In a recent op-ed, Alex Molinaroli, president and CEO of Johnson Controls, explains that the company did not accept taxpayer money as part of the auto industry bailouts and elaborates on the company’s decision to merge with Tyco International.
While the column states the merger was not motivated by taxes, such corporate inversions – in which a company re-locates its tax domicile to a country with a lower corporate tax rate – have become increasingly common as companies struggle to remain globally competitive. The MacIver Institute has consistently urged lawmakers to fix America’s broken tax system.
“The failure to modernize the federal tax code has pushed American businesses to move overseas. Our politicians have failed us, not Johnson Controls,” MacIver Institute president Brett Healy said in a press release when the Tyco merger was announced. Last November, Healy also authored an op-ed urging lawmakers to reform the tax code to make America a competitive place to do business.
Molinaroli’s column is below.
In this political season, our recently announced merger with Tyco has become fair game. Unfortunately, it has been portrayed that Johnson Controls accepted money from the Federal government in 2008 as part of the U.S. auto industry bailout.
That is simply not true. Johnson Controls did not request and did not receive aid from the government during the financial crisis. Nor did the company declare bankruptcy.
In fact, Johnson Controls did not even request an appearance before Congress on this subject. Rather, we were asked by customers and the Senate Banking Committee to testify in 2008 on behalf of automotive suppliers on proposed government support to U.S. automakers, who were struggling due to the financial crisis.
As a representative of the broad supply chain, our President and Chief Operating Officer at the time, Keith Wandell, encouraged Congress to support the automakers, noting that failure of even one of them would have devastating consequences for the entire industry, including many U.S. suppliers, particularly many small, women, and minority-owned businesses.
Let me set the record straight for our customers, suppliers, employees as well as interested citizens by referring to what the company actually did, as stated in our 2008 testimony.
Truth: Johnson Controls was not in financial distress and did not request aid from the government.
The testimony: “We are diversified, profitable and have a strong balance sheet. Unlike many automotive suppliers, we would weather this storm.”
In fact, Johnson Controls testified that it was financially strong enough to step in and had taken action itself to help support the industry.
The testimony: “Recently, a minority supplier to Johnson Controls, Plastech Engineered Products, failed and went into bankruptcy. This supplier had $800 million of revenue…providing parts to 52 vehicle assembly plants. Had Johnson Controls and the first-tier lending group not acquired Plastech’s assets out of bankruptcy… the supplier would have been liquidated, and forced the shutdown of these 52 assembly plants.”
The company’s participation and testimony in the Senate hearing was focused on the overall auto industry, not on Johnson Controls.
The testimony: “Our main concern is that once cascading supply chain interruptions would begin, many suppliers will fail due to the interdependence of the supply chain. Many of the companies which would be impacted are small, women and minority-owned businesses.”
I encourage you to read the entire transcript, which is available on our company website, johnsoncontrols.com.
Since the financial downturn, Johnson Controls has played a vital role in the recovery and growth of the U.S. economy, and continued to thrive as a leading global multi-industrial company.
Johnson Controls has been and will remain a major employer in the U.S. with nearly 36,000 employees. Since the low point of the financial crisis, Johnson Controls employment in the U.S. has grown by 8,000 jobs.
And we continue to invest in the U.S., spending $400 – $600 million per year in capital expenditures. In recent years, the company invested an additional half billion dollars on new IT initiatives in the U.S. Including our equity joint ventures, our U.S. capital investments swell by another $100 – $200 million annually.
We spend approximately $500 million per year in the U.S. on research and development, including work to develop advanced battery technologies for hybrid and electric vehicles.
This fall, Johnson Controls will spin off its automotive seating business into the independent automotive seating company Adient. The two companies will continue to pay significant U.S. taxes — in excess of $300 million annually in federal and state income taxes as well as $50 to 100 million in property tax, sales and use tax and excise tax. In addition, the companies will continue to pay hundreds of millions in payroll taxes related to our U.S. employees.
At about the same time, Johnson Controls will merge with Tyco International, the next step in the company’s journey to grow in the U.S. and globally, drive innovation and make buildings smarter, more secure and energy efficient. This merger is not motivated by taxes, as has been suggested, but rather an incredible opportunity to combine two global leaders, which will lead to continued investments and expanded opportunities for our U.S. workforce.
While we will be separate companies, Johnson Controls and Adient remain committed to growing and investing in the U.S. We won’t allow distractions of the campaign season to divert us from the decisions we make every day to invest in channels, markets and products that create growth, serve customers and increase shareholder value.
The original editorial can be found on the Johnson Controls website.