Update on Caterpillar and the Canadian Plant and Union

For background, please see the February 1 posting on "Global Competition, Companies, Unions, Communities and Nations ... Seeing Things Differently." It provides a brief and timely review of the various issues involved.

Caterpillar to Close Canadian Plant in Lockout Dispute says this about the Cat decision announced today:

"Caterpillar said Friday it will close a locomotive-assembly plant in Canada where unionized workers have been locked out since the beginning of the year.

The company blocked about 450 workers from entering Electro-Motive Diesel Inc.'s London, Ontario, plant after they refused to accept pay cuts and other concessions sought by Caterpillar.

"The cost structure of the operation was not sustainable and efforts to negotiate a new, competitive collective agreement were not successful," Caterpillar's Progress Rail subsidiary said in a news release.

Members of the Canadian Auto Workers Union have said Caterpillar's wage proposals would have halved wages and reduced benefits, lowering hourly pay to about $16.50 for some production workers from $34. The union's contract expired Dec. 31.

The CAW on Friday accused Caterpillar of bad faith negotiations and described the decision to close the plant as "callous."

"Caterpillar had no intention of keeping this plant open," said CAW President Ken Lewenza. "This is just plain greed and immoral and unethical behavior. We believe that Caterpillar was trying to provoke a crisis by forcing deep cuts that were not possible."

Caterpillar, based in Peoria, Ill., said locomotive customers won't face delays in receiving their orders as production from London is shifted to other plants in North and South America. Some of the assembly work from London is expected to be relocated to a 740,000-square-foot plant in Muncie, Ind., that the company purchased in late 2010. Electro-Motive also has had a longstanding agreement with Bombardier Inc. of Canada to make locomotives in Sahagun, Mexico. Caterpillar also is setting up a locomotive plant in the Brazilian state of Minas Gerais.

CAW workers have accused Caterpillar of using the Muncie plant as its exit option from London and its unionized work force. Indiana this week adopted legislation intended to make it difficult for unions to organize new plants.

"This was their business strategy from day one," Mr. Lewenza said.

Caterpillar has made clear it hopes to avoid any union representation at the Muncie plant. Last year, an online job advertisement published by the company sought human-resources managers with "experience with providing union-free culture and union avoidance."

In my view, union leadership did a huge disservice to its members as it played its weak negotiating hand poorly. As a result, many Canadian employees will now lose their jobs. However, the union leaders will keep theirs, of course.

And Cat will keep making and selling competitive products throughout the world. By the way, Muncie, Indiana employees will be happy as they get the jobs lost by the Canadian workers.

I wish I could say I'm surprised. Unions suck.

Thanks. Bob.