CATERPILLAR SHUTDOWN
Electro-motive Diesel just a pawn after all
“For months, all the pieces have been falling neatly into place toward one outcome: farewell, Canadian jobs.”
So that’s what an “investment climate” gets you.
You can swoop into a manufacturing floor waving $5 million in tax breaks, just like Prime Minister Stephen Harper did in March 2008, and even get a ride, or at least a photo op, in a real, live locomotive, and talk about how Ontario is still the “engine” — get it? — of the Canadian economy. But at the end of the day you’ve got what? Bupkus, that’s what. All political parties have put on their sombre, funereal faces, extending condolences over the news that Caterpillar Inc. is shutting down the Electro-motive Diesel plant in London, Ont. “Our thoughts are with the workers,” etc. Too late. A waste of fresh air. Those locked-out workers — the welders, the assemblers, the painters and crane operators who were asked to swallow an average wage cut of 50 per cent — have started polishing their resumes.
Mid-afternoon Friday, Canadian Auto Workers President Ken Lewenza, on his way to the picket line, fumed about Caterpillar’s “unethical, disrespectful and immoral behaviour.” It takes an extreme turn of events to make the commonly blustering CAW president sound like a man of reason. “The whole goddamn thing stinks,” he said, insisting that through six or seven exchanges he was given assurances by Progress Rail Services, the Caterpillar subsidiary that owns EMD, that a transfer of jobs south of the border was not the company’s intention.
On Tuesday, Lewenza will commence shutdown bargaining with the company, but he vows that won’t be the end of it, adding that he will be pushing the ministry of labour for an inquiry.
What would a forensic audit reveal?
A story of stealth, cunning and adaptability, of course. Just like a Cat. The $60-billion (revenues) company is vastly profitable and has long toyed, catlike, with the notion of picking off a locomotive assembly plant. The heavy machinery manufacturer that’s crushing it on Wall Street — that’s how the investment community talks about the company’s stellar stock performance — has long wanted to offer an end-to-end product buffet.
How fortunate for Caterpillar that an alliance of Greenbriar Equity and Berkshire Partners, two U.S. private equity outfits, stepped in to buy the locomotive division from General Motors in 2005. It was the private equity boys who owned EMD when the prime minister visited the plant and offered inducements to locomotive buyers. You can bet that American private equity players aren’t all that used to such gifts. Even then plant workers believed that Greenbriar was but a stalking horse for Caterpillar.
The Peoria, Ill.-based behemoth finally did pounce, in June 2010, paying $820 million cash for EMD, which includes an electronics man- ufacturing facility in La Grange, Ill. All final assembly has been done in London. Until now. Industry Canada will not tease apart that sales figure, except to say that the proportional book value of the Canadian assets did not exceed the then threshold of $299 million, above which the acquisition would have been subject to a net-benefit review under the Investment Canada Act. “If that’s not strengthened,” Lewenza says of the net-benefit provision, “it opens the door to a tremendous amount of global capital arrogance.” Four months after the EMD acquisition, Progress Rail announced it would be turning an abandoned factory in Muncie, Ind., into a locomotive assembly plant, and in at least one job posting advertised for a human resources manager with experience in both plant start-ups and providing “union-free culture and union avoidance.” In other words, all the pieces were falling neatly into place toward the pre-determined outcome: farewell Canadian jobs. The Muncie facility opened in October. You can read the semi-concerns emanating from some quarters in Muncie. “From the view here, it’s better to have jobs, even if they don’t pay as much as similar work performed in other locations, than to have the alternative — unemployment . . . “an editorial in the local Star Press said. “Yes, London’s loss could be our gain, but we’ll take the jobs.” Muncie has been hammered and unemployment continues to run at about 10 per cent. Three years ago, almost to the day, Borgwarner Inc. announced that it was shutting down its auto parts plant when union workers refused to come to the table three years early. And so it goes. On Saturday, Progress Rail will hold a Muncie job fair, where welders will line up for jobs paying $14.50 an hour and assemblers can hope to be taken on for $12, scrabbling in the global race for everlower wages. The timing is so neat, the entire operation so surgical. Caterpillar has padded away from the entire affair without, insultingly, saying a word and without, clearly, bargaining in good faith with those who helped the company deliver its best performance in 65 years. As an analyst said last week, the company just doesn’t care, a point that makes the analyst quite happy, by the way. It was, after all, a blowout year for the company.