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UTC Chief Financial Officer: Connecticut Too Expensive To Do Work

Eric Gershon

March 13, 2010

Connecticut's biggest private employer is determined to do more of its work outside its home state and other "high-cost" locations, top executives said Friday at an investors' conference in New York.

"Anyplace outside of Connecticut is low-cost," United Technologies Corp.'s chief financial officer, Gregory Hayes, told Wall Street investment analysts — paraphrasing previous remarks by another UTC executive, Jeff Pino, president of Sikorsky Aircraft.

"Even if work has to stay in the U.S., there are opportunities to reduce cost by moving out of those high-cost locations," Hayes said.

Hartford-based UTC employs 26,000 of its 205,000 workers in Connecticut, largely at Pratt & Whitney, Sikorsky and Hamilton Sundstrand.

UTC did not present a plan for reducing its home state employment base, and executives did not indicate that a plan is in the works, or that a specific division or group could be targeted.

In an interview with reporters later Friday, UTC chief executive Louis Chênevert insisted that the company would keep not only its headquarters in Connecticut for the foreseeable future — at least the 10 years he expects to remain in charge — but significant manufacturing operations also.

"The fact is, we're the largest employer in Connecticut and we will remain the largest employer in Connecticut for the next decade," he said in response to a question from The Courant. "And it's that simple."

The state's second-largest private employer, Stop & Shop, has about 15,000 employees in Connecticut.

The executives' remarks come as Pratt fights in a federal appeals court for permission to shut down one of its last three major Connecticut factories, in Cheshire. That factory and a smaller repair unit in East Hartford employ about 1,000 people. The jobs would be moved to Columbus, Ga., Singapore and Japan.

Chênevert suggested that UTC would not bear sole responsibility for making Connecticut a place where it would continue to operate.

"I think it's a known fact ... that Connecticut ranks almost dead last in competitiveness for manufacturing," he said. "And at some point, whatever the state can do to be helpful, maybe work with large companies like ours, is going to ensure that you have the optimal outcome for Connecticut."

The state in the past has presented incentive packages to UTC to save jobs, most recently last year as part of an unsuccessful effort to reverse the Cheshire decision.

How and whether state officials respond to the more general comments made Friday remains to be seen, but the office of Gov. M. Jodi Rell quickly issued a statement saying the remarks by UTC show the need to lower business costs in Connecticut.

"We need to cut spending and hold the line on taxes," the governor's office said. "It's really that simple."

But as UTC — among the world's largest and most complex firms — continues to remap its global footprint, its calculations are anything but simple. The company must weigh costs, but also international politics and shifting demand. These factors affect where it produces the jet engines, helicopters, elevators, air conditioners and related products and services that last year generated $53 billion in revenues.

UTC is investing heavily in operations in China, Turkey, Poland and elsewhere overseas where it sees demand for its products growing. The company, one of 30 members of the Dow Jones Industrial Average, also is increasingly bearing down on India.

But the engines, helicopters and parts that are headed for military use have to be made in the United States, though they can be made by foreign companies with operations in the United States.

Top UTC executives have complained for decades about the high cost of operating in Connecticut, especially in factory production work at Pratt.

In 1992, the company openly raised the possibility of sharply curtailing production in the state, and announced a plan to do so. A package of state tax breaks and other incentives saved thousands of jobs, but production work nonetheless declined in the years that followed.

In 1994, then-Pratt president Karl J. Krapek said Pratt would probably sell its 1,200-acre complex in East Hartford and move its headquarters to its Middletown plant by 2005, but that never came to pass.

In a 1997 speech to local business groups, George David, then UTC's CEO, said, "Manufacturing, I believe, is not in the future of the state of Connecticut," although he was referring to growth, not necessarily current operations.

UTC has in recent years maintained a stable workforce in its home state, in part by adding jobs at Sikorsky, despite job cuts at Pratt and Hamilton.

Sikorsky's local workforce has grown from 7,200 to 9,300 since 2003.

UTC also moved more than 1,500 Pratt engineering jobs from a plant in Florida to Connecticut in 1999. And when Hamilton bought Sundstrand, jobs moved from Illinois to Connecticut.

Of all the UTC divisions with major operations in Connecticut, Pratt has seen perhaps the most painful changes. There were about 15,000 state Machinists union employees at the jet engine maker two decades ago. The Machinists ranks have shrunk to 3,700 today, and Pratt is now trying to eliminate nearly 800 more Machinist jobs.

Pratt's story, like that of UTC as a whole, is one of globalization.

Just last year, Pratt opened two major new manufacturing operations in Shanghai and Istanbul. The company employs about 5,000 in Poland, said its president, David Hess — equivalent to about half of the division's Connecticut workforce.

Alain Bellemare, president of Hamilton Sundstrand, said his division had or is cultivating operations abroad, in Mexico, Puerto Rico, Russia, Poland, China and Singapore.

Pino, the Sikorsky president, reinforced the message that UTC finds Connecticut a burdensome place to do business.

"Generally, every place we go is lower cost than Connecticut," he said.

•Courant Staff Writer Mara Lee contributed to this story.