Company that Trump bashed isn't backing down

Company that Trump bashed isn't backing down
Posted at 11:14 AM, Feb 03, 2017

NEW YORK (CNNMoney) -- Donald Trump bashed Eaton, an industrial conglomerate with its roots in Cleveland, on the campaign trail because it merged with an Irish company a few years ago and then moved its headquarters out of Ohio to Dublin, Ireland.

Such a move allowed Eaton to lower its corporate taxes since Ireland has a much lower corporate tax rate than the U.S. But the company also became a target of Trump during the campaign.

"You know our companies are leaving our country, rapidly, rapidly, whether it's Carrier Air Conditioning, whether it's Ford, whether it's Eaton. I was in Cleveland and Eaton Corp., they're leaving, and so many companies are leaving," Trump said during his Super Tuesday speech last March.

"Frankly, I'm disgusted with it and I'm tired of seeing it and there's no reason for it. It's just gross incompetence at the highest level. We should not allow it to happen," he added.

Eaton had been domiciled in Cleveland before it bought Ireland's Cooper Industries in 2012. The company was also a target of Trump's opponent Hillary Clinton. She called out Eaton for shutting a factory in Berea, Ohio, which led to the loss of more than 100 jobs.

Clinton also criticized the company for paying its former CEO Sandy Cutler more than $11 million.

President Obama also wasn't a fan of deals that let U.S. companies move overseas, a practice called inversions. Obama called inversions "unpatriotic" and described the practice as "insidious."

But Eaton, which just reported its latest quarterly earnings on Thursday, isn't scared of these political attacks. In an interview with CNNMoney, CEO Craig Arnold defended his company's decision to expand globally.

The U.S. has only "5% of the world's population," said Arnold, who took over last June after Cutler retired. "If you take the long-term view, the better growth opportunities lie outside of the U.S. -- despite what may happen in the short-term," Arnold said.

Arnold added that even if Trump and the Republican-led Congress wind up changing tax laws that would allow U.S, firms to pay a lower rate if they brought back cash overseas to America, he has no plans to move Eaton's headquarters back to Ohio.

"The future of U.S. tax policy is a big uncertainty. There is no reason to re-invert the company right now. Plus, we pay taxes on all our U.S. income," he said.

Arnold said he has not had any discussions with the president or anyone in Trump's administration since the election, but that he is open to having a dialogue -- just like many other businesses have been.

And Eaton still has a major presence in the U.S. It sells electrical equipment, construction equipment, hydraulics and trucking parts.

Eaton may not be a household name, per se, but it is no slouch. It just reported annual sales of nearly $20 billion and the company is worth more than $30 billion.

The company also said it was proud of its record on jobs, pointing out that it had about 74,000 workers before the Cooper deal closed in 2012 and now has about 95,000 employees.

But Eaton does not break down where those jobs are. And the company has closed several plants in Iowa, Wisconsin and Ohio during the past few years, like the one in Berea that Clinton cited. In some cases, jobs have been outsourced to Mexico.

That might be problematic for Eaton in the Trump era, especially as Eaton and its competitors try to win various parts of any infrastructure contracts that the government puts up for bidding -- assuming that the stimulus actually makes it through Congress.

Could the Trump administration hold back on giving Eaton federal contracts unless it pledges to hire more American workers -- or even move its headquarters back to the U.S.?

Arnold said he is confident that there will be some form of stimulus -- and that his company would benefit.

But he also said he's a little concerned that investors -- and even companies -- are too optimistic about how much Trump will really be able to boost the economy.

"We've spent a lot of time looking at stimulus. But until the reality of this enthusiasm shows up in our order boos and our customers buy more, it's hard to predict how much it will impact us." Arnold said.

"The industry has been too optimistic in the past. We're not great forecasters," Arnold added. "We'll call the turn when we see it."