Obama Campaign Outsources Outsourcing Attack to Super PAC

Jun 27, 2012 12:16pm

President Obama’s campaign already has an ad accusing Mitt Romney of “outsourcing” jobs. Then The Washington Post ran a story that said while Romney ran Bain Capital, the firm invested in companies that were “pioneers” of shipping jobs overseas. While the Romney campaign debated the difference between outsourcing and offshoring, Obama himself made fun of the war of words at a campaign rally. And the Obama campaign then made a new ad, regurgitating the thrust of the Post story and calling Romney an “outsourcer-in-chief.”

Now Obama’s super PAC is trying to make the label stick. Bill Burton, the Priorities USA Action super PAC leader who was Obama’s White House press aide, writes in one of his memos to “interested parties” that Romney’s campaign “feigns semantic outrage” over the outsourcing-offshoring dispute. (Remember, the campaign and the super PAC definitely don’t coordinate stuff!)

Get more pure politics at ABC News.com/Politics and a lighter take on the news at OTUSNews.com

Here’s the super memo:

Last week’s Washington Post article on Mitt Romney profiting from companies involved in shipping jobs overseas clearly has the Romney Campaign concerned. Unlike their usual approach of simply not responding to any questions from reporters, the Romney Campaign has been forced to engage.

Their argument goes something like this: The Romney-owned companies that shipped jobs overseas also did other things, such as relocating jobs around the US. Instead of addressing the actual concern about jobs moving overseas, the Romney Campaign feigns semantic outrage over an issue that was never raised.

The Romney Campaign’s response to confirmed news reports of shifting jobs overseas is deceptive, irrelevant, and intentionally confusing.

The new response comes after the Washington Post reported that, “Romney campaign officials repeatedly declined requests to comment on Bain’s record of investing in outsourcing firms during the Romney era.”

Here are the facts:

In 1993, Romney invested in a company that ran call centers for technology companies. “Initially, CSI employed U.S. workers to provide these services but by the mid-1990s was setting up call centers outside the country.”

In a venture related to CSI, Romney’s firm controlled and profited from Modus Media, a company that specialized in outsourcing. That included helping US companies open manufacturing in Singapore, South Korea, Japan and Taiwan.

In 1987, Romney took over Holson Burnes, a maker of frames and photo albums. Under Romney, the firm fired hundreds of workers and, “By 1992, the company manufactured nearly 75 percent of its photo frames overseas, according to documents filed with the Securities and Exchange Commission.”

In 1993, Romney took over and profited from GT Bicycle. The company relied on factories in Asia to produce products it sold in the United States.

In 1998, Romney negotiated the purchase of a company that manufactured computer chips overseas to sell to US customers.

In another company related to CSI, Romney invested in Stream International. “Stream immediately became active in the growing field of overseas calls centers.”

In 1998, Romney negotiated the acquisition of SMTC. Shortly thereafter, the company shifted jobs to Mexico.

Background

WP: Bain Capital invested in Corporate Software, Inc., which began outsourcing jobs in the mid-1990s. According to the Washington Post, “Bain’s foray into outsourcing began in 1993 when the private equity firm took a stake in Corporate Software Inc., or CSI, after helping to finance a $93 million buyout of the firm. CSI, which catered to technology companies like Microsoft, provided a range of services including outsourcing of customer support. Initially, CSI employed U.S. workers to provide these services but by the mid-1990s was setting up call centers outside the country.” [Washington Post, 6/21/12]

Associated Press: Romney and Bain Made Millions While New Hampshire Workers Saw Their Jobs Shipped Overseas. According to The Associated Press, “More than two decades ago, Mitt Romney’s business venture came to town with a bounty of highly anticipated manufacturing jobs. The new plant, just past the gas station off Interstate 85, needed skilled workers to churn out thousands of photo albums. Four years later, the Holson Burns Group Inc. — the company controlled by Romney’s Bain Capital LLC — closed the factory and laid off about 150 workers. Some jobs were sent north, where months later many of those were also eliminated. Other operations went overseas. But Bain walked away with millions in profits.” [Associated Press, 12/19/11]

Associated Press: Romney and Bain Shut Down New Hampshire Plant, Shifted Work Overseas According to the AP, “Just as executives closed down operations here and sold its South Carolina factory to the Bic Corp., residents 900 miles away in Claremont, N.H., were preparing for the new jobs. The company said in spring 1992 that the expansion in Claremont “will allow us to focus our attention on our rapidly growing base” of products. But the prospect of new jobs — similar to expectations in Gaffney — was short lived. Within seven months, Holson Burnes began issuing furloughs to half its Claremont employees. Even if things looked up, the company told its workers, it would not rehire most of its clerical or managerial staff. Exact numbers of layoffs were never announced. Some workers estimated that 85 to 100 employees were affected, telling the local Claremont Eagle Times that entire departments had been “decimated.” The cost-cutting continued at Holson Burnes. By 1992, the company manufactured nearly 75 percent of its photo frames overseas, according to documents filed with the Securities and Exchange Commission. One of the company’s clock-making divisions also shipped work overseas from a Rhode Island plant.” [Associated Press, 12/19/11]

Corporate Software, Inc. eventually merged with another company to form Stream and continued to expand its outsourcing practices. According to the Washington Post, “Two years after Bain invested in the firm, CSI 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. [...] 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. And Bain’s role also grew with time. It ultimately became the majority shareholder in Stream in 1999 several months after Romney left Bain to run the Salt Lake City Olympics.” [Washington Post, 6/21/12]

Bain Capital was closely involved with the outsourcing practices of Modus Media, another portfolio company. According to the Washington Post, “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. Modus Media grew rapidly. In December 1997, it announced it had contracted with Microsoft to produce software andtraining 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 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. [...] 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’s 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.” [Washington Post, 6/21/12]

GT Bicycles relied on Asian labor to produce bicycles. According to the Washington Post, “Bain also invested in firms that moved or expanded their own operations outside of the United States. One of those was a California bicycle manufacturer called GT Bicycle Inc. that Bain bought in 1993. The growing company relied on Asian labor, according to SEC filings. Two years later, with the company continuing to expand, Bain helped take itpublic. In 1998, when Bain owned 22 percent of GT’s stock and had three members on the board, the bicycle maker was sold to Schwinn, which had also moved much of its manufacturing offshore as part of a wider trend in the bicycle industry of turning to Chinese labor.” [Washington Post, 6/21/12]

Within a year of SMTC Corp. merging with a Bain Capital portfolio company, SMTC announced it was expanding operations in Ireland and Mexico.  According to the Washington Post, “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 SMTCCorp., 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 it was expanding production in Ireland and Mexico.”  6/21/12]

Romney Negotiated Deal to Purchase Company Manufacturing Chips Made in China to Sell in US. According to the Washington Post, “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.” [Washington Post, 6/21/12]

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