Locked Out: Canadian workers pay heavy price in foreign acquisitions

LONDON, Ontario — Each day since the Employment Action Center opened in the basement of the local union hall here in London, at least a dozen of its unemployed members have gathered to figure out the next steps in life — and to reflect on what they’ve lost.

Until February these were employees of the Electro-Motive Diesel Plant, building the locomotives that criss-cross North America’s railways hauling passengers and goods to their destinations. It’s heavy, specialized work, but the kind you could make a comfortable living from, raise a family on and plan for the future.

That was until parent company Caterpillar abruptly closed up shop a month after locking out its 480 unionized workers who rejected a 50 percent pay cut, sending the jobs, equipment, and patented technology to Muncie, Indiana.

The corporation best known for its construction equipment had purchased Electro-Motive less than two years before, an $820 million bet that demand for rail transport would rise as the economy improved. The now-jobless workers in London say they feel betrayed and wonder how the Canadian government could let Caterpillar bypass legislation intended to protect the country’s industries. Electro-Motive had employed Londoners to build locomotives for over six decades, but these unemployed workers say Caterpillar never intended to keep the factory open.

“I expected to retire with a pension, and with the swipe of a pen they took that all away,” said Brandy Damm, 35, who was a welder at the plant and had worked there for four-and-a-half years before the lockout. 

Damm, energetic and outgoing, is proudly wearing her Canadian Auto Workers T-shirt. She is one of the “peer helpers” at the Action Center. Her job is to sign up her former co-workers for training opportunities available through the province of Ontario and help them to navigate the red tape that comes along with such opportunities.

‘Action Centers’ like the one in London have become a more common sight across the province, which has a large industrial base but a relatively low unionization rate compared to the rest of the country. Run with the help of government funding, 256 centers have been set up in the province since 2006 in response to layoff situations at union workplaces.

Here members can check and post notices on one of the center’s temporary partitions, write and send resumes online, sign up for a “needs assessment” appointment, or just grab a coffee with their former co-workers. The Action Center will stay open for at least 18 months, said coordinator Bob Scott.

Scott was, until February, the plant chair for the union and had worked at Electro-Motive for 23 years.

It is hard for people to adjust after so long in the plant, said Scott, who will also eventually have to, “figure something out.” And there is another problem: Jobs in the London area are “very low-paying,” with manufacturing jobs even harder to come by, he said.

“A lot of people are travelling out west,” he added. “Kitchener-Waterloo (about 60 miles northeast) seems to be a little higher paying, but down in this end it’s very low-paying jobs right now.”

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Electro-Motive was bought by Caterpillar subsidiary Progress Rail Services in 2010 from Greenbrier, an American equity firm that had purchased the faltering plant in 2004.

“As soon as [Caterpillar] purchased it you could see the writing on the wall that we were going to have an issue,” said Scott.

Caterpillar had also attempted to buy the plant in 2004, but the union blocked the sale in retaliation for Caterpillar locking out workers at its plant in Brampton, Ontario plant in 1991.

“We met with Caterpillar and told them that at no point would they ever own this facility after what they had done in Brampton,” Scott said, alleging Caterpillar ultimately purchased Electro-Motive through “the back door.”

“They purchased us for the technology,” he said.

Caterpillar counters that the company's past relationship with the union wasn’t a factor when buying the plant, and that its focus was on the “things that needed to be done to make the plant competitive,” said company spokesperson Rusty Dunn.

Electro-Motive locked out its workers on New Year’s Day after tabling a final offer that would have cut wages from an average of $35 per hour to $16.50 per hour amounting to a 50 percent reduction.

“When they came back with their final offer, I knew that they didn’t want to operate in Canada,” said Damm.

Caterpillar subsidiary Progress Rail held a job fair in Muncie in March, a month after the company announced the London plant would close. Wages at the Indiana plant range from $13 to $19 dollars an hour with benefits, according to Dunn. Recent job postings for welders at the plant list the starting wage at $14.85 an hour.

For its part, the state of Indiana passed “right-to-work” legislation in February that bars employment contracts that require all workers in unionized workplaces to pay union dues. It was reported earlier this year that Caterpillar recruitment ads for managers at the plant required candidates have “union-free” work experience. It was also reported that municipal leaders gave $28 million in tax incentives to Caterpillar for the plant to come to Muncie, and Dunn confirmed in an email to the GlobalPost that there were “some economic development incentives from the state.”

“Indiana gave those guys an incentive to move,” said Wayne Fraser, director for Ontario and Atlantic Canada for the Steelworkers Union. “If you think about NAFTA (North American Free Trade Agreement) that’s an unfair practice. There has to be an equal playing field.”

“Today it’s in Indiana, tomorrow it’s in India,” adds Fraser.

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After Caterpillar announced that they were shutting the London plant in February, the union and their supporters picketed outside the gate for three more weeks hoping simply to negotiate a decent severance package for their members.

Adding insult to injury to many here was the fact that while the workers in London were left to walk the picket line, Caterpillar was recording record profits; $1.55 billion (US) in the first quarter of 2012.

“That was trying because you knew the company was trying to give us zero when we made those people extremely rich. We were hoping to get at least something,” said Damm.

In the end the 480 workers won three weeks’ pay for every year of service.

Now with the plant all but closed (except for a skeletal shift of plant managers) the former workers are learning how to market themselves in resume writing workshops in the basement of the union hall while Doug Oberhelman, Caterpillar chairman and CEO, is making a fortune. 

Oberhelman, it was reported in April, made $14.8 million in salary and bonuses last year as reward for the performance of the company globally.

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Some labor advocates lay the blame for the failure of Electro-Motive in London at the feet of the Canadian government. They say it failed to enforce the Investment Canada Act, the piece of legislation meant primarily to regulate the foreign purchase of Canadian manufacturing companies by putting the onus on the foreign (mostly US) companies to prove that there is a “net benefit” to Canadians: new jobs, bringing innovation and trade to Canada and avoiding an adverse effect on competition within Canada. 

But in the last few years there have been several high-profile instances where a large international company bought a traditionally Canadian industrial company and then demanded major concessions from the workers.

In 2007 Pittsburgh-based US Steel bought the bankrupt Canadian Stelco in nearby Hamilton, Ontario and in short order idled various parts of its operations, claiming poor market conditions, then embarked on a bitter lockout of workers at two different plants.

The same year, UK-based mining giant Rio Tinto bought the Alcan Aluminium company. Then last December Rio Tinto locked out the workers at its smelting operations in Alma, Quebec in an ongoing dispute over the company’s demand to introduce new workers at 50 percent lower wages and no benefits.

In many of the cases, the government determined the deals were legal under the Investment Canada Act — or not covered by it. In the case of Electro-Motive, Michael Cimpaye, a spokesperson for Industry Canada, the ministry responsible for the enforcement of the act, maintained in an email to GlobalPost that the acquisition price fell short of the legislative threshold for a Canadian company.

“The threshold is $330 million and they’re saying [the purchase price of the plant] was $290 million,” said the Action Center coordinator Scott. “But the reality was their assets they claimed were $1.3 billion dollars . . . somebody dropped the ball.”

The Canadian Stelco deal was approved under the act because US Steel made certain guarantees to maintain staffing and production levels at the Canadian operations for at least three years. When US Steel went on to lock out its workers, first at its Lake Erie site in 2009, then at Hilton Works in 2010, the federal Conservative government signalled that it would be pursuing the matter through the courts as a breach of the Investment Act, but by December of last year the government’s legal action against the company was quietly dropped.

Then last week, Prime Minister Stephen Harper’s administration announced the government's plans to raise the $330 million threshold for reviewing deals to $1 billion.

“The government seems to be against any institution that aspires to improve wages and conditions,” concludes Dr. Pradeep Kumar, an expert on unions and industrial relations at Queen’s University in Kingston, Ontario, referring to the trail of foreign takeovers, labor disputes and plant shutdowns on this government’s watch.

“There’s no accountability in this process, there’s no transparency, and there ought to be,” said Joe Drexler, who runs campaigns for the United Steelworkers. “There needs to be a demonstrated net benefit to Canada, and that includes Canada’s people, and not just the multinational corporations that are coming in.

“It’s not just about Rio Tinto, it’s about US Steel, it’s about Caterpillar. It’s an economic rape of Canada,” Drexler said. “Ask yourself how often the lockout was used five years ago, three years ago, even two years ago as an offensive strategy by employers? It seems to be led by multinational corporations. You know a lockout is just an employer’s strike against the union . . . and it happened in all three of these instances, so they share something.”

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Caterpillar’s perceived aggressive tactics at the Electro-Motive plant, including the unheard-of demand for a 50 percent wage cut, seemed to strike a chord well beyond the borders of London. There was a large demonstration and march to the plant gates in January by supporters who had bussed in from across the province, willing to face the bitter cold with the union picketers.

The decision by the local Mark’s Work Warehouse, part of a national chain of work and safety clothing stores, to take Caterpillar equipment off their shelves in protest made national headlines in January, but the move was never intended to be permanent, and Caterpillar boots and gloves are once again for sale at the store.

And while motions to boycott Caterpillar products from use on municipal projects in the town of Ingersoll (neighboring London) and Hamilton (where US Steel locked out its workers in 2010) didn’t pass.

“From my perspective it was essential to focus in on a company that tapped into federal initiatives,” said Sam Merulla, the city councillor who brought forward the motion to boycott Caterpillar products in Hamilton.

“Their focus, in essence, is to make more and more money at the expense of anyone who comes in the way of that,” emphasized Merulla. “I find it offensive that they asked their labor force in London to take a 50 percent decrease — frankly that’s so aggressive, and so 1920.”

The Hamilton boycott motion failed to pass in March after large heavy equipment distributor Toromont, which distributes Caterpillar products, argued before the city council that it had pumped a large amount of money into the local economy. The vote was 11-4 against. Mark Hollman, a spokesperson for Canadian National Railway, the largest railway in Canada and a major customer of Electro-Motive, made clear that the rail company has no intention of overlooking Caterpillar products — or their competitor, GE — so as to get the best value from the marketplace.

“We will continue to purchase locomotives from both these manufacturers,” said Hollman.

Even worker representatives like Scott acknowledge mounting a successful boycott against Caterpillar now would be tough while the federal government is heavily promoting the Alberta oil sands development to the international community. Much of the heavy equipment used by contractors there is made by Caterpillar.

“Until our government actually puts some type of act in place that protects the corporations from being bought and sold in this country — at some point they have to put stipulations on, Scott said. “‘If you’re going to buy a facility that’s fine, but you’re going to follow the collective agreement for x amount of years, you can’t move, you can’t do anything,‘ Until they see that, I think these corporations are going to come in, buy the technology up, and leave.”

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Damm, who still describes herself as a “steelworker,” has no plans to find work in manufacturing again. “Too much heartbreak,” said Damm — though she will likely be alright. Since the shutdown she has been hired on as a part-time worker at the Canadian postal service. She also does small rod-iron artisanal jobs on the side and doesn’t have any kids. Damm worries more about her former co-workers, the ones who’ve been at the plant for over 20 years.

“They’re in a bit of a haze, trying to figure out what to do next, " she said. "Most of them have never had to fill out a resume.” 

This story is presented by The GroundTruth Project.