Are London EMD workers facing a Hobson's choice?

Are the locked out EMD workers facing a Hobson's choice?

The London Free Press reporter Scott Taylor reported in the Thursday paper that the lock out at the Electro-Motive plant in London is a local conflict with global causes. The reporter quotes Anil Verma of the University of Toronto's Rotman School of Management to back up this position. "Workers in China can make locomotives as well as they can here, so they're now facing the competition," the university expert told the paper.

I was puzzled. The threat facing the London jobs comes from Muncie, Indiana. The last time I checked Muncie was in the United States and not China. In the expert's defence, my guess is he was given a cold call by the reporter and the professor gave the caller his generic response.

Still, the paper reported Professor Verma "Thinks a deal can be reached . . . " Why? How? I was puzzled. I have been working on a piece of the Digital Journal, so I decided to give the professor a call. It turns out that he is in Chicago at a conference and unavailable until next week for an interview. But, he graciously sent a brief response to my e-mail.

Anil Verma wrote:

"You are probably right in terms of the immediate threat. I referred to China as competition, in general, for a wide range of manufacturing jobs. I do not know enough about EMD's specific competitive position in the industry in terms of costs, productivity, quality, etc."

I was right. He was called cold, given little background to the story, and being a gracious gentleman, he gave the reporter his generic China response.

Allow me to examine the the threat of closure facing the London EMD plant. A lot of stuff going into locomotives assembled in London originates in McCook, Illinois, located just outside La Grange where the EMD head office is located. The parts are shipped about 685 km from McCook to London, crossing the Canada/US border at one point. It is about an eight hour trip by truck — an expensive eight hour, international trip at today's exchange rate.

Progress Rail Manufacturing Corporation, a totally owned subsidiary of Progress Rail Services, now has a plant in Muncie, Indiana, less than 400 km and four and a half hours, from McCook. The Muncie plant, originally built by Westinghouse, then purchased by Asea Brown Bovery (ABB), has been rebuilt as a locomotive assembly plant at a cost of $50 million.

The 740,000 sq. ft. plant is massive with a main floor 1,960-feet in length, a 99-foot ceiling in the former transformer assembly area and locomotive-sized entry doors with railway tracks running through the building. It took only a year after its purchase for Progress Rail to hold the plant's opening ceremony.

Like London, a lot of what goes into the Muncie produced locomotives originates in La Grange, Illinois.  Unlike London, the Muncie workers are non-union, always a plus in the Caterpillar/Progress Rail playbook. Recently, Progress Rail posted a job opening for an HR Manager at its new Indiana assembly plant, they stipulated that the candidate should have "experience with providing union-free culture and union avoidance." The job is now filled but the union avoidance line is still shown on the online posting as I write this.

Welding jobs at the new facility are reportedly paying from $12-$14 an hour. Do the math. That's $24,960 annually to start for a 40-hour work week. This places these workers squarely in the ranks of the working  poor. There are a lot of working poor in Indiana according to The Working Poor Families Project.

Glassdoor, a site for employment information in the States, carries this comment:

"For a company [Progress Rail Services] that says that safety is number 1, they don't practice that. Employees are treated like dirt; both in pay and the softer sides unless you are a YES man. Unfair and inconsistent discipline and promotions, confidentiality is breached on a daily basis, safe work practices are bypassed in the interest of more and faster production, very little integrity in local management." 

Why should the London workers be concerned about China when they've got Indiana? Companies like Progress Rail and its parent, Caterpillar, don't have to go to the third world, they bring the third world to North America. David Olive, of The Toronto Star, looked at this development in an article: America, the world's sweatshop.

Welders in London make a living wage of about $35 an hour. It's good money and a lot of it stays in the community. It is good for the worker and good for the community. And in return, the company gets good work  — excellent work in fact.

This doesn't mean that Progress Rail, and EMD before it, is not taking advantage of what the third world has to offer. At least as early as 1998 EMD was working closely with Bombardier in Mexico. Recently, the first order of 32 EMD diesel-electric locomotives was assembled under contract at the Ciudad Sahagún Bombardier plant, Mexico. Progress Rail (South America) also has a new facility in Sete Lagoas, Minas Gerais, Brazil.

Before Progress Rail and its parent Caterpillar Inc. came on the scene and purchased the entire EMD operation in 2010, most (but not all) EMD locomotives were assembled in London, Ontario in one plant approximately two thirds the size of the refurbished facility opened in Muncie. Some limited EMD assembly and painting was done by SuperSteel Schenectady, Inc. (SSSI), Glenville, N.Y., and, as mentioned earlier, by Bombardier in Mexico. Sometimes, after assembly at SSSI, some locomotives were sent to Alstom in Hornell, N.Y., for finishing and final paint. I have heard reports, see comments after this story, that some work might have also been done in St. Catharines.

With so many plants available for locomotive assembly, why was an entirely new plant created in Muncie?  — a plant with a much larger floor area than the one in London and with a proposed staff, when fully operational, approximately the same size as London's? Well, for one thing, the SSSI factory which produced everything from streetcar shells to locomotives was shut down in 2008. The SSSI closure underlined the need for a U.S. assembly plant to meet the made in America demands. I believe the new Muncie plant was designed right from the start to replace the London operation.

I fear that the EMD/Progress Rail/Caterpillar hierarchy of companies extended the contract in London in order to buy time to get the plant in Muncie operational. Remember, if problems should arise at Muncie, Progress Rail does have options when it comes to assembly and painting of new locomotives.

If the London workers don't accept the pay cut and the present lock out begins to hurt the company's bottom line, maybe the company will fold their hand and shelve demands that would not look out of plane in a book by Charles Dickens. But, I doubt it. What ever happens,  when Muncie is up and running, backed by a plant in Mexico, I believe the London facility will be shuttered.

If  the workers take the pay cut, they will return to work but their lives will be in tatters. Mortgage payments, car payments, monthly food bills, possibly tuition for children in university, all will take massive chunks out of their vastly shrunken family budgets. I predict marriages will fail under the stress. After earning a decent wage for years, it will be economic hell for the EMD workers.

I see the London EMD workers facing a Hobson's choice. No matter what decision the locked out workers make, in the end they will find themselves out of a job.

Locomotives: They're big, expensive and U.S. workers build 'em for $12.00 / hr. and up.

Addendum: This report reflects a correction sent anonymously. The correction can be seen in the comment section.