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Tue August 14, 2012
Inside Offshoring, Part 2: The Impact on Attleboro
For companies looking to increase their profits or even stay afloat, sending jobs overseas "is only business." But for the individual in the job market, business decisions become deeply personal. That contrast is what makes the 2012 presidential race all the more interesting — it pits President Barack Obama's record on job creation against Mitt Romney's history at Bain Capital, where offshoring jobs was, and is, a business strategy. The lasting impact of that business strategy can be seen in the town of Attleboro, Mass.
Offshoring Creates Unemployment in Attleboro
Step into Morin's restaurant, and you will have arrived at a permanent fixture in the Attleboro community. Textile workers, teachers and farmers have passed through its doors over its 100-year history. But even this landmark has seen a significant decline in business with the disappearance of thousands of manufacturing jobs at Sensata Technologies, which makes sensor devices for automobiles and planes.
"We definitely saw a dropoff in business from them," said Bill Morin, who works for the family business.
“We're still a staple in Attleboro, but yeah we definitely feel it during lunch time,” Morin explains. “My father misses a lot of familiar faces that he doesn't see anymore. [We] just lost a little sense of community — people that came to the same place everyday to have lunch and then go back to work — well, unfortunately we lost a little bit of that.”
The U-Haul store on Pleasant Street is one business making gains in Attleboro. Manager David Battapaglia knows his clients are former Sensata employees moving out of the area. But where do they go?
"Primarily the lower 48 states up to Alaska, Hawaii. We've had people come in who were moving overseas,” Battapglia remembers. “They were looking for products, boxes, and they want to start shipping their stuff. Clothes, small pieces of furniture. Stuff like that."
After speaking with Battapglia and Morin, I was curious to learn more about those moving out of Attleboro: the people who placed their lives in boxes and packing crates as workers in China, Mexico, Brazil and elsewhere began to perform their old jobs.
With a list of former Sensata employees who were among the last to be laid off between 2009 and 2011, I set out to understand how offshoring affected their lives.
After a few failed attempts, I managed to locate former employee Agustus Silvia at his house in Raynham, Mass. He worked at Sensata and the company that preceded it, Texas Instruments, for 35 years. When I approached him, Silvia did not want to comment on Sensata's role in offshoring his job, objecting, "Nah, I got nothing to say about it. I don't. I don't. I really don't."
One current Sensata employee, with whom I spoke with in confidence, said that mandatory confidentiality agreements were responsible for the brick wall I ran into when trying to get information from Sensata workers in Attleboro who were either laid off or forced into retirement.
The Corporate Rationale Behind Offshoring
Pulling into the parking lot of Sensata at twilight, there are only three or four cars in the massive space, which used to be filled with shiny automobiles.
That was when Sensata ran a second, and even a third, manufacturing shift.
I came to meet with Sensata CEO and board president Tom Wroe, and I hoped he would explain his company's offshoring business strategy; one that is a lightning rod in this presidential election.
"Sensata has a history of globalization,” Wroe begins. “I'm going to refer to it from this point on as globalization rather than offshoring."
Wroe is a heavy-set, confident man. He started at Sensata when the company was run by Texas Instruments and made the transition after Bain Capital bought TI's Sensors and Controls division in 2006. At that time, offshoring in Attleboro was well underway.
"What we saw in the late ‘80s was we began to see entire markets migrate out of the U.S., so we began to move to follow them,” Wroe explains. “[We] established locations in Mexico, in Korea, in China in order to be closer to the customer, shorten the supply chain, get a competitive cost base — no doubt about that because it was more cost-effective. And do battle with emerging competitors who were U.S.-based and now all of a sudden were new and emerging in other areas."
Offshoring at Sensata accelerated under Bain's stewardship. Today the Attleboro headquarters employs about 900. At its height, this facility had at least 5,000 employees. Most of those jobs — part of the manufacturing output at this company — are long gone.
"[The jobs] shifted when the markets shifted, basically,” Wroe observes. “So our manufacturing centers are now in Mexico, China and Bulgaria."
An engineer by trade, Wroe makes no apologies for the offshoring of U.S. manufacturing jobs. Instead, he states, "It's the reality of where the markets are, and it's the reality of how you can be competitive from a purely cost perspective. "
In Wroe's world of globalization, is there a strategy for maximizing profits through offshoring? While jobs have decreased dramatically in Attleboro, Sensata's overall workforce has jumped from 6,500 to 12,000 worldwide. But according to a recent Salon.com analysis, only nine percent of those jobs remain in the United States.
"In general, private equity firms don't make a secret about [offshoring],” explains Dan Primack, senior editor at Fortune Magazine. “[They] see something that they think is bloated and they think they're spending too much money, sometimes on facilities, sometimes on people. In the case of Sensata, clearly they thought it was about people."
Sensata Offshores Jobs in Illinois
In recent years, Sensata has made lots of profit for its shareholders. The company generated more than $2 billion in revenue this year and 10 percent growth overall. Three of Sensata's nine directors are Bain Capital executives, including Edward Conard, Mitt Romney's former partner at Bain and an outspoken advocate of offshoring. In the wake of Bain's Sensata acquisition, four buyouts expanded the company's operations. One buyout included the purchase of Honeywell's Automotive Division in the economically struggling town of Freeport, Ill.
"I've been with Honey and Sensata a combination of 33 years. We make switches for Chrysler and GM," says longtime Honeywell employee Cheryl Randecker.
But Randecker’s seniority didn’t save her from outsourcing when the companies merged. "After they signed the papers — which I believe was on a Thursday — the following Monday in January we were told, 'Welcome to Sensata,’” Randecker remembers. “Shortly after that little phrase, we were told 'We're outsourcing everybody by the end of 2012. Everything will be gone. We are moving to Mexico and China.'"
Randecker says she was then sent overseas "to train the Chinese.”
Political independent Cheryl Randecker is just one of 170 Sensata employees in Illinois who will lose their jobs 3 months from now. The jeopardized employees, who will only receive up to six months severance, have appealed directly to GOP presidential candidate Mitt Romney for help.
"I would like to see him come and talk to the workers,” Randecker says. “Not as a political thing, because with him being so closely tied to Bain — whether he wants to admit it or not — I think he could with his influence maybe offer the workers here a little better package."
Romney, the effective leader of Bain until 2002, was on a bus tour through Illinois in July, but he bypassed Freeport. Disappointed Sensata workers in Freeport are now considering traveling to Attleboro to appeal to CEO Tom Wroe directly.
Wroe argues that the imminent layoffs should not have come as a surprise to Freeport workers.
"[As] we talked to our people in Freeport, the original intent of that was to consolidate our operations into those large, existing plants to be able to get the efficiencies associated with how we run our business,” Wroe explains. “In addition, 70 percent of the revenue was associated with the Freeport-based business, which was really speed- and position-sensing, is outside the United States."
Freeport workers argue that Wroe's most recent salary and his additional compensation of more than $4 million suggest that the layoffs of 170 American workers aim to make money for executives, investors and shareholders and not to increase efficiency.
Sensata Offers Employees an Ultimatum
In 2009, Sensata manufacturing workers in Attleboro faced a similar dilemma as Freeport workers. By 2011, they were all gone. After several days of knocking on doors in the Attleboro area, I found a former employee willing to tell that story. We met in the parking lot of a local library.
After more than 30 years of working for Texas Instruments and Sensata, the former employee said he was given a choice: either be laid off or agree to a retirement package.
He tells his story in part three of our series.