The American Enterprise Institute’s Jim Pethokoukis sets the Washington Post right…for now….
Sorry, Washington Post, Romney didn’t get rich moving U.S. jobs overseas
In what is meant to be a bombshell political story, the Washington Post is attempting to paint Republican presidential nominee Mitt Romney as a private equity boss who got rich by shipping American jobs overseas.
Or maybe this was a story just too politically juicy to properly check.
But whatever the reason, WaPo World’s version of Romney’s business career at Bain Capital may not correspond with reality, via a source familiar with Bain’s activities as well as a detailed analysis of the piece.
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
Romney Reality: What CSI actually did was provide U.S. software developers with technical support and sales. Example: It provided domestic outsourcing — which is different than overseas offshoring — for call centers and help desks. As far as its international business goes, CSI was reseller of U.S. software in European markets. In other words, they helped distribute U.S. software around the world.
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. … 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. … 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.
Romney Reality: Those overseas call centers in the WaPo story were based in Europe and Japan, and serviced international customers of U.S. companies in their local languages.
3. WaPo World:
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. … 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. …
Romney Reality: Again, what Modus Media did was help companies like Microsoft and IBM sell their products internationally. Products destined for American consumers were manufactured here at home.
4. WaPo World:
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.
Romney Reality: This WaPo charge is particularly weak. Turns out GT Bicycles had overseas suppliers before Bain invested in the company. The story doesn’t outright suggest Bain moved jobs overseas, but it does lead readers to make that erroneous leap for themselves.
5. WaPo World:
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.
Romney Reality: As the story notes, SMTC wasn’t even acquired until months after Romney left Bain Capital. Is Romney running for president or is Bain?
6. WaPo World:
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.
Romney Reality: Stop the presses! Chippac was purchased in March 1999, a month after Romney left Bain Capital. Prior owner was Hyundai, a South Korean company that already had factories in Asia at the time of sale. So buying a company with foreign factories is the same, apparently, as “shipping jobs overseas,” according to the Washington Post.
And that’s it. That’s the big story that’s supposed to derail Romney campaign, I guess. Instead of the headline “Romney’s Bain Capital invested in companies that moved jobs overseas, ” perhaps the WaPoheadline should have been something different.
Some more accurate options:
– “Romney’s Bain Capital invested in companies that expanded overseas jobs overseas after he left”
– ”Romney’s Bain Capital invested in companies that had international employees before it bought them”
– “Romney’s Bain Capital invested in companies that created foreign call centers to deal with foreign customers”
And it’s also just bad economics to suggest offshoring is necessarily a job killer.As this study suggests, “Increased globalisation of manufacturing processes does not necessarily imply a hollowing-out of domestic production … Firms that go abroad expand employment at home relative to non-globalizers.”
Bad reporting, it would seem, and bad economics, absolutely, from The Washington Post.