The Bain Capital Wars Move Offshore, Part Two

James Pethokoukis has cast doubt on claims by the Washington Post that, while at Bain Capital, Romney was involved with companies that were sending jobs overseas. As I discussed here, the Post relied on six Bain-related companies: Computer Software Inc. (CSI), Stream Internationl, Modus Media, GT Bicycle, SMTC Corp., and Chippac. Let’s look at each of them.

CSI — The Post says that CSI provided companies like Microsoft with a range of services including outsourcing of customer support. Initially, CSI employed U.S. workers to provide these services but by the mid-1990s, it was setting up call centers outside the country. However, Pethokoukis says (per “a source familiar with Bain’s activities”) that CSI provided call centers, help desks, and the like in the U.S. The international component of its business involved reselling U.S. software in European markets. Naturally, this work would be performed mainly by Europeans. If Pethokoukis’ source is right, there was no “offshoring” here.

Stream International — The Post says that by 1997, Stream was running three tech-support call centers in Europe and was part of a call center joint venture in Japan. It continued to expand its overseas call centers thereafter. But Pethokoukis’ source says that these overseas call centers serviced international customers of U.S. companies in their local languages. I think this qualifies as work Americans can’t do.

Modus Media — According to the Post, this company specialized in helping companies outsource their manufacturing. In December 1997, the company announced it had contracted with Microsoft to produce software and training products at a center in Australia, and 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.

But Pethokoukis’ source says that Modus Media helped companies like Microsoft and IBM sell their products internationally. Products destined for American consumers were manufactured in the U.S. If so, the facts pertaining to Modus Media are considerably less lurid than the Post depicts them.

GT Bicycle — This company, says the Post, used Asian labor. But apparently this was already the case when Bain purchased it, so Bain was not involved in offshoring. The Post adds that GT Bicycle eventually was sold to Schwinn, which had also moved much of its manufacturing offshore. Again, this involved no offshoring by Bain.

SMTC Corp. — The Post reports that within a year of being taken over by Bain, SMTC told the SEC it was expanding production in Ireland and Mexico. But this occurred after Romney had left Bain.

Chippac — According to the Post, 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 Asian-made computer chips. An overwhelming majority of Chippac’s customers were U.S. firms, including Intel, IBM and Lucent Technologies.

Chippac had been a subsidiary of Hyundai. Just as Romney was leaving the company, Bain purchased it. The Asian factories were already in place — they were part of what Bain purchased. Thus, no American jobs were offshored.

In sum, the Washington Post appears to have vastly overstated, and in some instances very possibly misstated, its case (and Obama’s) against Mitt Romney.

JOHN adds: I don’t doubt that all of the above is true, but I think a more fundamental point should be made: there is absolutely nothing wrong with a company that has its headquarters in the United States also having facilities, whether manufacturing, call centers, local distribution centers, local subsidiaries, or whatever, located in other countries. If there are Americans who actually don’t get this, they need to grow up. Business these days is largely international. I recently bought my wife a new BMW; it was manufactured in South Carolina. Is BMW “shipping jobs overseas” from Germany? I trust that Germans are not dumb enough to ask that question. There was a brief moment when the Democratic Party, led by Bill Clinton, could plausibly claim to have a halfway-sophisticated understanding of economics. Those days, no doubt overrated at the time, are now entirely gone, and today’s Democratic Party stands for know-nothing demagoguery. Those who have some idea how the world works need to stand up to the Democrats’ ignorance.

PAUL adds: I agree, and so argued here. Unfortunately, there are many Americans who, I think, don’t get this. Many of them will vote in November, before they have had enough time to grow up.


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