About That Free Market …
When Caterpillar took over the Progress Rail Services, Corp. of London, Ontario, a manufacturer of diesel electric locomotives, there were all kinds for assurances that nothing much would change and everyone would prosper.
Then the union contract at the plant expired on January 1st when the union failed to agree to the company’s demands for a 50% pay cut for workers. The workers were locked out.
Immediately following a “Right to Work” law in Indiana, Caterpillar closed the Ontario plant and announced that it was hiring in Muncie, Indiana.
I can see why Caterpillar would do this. their record profits might not continue, and the workers don’t do anything but make the products that generate those profits with skills that require years to master.
I feel certain that in addition to changing their laws, the state of Indiana won’t burden Caterpillar with any tax bills, because they are ‘job creators’, even if the jobs come with no benefits and burger-flipping wages for skilled jobs.
Slavery by any other name…
10 comments
Never mind the fancy name… Caterpillar is a worm.
I guess Indiana is the new ‘China’, and the Harper government has learned what being ‘business friendly’ gets you – screwed.
ONe word to describe Caterpillar – Scum
EMD never had any intention of keeping the London plant open past the beginning of the year. They never made any serious offer to the union, the whole point was to let the union contract run out because the union contract made it more expensive to close the plant due to the six months of severance pay in the union contract. Construction on the Muncie plant started immediately after Caterpillar took over EMD, in July 2010, primarily because the locomotives of most U.S. transit authorities are nearing end-of-life and most of them require that the replacement locomotives be built in the United States. Well, in case you haven’t noticed, London Canada is not in the United States. So either EMD would need two locomotive assemby plants — one in London and one in Muncie — which would make no business sense at all — or they could close the one in London. Which was pretty much a foregone conclusion the moment they started building in Muncie, especially after locomotives started coming off the end of the line in Muncie in October 2011.
The decision likely had nothing to do with Right to Work (since EMD Muncie started construction in July 2010, before that law was even introduced), and a lot to do with proximity to the main locomotive parts manufacturing plant in La Grange, IL, and Caterpillar’s other plants that provide locomotive parts located primarily in Lafayette, IN and Peoria, IL, as well as access to a spur line and an old railroad maintenance facility that had sufficient space under one roof. The London plant was built over 60 years ago by General Motors when they consolidated all EMD locomotive and transit car production in one plant, and at that time was convenient to other General Motors plants which provided parts for EMD locomotives. But when GM sold off EMD for cash to go out of business with (well, not exactly, but that’s what was happening), any business case for keeping that plant in Canada vaporized. It’s simply too far from parts suppliers, too old, too expensive, would require too much work to refurbish it and bring it up to modern standards, and it simply made no sense to keep it open once Muncie came online back in October. It sorta sucks that they used this scheme to cut their cost of closing the plant, rather than do it the upfront way of a formal plant closing, but so it goes.
In short, the Ontario plant was a goner regardless, the workers got paid in November and December to just sit around because that was cheaper than officially firing them and having to pay the six months severance under the union contract, but their job was done regardless. Gone. Kaput. End of game. It sucks the way Caterpillar did it, but it was over regardless.
– Badtux the Business Penguin
Scum, sums them up nicely, Jams.
Badtux, lies and fraud are not standard business practices, not matter what some would make you believe. They didn’t act in good faith in the entire process.
NAFTA precludes a ‘buy American’ policy, as the Canadians have already pointed out in other areas.
There really are a lot of businesses that are successful that don’t lie and that do negotiate in good faith.
Certainly Caterpillar did not act in good faith. They should have announced the plant closing and paid the severance required by their union contract rather than the slimy way they did it. But the point remains that the Right to Work law had nothing to do with the Muncie plant being in Indiana, the Muncie plant was under construction long before the new law was even introduced.
Regarding the “Buy American” mandate, Bombardier has to maintain a plant in New York to build transit cars for exactly that reason. BART is talking about getting some new cars now that they’re expanding to San Jose, and Bombardier is going to build them — in New York, not in Ontario.
How does that square with NAFTA? It doesn’t. But as the Chimperor once said, “it’s just a piece of paper.”
BTW, you want to know who’s successful who doesn’t lie and who negotiates in good faith, look at EMD’s biggest competitor, GE. They not only pay their (unionized) workers in Erie PA the $30/hour that Caterpillar claimed was too much to pay Canadian workers, but they also have lower production costs overall due to keeping their plant modern and have better product due to investing in R&D instead of doing like GM did to EMD and rip all its revenue stream out to subsidize unprofitable automotive operations. So they have about 75% of the U.S. market to EMD’s 25%. So it goes.
I should have known that, whatever their motive, it would be a loco motive.
Oh, one more thing. Progress Rail Services has always been headquartered in Albertville, Alabama, ever since it was founded in 1982. Caterpillar bought Progress in 2006 . Electro-Motive Diesel (EMD) was created by General Motors in 1941 from merging several of their rail-oriented divisions and was always headquartered in La Grange, Illinois. Caterpillar used Progress to buy EMD in 2010. In short, neither Progress nor EMD were *ever* a Canadian company. This is a case of an American company bringing a factory home to America. The way they did it was unfair to Canadians, but I’m not going to criticize an American company for bringing jobs home, when the usual thing is to send them overseas.
To understand my reaction you have to know my history, and my family’s history. We watched mills shut down in the Northeast and the jobs shipped South, and then those jobs were shipped to Asia and that is just in my lifetime.
The pattern is always the same – cut R&D, don’t modernize plants, don’t update products, and then seek out the cheapest labor available.
Germany and Japan shouldn’t be able to be competitive based on their labor costs, according to US CEOs, but somehow they manage.
Caterpillar didn’t start hiring at Muncie until after the Right to Work law was passed, and the Republicans in the Indiana government slashed business taxes after Mitch Daniels was elected three years ago.
It doesn’t really matter, because most of their business is Asian, and the Chinese will soon be making their own ‘Caterpillars’ without the US company getting anything. That’s the way it works.
Uhm, no. Caterpillar started hiring in Muncie in October 2010, more than a year before the Right to Work law was passed. Unless they had a time machine, the Right to Work law probably had nothing to do with it. The number of out-of-work former General Motors employees willing to work for cheap might have had something to do with it (Muncie used to have several GM plants, mostly parts, all of which got shut down over the past ten years as GM wound down towards bankruptcy), Caterpillar is notorious for that kind of thinking, but Right to Work was *not* an issue because it wasn’t even introduced in the Lege at the time that Caterpillar started construction on the Muncie plant.
One last thought: EMD was pretty much fscked before Caterpillar bought them. GM had neglected them and looted them for cash as GM went towards bankruptcy, then the vulture capitalists who bought EMD from GM did the usual vulture capitalist thing and sucked all the money out of EMD. EMD had a chance in 2008 to be big in Europe, they sold over 100 locomotives there in less than two years, but there was a change in Euro emissions laws for heavy diesels and EMD didn’t have the money to meet the new standards and had to withdraw from the European market. Without Caterpillar buying EMD there would not have been an EMD in another five years or so, the company was on a long hard slide to bankruptcy.
Which of course doesn’t excuse Caterpillar for being a buncha vicious dishonest lying crackers, but point being, EMD was fscked long before Caterpillar bought them. A major investment had to be made if EMD was to survive, including a new factory to replace the outdated and expensive-to-operate Ontario factory and new engines to replace the smoky old two-stroke GM engines that will shortly be illegal, and Caterpillar was pretty much the only company willing to do so.