David McMcormick, the Republican nominee for Pennsylvania’s U.S. Senate seat, touts himself as a job creator, ready to bring his business acumen to serve Pennsylvanians. He told Fox News he “created hundreds of jobs” and his X account boasts he is a “PA job creator.”
However, McCormick’s tenure as the head of a FreeMarkets — a Pittsburgh-based business-to-business software company — has come under scrutiny, and the claim that he created “hundreds of jobs” in Pittsburgh appears unsupported by evidence.
McCormick joined the online auction and sourcing company as a vice president in December 1999, when the company employed 375 people.
By the time McCormick became president in October 2002, the company had 1,068 employees. Just a few months later, McCormick became CEO and joined the board of directors. By the end of 2003, in his first year as CEO, the company had reduced its workforce by 100 employees. Then, in January 2004, McCormick cut the company’s workforce by 77 employees, 45 of whom were at the Pittsburgh headquarters.
During the layoffs in early 2004, company spokesperson Karen Kovatch told the Post-Gazette that the company “did it primarily to flatten our organization and streamline operations so that we can move forward more quickly."
In February 2003, right after a round of layoffs, McCormick announced the company would spend $4.3 million to open an online auction monitoring center in India, employing more than 100 people. He added that the New Delhi location would potentially include software development in the region, taking advantage of lower labor costs.
At that time, Kovatch said the center in India was established to handle the company’s growing overseas business, similar to others in Singapore and Brussels.
It’s impossible to know whether jobs were outsourced abroad, but the numbers suggest that the company shed local jobs under McCormick while growing overseas operations. FreeMarkets also opened a facility in Shanghai, China, which the company said was intended to tap into the rapidly growing Chinese market.
Republican opponents were the first to call McCormick out on the job losses during his first run for U.S. Senate in 2021. “McCormick made his fortune by destroying the lives of patriotic Pennsylvanians and shipping their jobs away to China and India for cheap labor,” a GOP operative involved in the primary told The New York Post during his primary race against Mehmet Oz for the U.S. Senate seat now held by Democrat John Fetterman.
In response to a request for comment by WHYY News, the McCormick campaign defended the candidate’s claim he had created 1,000 jobs, saying that the early growth was a result of the company going public in 1999 and “the decision to go public was a joint effort” by corporate leadership, including McCormick.
However, in a media interview at the time, McCormick downplayed his overall authority before becoming president, saying, “In my previous role, my primary responsibility was for customer sales and customer service. Now, the entire day-to-day operation of the company is more my concern.”
During McCormick’s term as CEO, FreeMarkets lost millions of dollars in revenue, operated at a loss and sold off assets in addition to laying off employees. In SEC filings, the company cited its “transition to a new business model” and a “weak” economy for the downturn. The losses primarily came from its flagship product FullSource, an online sourcing software.
Possibly as a result, McCormick started pursuing a merger with a West Coast competitor, which resulted in more local job losses.
The merger
In June 2003, McCormick initiated discussions with Robert Calderoni, chairman and CEO of Ariba, a Palo Alto-based FreeMarkets competitor, about the possibility of a “strategic relationship of some form” and potentially a “business combination.” After more discussions, McCormick approached his board about the idea in September.
From the beginning, the company made clear its intent was to save money by reducing “redundancies,” including those resulting from duplicative jobs. According to SEC filings, FreeMarkets told its shareholders that a benefit of the merger would lead to “at least $25 million in annual potential cost savings, through the consolidation of redundant facilities, personnel and overhead.” Jim Frankola, chief financial officer for Ariba at the time, told analysts on a January 2004 conference call, “Of those savings, we anticipate approximately one-third to come from duplicative G&A functions, plus the one-half from redundant R&D efforts, and the remainder from other functions.”
Later that month, Michael Schmitt, Ariba’s executive vice president and chief marketing officer, told San Jose Mercury News that FreeMarkets would consolidate its headquarters into Ariba’s, with the companies trying to “eliminate redundant jobs.” That same day, the Pittsburgh Post-Gazette quoted an analyst saying it was likely “a lot of people in Pittsburgh will lose their jobs,” adding “that’s certainly what typically happens” with a merger.
McCormick told the Pittsburgh Post-Gazette, “There will certainly be redundant functions and consolidation of those functions.” In a July 2004 deposition regarding the merger, he told the court that job losses were expected “particularly in our technology development organization where our plan as part of the merged company is to eliminate that completely.” The next month, McCormick told Ariba shareholders what they “accomplished” leading up to the merger: “We have already eliminated 150 positions and have plans to eliminate another 100 positions over the next two quarters.”
Indeed, by the time the merger was complete, in July 2004, FreeMarkets had laid off or eliminated 150 positions. By December 2005, the combined company had reduced its workforce by an additional 100 employees, for a grand total of 250 lost jobs. At least 100 of those jobs were in Pittsburgh.
Calderoni defended McCormick in an interview with the New York Post, saying, “When we bought FreeMarkets, Dave insisted on keeping jobs in Pittsburgh. It really mattered to him as part of the transaction. In fact, he pushed for us to move jobs from California to Pittsburgh.”
It was a difficult time to run a startup tech company. The early aughts saw the bursting of a tech bubble that had grown during the late 1990s thanks to easy access to capital but started to pop in the early 2000s. As the Pittsburgh Gazette reported, the merger married “two unprofitable online business-to-business software and service firms that made names for themselves at the height of the dot-com boom, only to see their fortunes turn sour with the industry, forcing them to struggle to grow.”
McCormick wrote in his book that “creative destruction along with the bursting of the tech bubble eventually found its way to our sector as well.” However, he also admitted, “We didn’t move fast enough to become one of the true ‘software as a service’ companies that would eventually dominate the landscape. As CEO, I hadn’t built a team around me capable of evolving our business model quickly enough,” leading to the decision to merge with Ariba.
The merger, however, profited McCormick quite well. He became president of Ariba and a member of its board of directors, drawing $500,000 in annual salary, compared to the $350,000 he made at FreeMarkets, and was eligible for an annual bonus targeted at $300,000. He was also awarded 83,333 shares in Ariba, valued at $921,663, and 500,000 shares of stock options that had a potential realizable value between $3.4 million and $8.8 million. In September 2005, McCormick resigned as president of Ariba to work in the George H.W. Bush administration and received another $1,701,699 in severance.
McCormick spokesperson Elizabeth Gregory told WHYY News in a statement, “Dave is proud to have helped create hundreds of jobs in Western Pennsylvania during his time at FreeMarkets.”
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