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<h1>Romney’s Bain Capital invested in companies that moved jobs overseas</h1>
<h3>
By <a href="http://www.washingtonpost.com/tom-hamburger/2012/03/05/gIQABXKfTS_page.html" rel="author">Tom Hamburger</a>, <span class="timestamp updated processed">Published: June 21</span>
</h3>
<p style="color:rgb(0,0,153)"><b>Mitt Romney’s financial company, Bain Capital, invested in a series
of firms that specialized in relocating jobs done by American workers to
new facilities in low-wage countries like China and India.</b></p>
<p>During the nearly 15 years that Romney was actively involved in
running Bain, a private equity firm that he founded, it owned companies
that were pioneers in the practice of shipping work from the United
States to overseas call centers and factories making computer
components, according to filings with the Securities and Exchange
Commission.</p><p>While economists debate whether the massive
outsourcing of American jobs over the last generation was inevitable,
Romney in recent months has lamented the toll it’s taken on the U.S.
economy. He has repeatedly pledged he would protect American employment
by getting tough on China.</p><p style="color:rgb(255,0,0)"><b>“They’ve been able to put American
businesses out of business and kill American jobs,” he told workers at a
Toledo fence factory in February. “If I’m president of the United
States, that’s going to end.”</b></p><p>Speaking at a metalworking factory
in Cincinnati last week, Romney cited his experience as a businessman,
saying he knows what it would take to bring employers back to the United
States. “For me it’s all about good jobs for the American people and a
bright and prosperous future,” he said.</p><p>For years, Romney’s
political opponents have tried to tie him to the practice of outsourcing
American jobs. These political attacks have often focused on Bain’s
involvement in specific business deals that resulted in job losses.</p><p style="color:rgb(0,0,153)"><b>But
a Washington Post examination of securities filings shows the extent of
Bain’s investment in firms that specialized in helping other companies
move or expand operations overseas. While Bain was not the largest
player in the outsourcing field, the private equity firm was involved
early on, at a time when the departure of jobs from the United States
was beginning to accelerate and new companies were emerging as
handmaidens to this outflow of employment.</b></p><p>Bain played several
roles in helping these outsourcing companies, such as investing venture
capital so they could grow and providing management and strategic
business advice as they navigated this rapidly developing field.</p><p>Over
the past two decades, American companies have dramatically expanded
their overseas operations and supply networks, especially in Asia, while
shrinking their workforces at home. McKinsey Global Institute estimated
in 2006 that $18.4 billion in global information technology work and
$11.4 billion in business-process services have been moved abroad.</p><p>While
the export of jobs has been disruptive for many workers and communities
in the United States, outsourcing has been a powerful economic force.
It has often helped lower the prices that American consumers pay for
products and created a global supply chain that has made U.S. companies
more nimble and profitable.</p><p>Romney campaign officials repeatedly
declined requests to comment on Bain’s record of investing in
outsourcing firms during the Romney era. Campaign officials have said it
is unfair to criticize Romney for investments made by Bain after he
left the firm but did not address those made on his watch. In response
to detailed questions about outsourcing investments, Bain spokesman Alex
Stanton said, “Bain Capital’s business model has always been to build
great companies and improve their operations. We have helped the 350
companies in which we have invested, which include over 100 start-up
businesses, produce $80 billion of revenue growth in the United States
while growing their revenues well over twice as fast as both the S&P
and the U.S. economy over the last 28 years.”</p><p>Until Romney left
Bain Capital in 1999, he ran it with a proprietor’s zeal and attention
to detail, earning a reputation for smart, hands-on management.</p><p>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.</p><p>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. Bain was initially a minority shareholder in
Stream and was active in running the company, providing “general
executive and management services,” according to SEC filings.</p><p>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.
“The Company believes that the trend toward outsourcing technical
support occurring in the U.S. is also occurring in international
markets,” the SEC filing said.</p><p>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.</p><p>Bain sold its stake in Stream in 2001, after the company further expanded its call center operations across Europe and Asia.</p><p>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.</p><p>Modus Media grew rapidly.
In December 1997, it announced it had contracted with Microsoft to
produce software and training 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.</p><p>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.</p><p>
“Technology companies, in particular, have increasingly sought to
outsource the business processes involved in their supply chains,” the
filing said. “<span>. . . </span>We offer a range of services that provide our clients with a one-stop shop for their outsource requirements.”</p><p>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.</p><p>The global expansion that began while Romney was at
Bain continued after he left. In 2000, the firm announced it was opening
a new facility in Guadalajara, Mexico, and expanding in China,
Malaysia, Taiwan and South Korea.</p><p>In addition to taking an
interest in companies that specialized in outsourcing services, Bain
also invested in firms that moved or expanded their own operations
outside of the United States.</p><p>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 it
public. 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.</p><p>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 SMTC Corp., 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.</p><p>In its prospectus
that year, SMTC explained that it was in a strong position to meet the
swelling demand from other manufacturers for overseas production of
circuit boards. The company said that communications and networking
companies “are dramatically increasing the amount of manufacturing they
are outsourcing and we believe our technological capabilities and global
manufacturing platform are well suited to capitalize on this
opportunity.”</p><p>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.</p><p>A filing with the SEC revealed the promise that
Chippac offered investors. “Historically, semiconductor companies
primarily manufactured semiconductors in their own facilities,” the
filing said. “Today, most major semiconductor manufacturers use
independent packaging and test service providers for at least a portion
of their <span>. . . </span>needs. We expect this outsourcing trend to continue.”
</p><p>
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</p><p>Research editor Alice Crites contributed to this article.</p></div>
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