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 such as 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 outsourcing of American jobs over the last generation was inevitable, Romney in recent months has lamented the toll it has taken on the U.S. economy. He has repeatedly pledged he would protect American employment by getting tough on China.
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 work forces at home.
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.
OBAMA SEIZES ON REPORT
President Barack Obama seized on the Post’s report Friday to launch a new attack on Romney.
“Today it was reported inThe Washington Post that the companies his firm owned were pioneers in the outsourcing of American jobs to places like China and India - pioneers!” Obama told a crowd of 2,500 at Hillsborough Community College in Florida. “Tampa, we do not need an outsourcing pioneer in the Oval Office. We need a president who will fight for American jobs and fight for American manufacturing. That’s what my plan will do. That’s why I’m running for a second term as president of the United States.”
Earlier Friday, the Romney campaign sharply criticized the Post report. Romney spokesman Andrea Saul called it a “fundamentally flawed story that does not differentiate between domestic outsourcing versus offshoring nor versus work done overseas to support U.S. exports.”
Saul continued: “Mitt Romney spent 25 years in the real world economy so he understands why jobs come and they go. As president, he will implement policies that make it easier and more attractive for companies to create jobs here at home. President Obama’s attacks on profit and job creators make it less attractive to create jobs in the U.S.”
Before the article was published, the Romney campaign declined at least six requests for comment, starting three days before the story appeared. Before publication, the Post provided the campaign with the names and details of the companies that would likely be mentioned in the story.
After Obama’s speech in Tampa, the Romney campaign issued a further statement, saying Obama “continued to talk about anything but his record on the economy.”
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 whichwe have invested, which include over 100 startup 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.”
OVERSEAS CALL CENTERS
Bain’s foray into outsourcing began in 1993 when the private-equity firm took a stake in Corporate Software Inc. after helping to finance a $93 million buyout of the firm. Corporate Software, which catered to technology companies such as Microsoft, provided a range of services including outsourcing of customer support. Initially, Corporate Software 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, Corporate Software 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.
Stream continued to expand its overseas call centers. Bain 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.
In December 1997, Modus Media 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 that it was performing outsource packaging and hardware assembly for IBM, Sun Microsystems, Hewlett-Packard Co. and Dell Computer Corp. The filing disclosed that Modushad 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.
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’ 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.
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 that it was expanding production in Ireland and Mexico.
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.” Information for this article was contributed by Alice Crites and David Nakamura of The Washington Post.
Front Section, Pages 2 on 06/23/2012