East Hartford, the co-chairman of the Commerce Committee, called the comment a gratuitous and devastating line to share with a national audience on Wall Street.
“I couldn’t think of anything more damaging,” said LeBeau, whose district is home to Pratt & Whitney.
“It’s not helpful, that’s for sure,” said Joan McDonald, state commissioner of economic development.
UTC declined to offer specifics about Hayes’s complaints or make any comment about Connecticut’s business environment.
Rell spoke privately Tuesday to Louis Chenevert, the chairman and chief executive officer of UTC, but she said that the executive did not ask her for any assistance or policy change.
“I had a very interesting conversation with him. He was reminding me of the high cost of doing business in this state,” Rell said. “I reminded him about the good quality of life that we have in this state and the fact we have, that his company and his executives and his employees have done very well by the state of Connecticut.”
Rell said that Chenevert told her he was under pressure from his customers, which include branches of the U.S. military that power airplanes with Pratt engines, to find lower-cost places to do manufacturing.
The governor said Chenevert “talked about the cost of contracts and how his customers, including the federal government, military contracts, are demanding that they cut costs. In fact, they are even looking at costs in Connecticut as compared to, say, Georgia and saying you can get a better deal if this engine is built in Georgia.”
Rell said Chenevert accepted her invitation to meet with her and legislative leaders.
“He said he would be glad to do that,” Rell said. “But I also have to tell you that — I don’t want to say he was skeptical-but he has met with leaders before. He does not feel he has always been responded to in a appropriate manner. And frankly I can’t blame him.”
The Rell administration offered Pratt a package of economic assistance when it announced plans to transfer out of state work from an engine plant in Cheshire and a repair facility in East Hartford, but it was declined.
McDonald said the company’s biggest concerns seemed to be the cost of labor and electricity, two issues largely beyond the state’s control.
Corporate taxes were not mentioned, she said. The state’s corporate tax rate is among the lowest in the nation.
Hayes’ comments infuriated some at the Capitol and raised concerns among the corporation’s unionized workforce in Connecticut, which is facing contract talks at two UTC divisions, Pratt & Whitney Aircraft and Hamilton Sundstrand.
“I saw it as very anti-union,” LeBeau said. “I don’t think the costs that UTC is talking about are costs controlled by the state of Connecticut.”
Its costs are controlled by union contracts, he said.
“We just opened negotiations today with Hamilton Sundstrand. We exchanged proposals,” said Jim Parent, a spokesman for the Machinists union. “We’re concerned about the comments.”
Parent said his members are afraid their employer sees its future in other states and overseas.
Pratt’s employment in the state is down to 3,700 union workers, down from 11,000 in 1993, he said.
“When I was hired in ’65, there were 22,000 blue-collar workers at Pratt in East Hartford alone,” Parent said.
Carstensen said he was sympathetic towards UTC, but he also felt that the corporation undervalues the high-productivity it gets out of its Connecticut work force.
Senate Minority Leader John P. McKinney, R-Fairfield, called UTC’s public complaints healthy.
“It’s damaging, of course. But it’s also reality,” McKinney said. “I am more appreciative of UTC’s outspokeness and honesty, because what’s been happening over the last decade is businesses have been leaking jobs out of Connecticut without anyone noticing it.”
Senate Majority Leader Martin M. Looney, D-New Haven, said he was unsure if UTC truly was the case study that would point to changes Connecticut needs to make to retain and expand its businesses.
“UTC has become more and more an international business,” he said of the company’s markets. “Many of those countries demand as a price of access that some operations be done in those countries.”
Carstensen said the state has many issues to confront beyond the cost of its labor. Unlike other states, he said, Connecticut does a poor job matching its education programs to the needs of business.
The state also has a poor reputation among businesses for stability.
“I’ve had business people say to me they can go to every other state in the country and they know when they get a deal, the deal is real. In Connecticut, you cannot get a reliable commitment,” he said.
Carstensen said Rell recently undermined one of the state’s economic development successes by proposing that the state suspend its annual $10 million contribution into a $100 million fund to encourage stem cell research.
The stem cell funding was an example of the state encouraging a sector of the economy instead of offering aid to a single company, an approach increasingly out of favor in other states, he said.
“What’s wrong with these people?” he asked. “If anything, we ought to be expanding the funding.”
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