Sunday, February 05, 2012

Caterpillar, EMD, unions, and nonsense

Caterpillar bought EMD, the former General Motors subsidiary that is one of the world's foremost manufacturers of diesel-electric locomotives, back in July 2010. They immediately started construction on a locomotive plant in Muncie, Indiana, on the site of a former Westinghouse transformer plant that had a gigantic building with a rail spur already running through it (with doors big enough for the biggest of locomotives to go through it) and enough open land behind it to build sheds and tracks for testing of the locomotives. They had multiple reasons to do this:

  1. Buy American mandates on the part of U.S. transit authorities, the same reason why Bombardier is forced to maintain a facility in Plattsburg, NY.
  2. The fact that GM had sold off the LaGrange IL locomotive assembly facility (EMD's original U.S. assembly facility ) many years before to a trucking firm that had demolished the original buildings, so there was no ability to produce locomotives there,
  3. The availability of this huge assembly plant for cheap -- it had been shuttered since 1998, and Westinghouse was eager to quit paying taxes on it.
  4. The proximity of Muncie to existing Caterpillar and EMD parts suppliers
  5. The extensive rail network coming in and out of Muncie from all directions, making it easy to get parts into Muncie and get assembled locomotives out to customers.
  6. The availability of workers -- Muncie had long been a railroad center, and there were a large number of railroad workers in Muncie with experience in repair of EMD equipment who could easily be turned into assembly line workers
  7. The obsolete nature of the London, Ontario plant, which could not be renovated to modern standards because it was EMD's only facility and was operating at capacity, due to its age and configuration it was very expensive to operate and could not be fixed short of shutting it down and rebuilding it entirely. Which could only be done by building a new facility capable of building as many locomotives per month as the London plant built.
The net result of all this was that a) the Muncie plant was built, taking approximately one year to build and with the first locomotives rolling off the end of the line in October 2011, and b) it had more than sufficient capacity to build as many locomotives as EMD needed to build. At which point the London, Ontario plant becomes surplus, with the inevitable result -- the plant is now closed.

Please note the *timing* on all the above. The Indiana "Right to Work" union-busting law was passed last month. Construction on the Muncie plant started in September 2010. So, uhm, what is the relationship between the two? Hint: None. Nada. Zero. Zilch. It had absolutely nothing to do with Caterpillar's decision to build in Muncie, because it hadn't even been proposed then. So the CBC even mentioning that law in conjunction with EMD is nonsense, the sort of thing I'd expect from a Faux News story, not a supposedly reputable journalistic outlet.

Now, the way Caterpillar set about closing the Ontario plant -- by proffering a union contract that they knew wasn't going to be accepted, so that the contract would expire and thus they could shutter the plant without having to pay out the severance pay required by the contract -- was pretty shitty. They should have just bit the bullet and taken the one-time cost of paying everybody the severance pay they were owed under the union contract. But that plant was toast, period, from the moment Caterpillar started work on the Muncie plant. It was simply too small, too run-down, and too expensive.

-- Badtux the Business Penguin


  1. This is one of the few Canadian economic issues that I've heard Canadians talking about. We hosted a house party Saturday night for Nicole Foss, who writes as "Stoneleigh" at The Automatic Earth blog. It drew about 15 people, mostly from the Village Vancouver branch of the "Transition Towns" movement. (TT, if you haven't heard of it, and most people on Earth haven't, even though it has offshoots in many countries, is for people trying to figure out ways of getting by post Peak Oil.) Anyway, these were all intelligent, tuned-in folks, chattering about current events. The way they perceived it was evil corporatists trying to get workers to accept a 50% wage cut, then moving the work to a union-busting state. No one knew about the pre-planning that went into this, and there was no perception that the Canadian factory was outdated.

    It did fit into the popular perception that corporations will screw the workers five ways to Sunday. To the extent that people think about economic things at all, there's a deep suspicion that corporations are out to get them. In a remarkably short time, given that societal attitudes are usually slow to change, the masses' mindset has gone from "Corporations are efficient and good!" to "corporations are our enemy." I don't know how the ramifications of that attitude will play out, but it is not a good thing for corpos. They have screwed their own pooch.

  2. It is such a sorry state of affairs when a Union of this size has it's head handed back to them like this.
    Glad for the new workers though, hope they don't end up the same way.
    Another of the Great Unemployed Mass.

  3. 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.

    -- Badtux the Investigating Penguin


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