Hope for the best in Johnson Controls-Tyco merger


Well, Milwaukee is losing another corporate headquarters. This time it’s Glendale-based Johnson Controls Inc., which will merge with Tyco International plc and will shift its global headquarters to Tyco’s legal domicile in Cork, Ireland.

The headquarters move, in what is known as a tax inversion, will save the company, to be known as Johnson Controls plc, $150 million a year in taxes.

It didn’t take long for politicians to cry foul at the news. Hillary Clinton called the Johnson Controls tax inversion plan “outrageous.”

“These efforts to shirk U.S. tax obligations leave American taxpayers holding the bag while corporations juice more revenues and profits,” she said.

The planned merger between Johnson Controls and Tyco International “would be a disaster for American taxpayers,” Sen. Bernie Sanders said in a statement. “These corporate inversions must stop.”

Clinton wants to place an “exit tax” on corporations that leave the country to lower their tax bill. Sanders last year introduced the Corporate Tax Dodging Prevention Act, which he says would end tax inversions like the Johnson Controls-Tyco arrangement.

These tax inversions clearly are bad for America, as the nation loses corporate headquarters and tax revenue. But could Clinton or Sanders really solve this problem? If elected, it wouldn’t be surprising to see them sign well-intended legislation that would have the unintended consequence of encouraging more companies to move overseas.

On the other hand, Republicans like Sen. Ron Johnson say the Johnson Controls-Tyco tax inversion shows that the U.S. corporate tax rate is too high. But what impact would a lower corporate tax rate have on the federal budget?

Indeed, something must be done to stop these inversions, but it must be a policy that makes the U.S. more competitive and is in the best interest of taxpayers.

Meanwhile, it remains to be seen exactly how this merger will impact the Milwaukee area, which Johnson Controls says will remain its operational headquarters. If the Ireland global headquarters remains just a small office to reap the tax benefits, perhaps Johnson Controls will maintain or even grow its presence here.

“It’s great that their leaders recognize that Milwaukee is the desired location for its operational headquarters,” Milwaukee Mayor Tom Barrett said. “I’m optimistic. We are going to work with them on a number of fronts to make sure we do everything we can to preserve jobs here.”

But current Johnson Controls CEO Alex Molinaroli will step aside in 18 months to be replaced by Tyco CEO George Oliver, who will have no loyalty to the Milwaukee area. Will that impact the company’s long range plans here?

Fraser Engerman, a spokesman for Johnson Controls, says the Tyco merger will benefit the Milwaukee area, but declined to comment on the company’s future employment plans in the area. Johnson Controls has about 3,400 employees in our region.

Long rumored plans by Johnson Controls to build a 50-story office building in downtown Milwaukee will not be affected by the Tyco deal, said Engerman, who also said no decision has been made about the building project.

Who knows what the future holds for Wisconsin’s largest public company? In Milwaukee, we can only hope for the best.

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Andrew Weiland
Andrew is the editor of BizTimes Milwaukee. He joined BizTimes in 2003, serving as managing editor and real estate reporter for 11 years. A University of Wisconsin-Madison graduate, he is a lifelong resident of the state. He lives in Muskego with his wife, Seng, their son, Zach, and their dog, Hokey. He is an avid sports fan and is a member of the Muskego Athletic Association board of directors.

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