What’s Wrong With Caterpillar?

Local 27 members of the Canadian Auto Workers (CAW) union were locked out on New Year's Day by Caterpillar Inc.'s Electro-Motive Diesel in a callous display of corporate might, by a company that may be intending to leave Canada.

The 465 CAW members in London, Ontario, voted by 97 per cent on December 30 for strike action and, 24 hours later, just as they were returning to jobs on New Year's Eve following a holiday shutdown, they were locked out. Paul Bruder has worked at Electro-Motive Canada (EMC) for 23 years and sees the company lockout, and their demand for a 50 per cent wage cut, as an attack on workers' lives.

Electro-Motive Canada (EMC) is owned by the American heavy equipment giant Caterpillar Inc. through its Progress Rail subsidiary. Caterpillar is a very profitable company! In the first nine months of 2011 profits were up 95 per cent, to $3.4 billion. Caterpillar is on track this year to see its highest sales and largest profits in the company's 86-year history. The outgoing CEO, James Owens, received $22.5 million for six months work last year and a defined-benefit pension worth $18.7 million. Electro-Motive sales are up strongly in the latest quarter and the operations
remain profitable.

On December 27, plant workers rejected an offer that would have cut wages to less than half; eliminated a pension plan, and cut other benefits in half. A skilled worker making $35 an hour would, under this new proposal, receive $16.50 an hour. The current minimum wage in Ontario, for 2011, is $10.25 per hour. These employees have families, mortgages and households like other Canadians, so the wages on offer are not living wages.

Apparently the process of compulsory conciliation took place, so the lockout is legal under Ontario law. The Premier has said nothing except that he is concerned, but, as I write this, the province has not appointed a mediator, as it often does after a strike/lockout is in progress.

Typically, these days, if you go online and read news about a strike, the comments section is full of anti-union individuals asking, rhetorically: "What's the problem?" In this case, the CAW announced that the Ontario Federation of Labour would be supporting a demonstration on January 21 at the plant that would highlight Ottawa's failure to protect Canadian jobs and Canadian workers. In a typical response, a comment was: "What the deuce does Ottawa have to do with it? This is private industry! Is it union-busting? Maybe. But it doesn't have anything to do with the Federal Government. There is NO SUCH THING as job security anymore. Better get used to it."

This dispute certainly is about breaking a union. BUT, it also has a lot to do with the federal government's policies. Consistently in 2011, the federal government supported employers and interfered or not interfered in labour relations disputes, depending on which strategy sided best with business. It not only passed back-to-work legislation, but also rewrote the wage clauses in the Canada Post dispute, so employees were given lower rates than what the company had offered, thereby overriding normal arbitration procedures where a neutral professional tries to find a fair solution.

In the summer, it also threatened back-to-work legislation against CAW members on strike at Air Canada. In the fall, it made the same threat against flight attendants. Then it intervened by cynically referring the situation to the Canada Industrial Relations Board, alleging "immediate and serious danger to the safety or health of the public." This suspended the flight attendants' right to strike, and led to an arbitrated settlement that imposed a tentative agreement the workers had earlier voted to reject.

In the Caterpillar dispute, the feds have washed their hands of it. A spokesman for federal Industry Minister Christian Paradis said the minister would not intervene because "these disputes are between a private company and a union." A spokeswoman for Labour Minister Lisa Raitt repeated the same talking points in an emailed response. When it was pointed out that Raitt aggressively intervened in the Air Canada dispute, the response was that the Electro-Motive dispute "is in fact a matter of provincial jurisdiction." This federal response is disingenuous.

The federal government certainly is involved with Caterpillar and not neutral. On March 19, 2008, Prime Minister Harper visited the Electro-Motive plant to showcase a $5 million federal tax break for buyers of the diesel locomotive-maker's wares and a wider $1 billion tax break on industrial capital investment. Yet, Caterpillar has received attention, since the 1990s, as a terrible employer with a very regressive business culture. If our political culture were guided by ethics, our government would not offer incentives to this company. It would judge them unfit to operate in this country and, instead, encourage a local, Canadian, ethical competitor, if one existed, or encourage competition in that sector. Heavy equipment is not a really high-tech product and there is demand and a market in Canada and in the countries Canada already exports to.

The company is suspect in this government-business collusion, which is so unfair, because the companies that have money gain more money and the workers are told to take wage cuts. Caterpillar, in August 2010, bought the company in London for US$820 million from Greenbriar Equity Group and Berkshire Partners. The federal government was notified of the 2010 purchase by Caterpillar under the Investment Canada Act, and determined that approval of the sale required no further review. In mid-December 2011, the CAW raised its concerns over the process and demanded that the federal government disclose details of the sale and undertake a full review. A federal Industry Minister spokesman said the value of the company's assets were below the $299 million threshold when it was sold. "There is no oversight and no transparency in this whole process," CAW president Ken Lewenza said. "Caterpillar declared a gain of $1.3 billion in assets on its books following the takeover of EMC. The federal government now says that the takeover did not meet the threshold of $299 million for a full review, or to seek legally-binding commitments to Canada."

This would suggest that, in a $1.3 billion deal, not even a quarter of those assets are in Canada. Yet, the London plant is the company's largest manufacturing plant and, at the time of the takeover, had nearly half the company's employees. "The Harper government gave this sale a rubber stamp paving the way for this disaster," Lewenza said. "This is a disservice to Canadians." On January 3, when Opposition MP Peggy Nash, candidate for the NDP leadership, walked the picket line, she renewed calls to strengthen the Investment Canada Act, which she argues must be changed to ensure it maintains and creates good jobs for Canadians.

After this company received the government go-ahead to purchase, and a large tax break, it treated these Canadian workers with total disrespect. To add insult to injury, its attempt to extract unreasonable wage and benefit concessions from Canadian union members is likely an excuse to shift production of electric-powered diesel engines and associated railroad components to a start-up and lower-wage plant in Muncie, Indiana. There, the company has received lucrative incentives (more public money) from Indiana's anti-union state government for the Muncie start-up. There, it advertised for a Human Resources manager with the stipulation that he/she have "experience with providing union-free culture and union avoidance."

At the same time, Caterpillar is picking up more public money in North Carolina. The New York Times reported on Janueary 8, 2011 that some of Caterpillar's newest factory workers are being trained in classrooms, with online tutorials and study blueprints emblazoned with the company's logo. On a mock factory floor, they learn to use wrenches, hoses and power tools that they will need to build axles for large mining trucks. Yet, North Carolina is picking up much of the cost. It is paying about $1 million to help nearly 400 workers acquire these skills, and a community college has committed to develop a custom curriculum that Caterpillar has valued at about $4.3 million. Caterpillar is one of dozens of companies, many with growing profits and large cash reserves, that have come to expect such largess from governments in return for creating jobs.

Critics ask: "Why shouldn't the companies pay for this training, which benefits them?" The programs may not assist workers if the resulting jobs pay low wages or simply disappear after a few years.

Low wages is what Caterpillar is offering! Caterpillar's lead negotiator, with 37 years at bargaining talks, conceded that he had never before proposed such dramatic cuts, nor ever heard of similar demands being made elsewhere. "This is unprecedented in every way," said Lewenza, "and admitted so by Caterpillar themselves."

If Caterpillar breaks this local union, collective bargaining as we once knew it in Canada will be destroyed for a long time. As Lewenza said: "A 50 per cent reduction (in salaries and benefits)would be an incredible victory for multi-national corporations. If they can do this at a mature workplace like Local 27, they can do it anyplace. This is a bigger fight than with just Caterpillar."

Since the lockout began, Lewenza has received emails and phone calls from other CAW locals, as well as many provincial, national and international labour organizations. The arrival on the picket line of members of Occupy London speaks to the nature of the attack being made against workers everywhere. Many support the right of the current workers of this unjust firm to protest and resist and exercise all their legal rights and options. The type of wage reduction contemplated is shocking in itself, and even more shocking as it would also greatly reduce any
pension contributions.

The workers are bracing for a long, difficult standoff. "It's not just about the union," said Paul Dona, a six-year Electro-Motive employee. "It's about the whole country." "There is no rationale for what is going on here," CAW national secretary-treasurer Peter Kennedy said. "It is a profitable company; they are making money. They are doing this simply because they can. Where is the justice in that?"

"Where the hell's it stop?" asked another picketer. It's a good question! Why are our elected politicians using public money to support profitable companies that are abusing Canadian workers' collective bargaining rights and their standard of living? Why are they promoting private interests rather than protecting the public interest? Why are governments telling Canadians to pull in their belts as there is not enough money, and then handing over millions of dollars in subsidies and tax breaks every year to companies with poor labour relations policies and often abysmal environmental records - and all without demanding real commitments to investment and jobs?

The Tories, federal and municipal, are into union-bashing pure and simple, and it is not only bad for workers, but it is threatening to democracy. I don't know who is going to pay taxes if everyone is in poorly paid jobs.

I wrote this piece over the last few days in a mood of anger and frustration. The injustice of the Caterpillar lockout is astounding. I think more of us have to think about what is happening to people at the hands of governments and employers, and start speaking up and taking action.

Laurel MacDowell is a professor of history at the University of Toronto.

For more information about the Day of Action on January 21 in support of the locked-out workers visit the CAW's website or the Ontario Federation of Labour's website, or Facebook page.

Many thanks to David Camfield, associate professor in labour studies at the University of Manitoba, for his early feedback.