Cool is the key

The headline in The London Free Press read "Cool is the key." The headline writer may have been right. Michael Bloomberg, the mayor of New York City, wrote in the Financial Times:

Economists may not say it this way but the truth of the matter is: being cool counts. When people can find inspiration in a community that also offers great parks, safe streets and extensive mass transit, they vote with their feet.

Yet, when I read the NY mayor's list I feel something is missing — something that is assumed to be present: Jobs. With an unemployment rate pushing ten percent, London has more to worry about than park improvement. As long as Londoners insist on tackling the unemployment problem as if it is a unique, local problem and not a problem that is becoming endemic in much of the former manufacturing core of North America, the employment problem may prove intractable.

London planners like to say London is well placed. It is right on one of the busiest highways in North Amercia: 401. It is also linked to the States via 402 to Port Huron. London is surrounded with some of the best farmland in the country.

Still, London appears to be located just outside the positive Toronto sphere of influence. Kitchener-Waterloo seems to grab a little of the Toronto energy but the remaining energy dissipates before reaching London. There is no question that Windsor is out of the Toronto loop and as a result Windsor actually lost population in one recent annual survey. The loss of urban population is a problem many American Midwestern cities are contending with.

London is half way between Toronto and Windsor. This position could be a positive if played correctly, but played poorly London could become more like Windsor to the west and less like Kitchener-Waterloo to the east.

Set-up photo captures real mayor.

There's a reason that London has the highest unemployment numbers among all of Canada's big cities and part of that reason is its location. Another part of the reason may be London's mayor, Joe Fontana, and to the city council.

Fontana has always been a showman. Years ago, at the urging of the local paper, he put on red boxing gloves to pose illegally on some railroad tracks. Joe and the photographer trespassed in order to get the photo. Today, that photo of Fontana posing as something he isn't while breaking the law may be the best photo every taken of the man.

London's industrial sector has taken all the classic hits lately. On paper, London sounds like a classic Midwest city suffering from a serious decline in its manufacturing sector. Jobes are being lost to:

• obsolete technologies
• business mergers
• outsourcing
• automation
• reshoring

When the EMD plant in London closed after some six decades in the city to be reshored back to the States, Fontana fell back on bluster. It was all showmanship, no leadership. That plant was moving toward closure almost from the moment it was sold to Greenbriar Equity Group LLC and Berkshire Partners LLC by the failing General Motors. The closing of the plant came as no surprise to those following such things. Fontana was not among them.

Fontana's shout-out to Prime Minister Stephen Harper, ordering the PM to "get his ass down" to London, was juvenile. Maybe what London needs right now is not more urban planning but more intelligence, more creativity, from the mayor and city council. Heck, I'd settle for a little more maturity and clear thinking.

When it comes to the all important ingredient, clearly neither the mayor nor the city council exhibit much cool.

The discreet charms of the bourgeoisie investments

 

Last Friday (Feb. 3, 20120 the Electro-Motive Diesel plant in London, Ontario was closed. A day earlier the Veyance Technologies plant in Owen Sound, Ontario was closed. These two closures threw hundreds of workers out of work and left two communities to deal with the fallout.

These two closings, separated by about 225 km., had at least one thing in common: John S. Hamilton. Hamilton is the present CEO and president of Veyance Technologies and from 2003 to 2010 he was CEO and president of Electro-Motive Diesel.

I found this interesting and decided to learn a little more about Mr. Hamilton.

I learned that this gentleman is also, or I should say was also, the CEO of the Tokheim Corporation. He took over the helm of Tokheim in 2001, and by November 2002 the company had filed voluntary petitions for relief under Chapter 11 in the U.S. Bankruptcy Court.

Hamilton said at the time: "We are working through the bankruptcy process with our various constituencies to complete this sales process as quickly as possible. Our goal is to smoothly transition our businesses into the hands of new owners."

In 1898 John Tokheim, an Iowa hardware store owner, invented a pump to dispense kerosene and gasoline. It was such a fine pump that the business was purchased in 1918 and moved to Ford Wayne, Ind. from Cedar Rapids, Iowa.

Today, Tokheim still brags it's a world leader in fuel dispensing technology. It also brags it's French.

The French didn't get all the Tokheim operation. Back in 1986 Tokheim acquired the business they operated as Gasboy International, Inc. until March, 2003, at which time they sold their prize to the Danaher Corporation.

And how has that sale worked out? Well, on a bulletin board I read:

"Gasboy was a great company that myself and 249 other people use to work for until Danaher acquired us and shipped part of our plant to North Carolina to consolidate us with Gilbarco and of course they sent the rest of it to Mexico.

"Thank you Danaher."

There's a sad network of closures associated with the closure of the London EMD plant. And, contrary to what some like to argue, business closures of this nature do not always result in gains for the shareholders of the companies involved. But, in all the wheeling and dealing, there are most certainly winners and losers. The winners may not be long time owners, but johnny-come-lately private equity investors, and the losers are all too often the long time workers, and in some cases long term shareholders.

For a little more info, let me hand you off to a linked Economist article.

Manufacturing in London, ON: Lots of reasons for decline

This post has been attracting a lot of attention, but not from Londoners, from people surfing the net searching for information on why Southwest Ontario cities, and others, are fighting stubborn unemployment numbers. Here are the threats to employment noted in the following blog post:

• outsourcing
• obsolete technologies
• business mergers
• automation
• reshoring

For more details, read the rambling post.
Cheers,
Ken
____________________________________________________________________________

There was an interesting article in The London Free Press on the 9.6 percent unemployment rate in my Southwest Ontario city. To understand this distressing number, the article instructs us, "Look at your shoes." I did. Well actually, I looked at my granddaughter's — at her Crocs.

My granddaughter's Crocs cost $36.35. Why can't these be made in Canada?

The collapse of the shoe making industry, both locally and across the region, was being used by the writer to illustrate the implosion of local industry under the continuing pressure of outsourcing, the moving of jobs offshore. "Globalization happens," we're told.

The writer justifies the outsourcing, telling us, "Check out the rows of stitching . . . " Making shoes is labour-intensive piecework requiring workers to cut, stitch and glue materials.

Made in China. Why?

I looked again at my granddaughter's Crocs. I found them to be mainly one piece of molded, soft, pink plastic carrying a Disney fairy tale motif on the toes and a simple, white strap at the heel. Could this shoe not be made in Canada, I wondered.

I found the answer in The Free Press article itself, and the answer is yes. The writer tells us injection-molded footwear is a Canadian success story. Think of Kamik brand boots by Genfoot or the Kodiak brand boots under the control of Williamson-Dickie, Fort Worth, Texas. Some lines of both the Kamik and the Kodiak boot brands are made in Canada.

Made in China, full price of $39.99 only drops to $36.35 online. Incredible!

Did you notice an American company owns the Kodiak brand today? Buy a Canadian made Kodiak boot and support a company in Texas. Makes you think.

I started this post to investigate outsourcing. Globalization may happen but should it? We're told companies outsource to stay competitive. The resulting globalization keeps prices low, making products cheaper to buy by those consumers who still have jobs.

I think of my granddaughter's Crocs again: $40. And I think the argument that outsourcing is done to help the consumer may also be a crock.

There are, of course, more examples of stuff made offshore but still selling at a premium price. I am sure you, the reader, can think of some. We're all familiar with stuff like shirts, pants and sweaters now made in China or Bangladesh or Mauritius which seem to cost just about what they did when they were made in Canada.

I googled the idea that globalization is not all it is cracked up to be. I discovered Yunchuan "Frank" Liu, a professor of business administration at the University of Illinois. Liu says consumers are paying artificially higher prices for many goods thanks to outsourcing. Liu was quoted by the university News Bureau:

"Outsourcing is a topic that affects just about everyone, and the general consensus is that it's bad because American workers will lose jobs because of it," he said. "Most people only focus on the job-displacement angle, but very few people have questioned how it affects consumers and competition in the marketplace."

Liu discovered some firms "are unwilling to pass along the savings they've reaped from outsourcing production and labor . . . " If you want to know more, click the link: Study.

While outsourcing may not always provide the promised benefits, it always delivers the promised pain. And outsourcing does not always mean moving jobs offshore. Sometimes it can mean moving jobs from say London to another place in the province.

For instance, there was a time when a subscriber calling The London Free Press to report a missed paper reached a circulation employee working out of the York St. building. I believe London lost more than a dozen jobs when the paper outsourced that work to a group in Ottawa.

The newspaper graphics department didn't go as far when it was outsourced. The in-house department was closed, the work moved to Woodstock and the staff offered their old jobs back but at a reduced wage with reduced benefits.

Sometimes outsourcing can be done simply by firing staff and finding others willing to perform the same work for less. At one time The London Free Press owned a fleet of trucks for delivering the paper. The drivers were all Free Press staff, the trucks were maintained on site by company mechanics working in The Free Press garage. Today, the trucks and their drivers are outsourced, the company garage is closed and all the mechanics are gone. Again, high paid jobs have been eliminated and the jobs that remain are poorly paid in comparison with the past.

But outsourcing, be it local or global, is not the only thing killing jobs in London. To outsourcing, we can add the following:

• obsolete technologies
• business mergers
• automation
• reshoring

The Free Press can be used to illustrate the next two job killers.

When I started in the newspaper business a huge back shop brimming with staff was required to put out a daily paper. For instance, there were Linotype operators tapping out stories in molten lead. The computer made the Linotype machines obsolete and then, almost overnight, made almost every other job in the back shop obsolete. Today you can count on your fingers the people left working in The Free Press back shop. Dozens of jobs have been lost and they won't be coming back; They're obsolete — gone like the buggy whip.

The next job killer is the company take-over. This merging of businesses, often competitors, is always claimed to offer the benefit of synergies. The Free Press was taken over by Sun Media. The Free Press suffered a layoff. Sun Media was absorbed by Quebecor. The Free Press and Sun Media suffered layoffs. Sometimes I think synergy is just a fancy name for job cutbacks, layoffs.

Then there is automation. More and more robots are showing up on the factory floor. They paint, they weld, they lift, move and mix. These jobs are also gone for good. Some were dangerous, many were tedious, all are done better by machine. A robot now wields the spray-gun in electro-static spray booths and even some old-time painters are glad to see that job taken over by a machine.

Reshoring is the last cause of job loss and it is especially prevalent in London. Electro-Motive Diesel is a prime example of reshoring. EMD moved a lot of jobs from La Grange, Illinois, to London in the about two decades back. To the thousands and thousands of La Grange workers left unemployed by the move, London represented an outsourcing destination. With the U.S. in the midst of a "Buy American" movement, and with the Canadian dollar trading at par with the greenback, the time was right for the reshoring of EMD.

London wants to attract new businesses to the community. To this end, depending upon whose numbers you believe, up to $19 million in taxpayer money has been used to entice Dr. Oetker into setting up shop in London.

Funny, isn't it? Dr. Oetker, with reported revenue of €7.7 billion and with 23,000 employees worldwide, needed $19 million to be coaxed into locating in London. I recall a time when London businesses located in London because the business owners lived here. They didn't have to be paid to build their plant in their hometown; they just did it. It as logical. And they didn't demand to be paid to locate here but they gave, and gave generously, in support of their hometown.

The closed McCormick biscuit and candy factory in London.

Think of Thomas McCormick, founder of McCormick's Biscuits and Cookies. The word philanthropist comes to mind as one recalls the McCormick Home also founded by Thomas McCormick.

Now, think of Marc Leder, the fellow many claim closed the McCormick plant leaving the remaining staff unpaid, their pensions unhonoured. The word philanthropist, at least here in London, does not come to mind.

Many Londoners don't realize McCormicks brand candy is now made in Brazil.

The McCormick plant is closed, damaged by fire a few months ago it may well be demolished. But the McCormick brand of candies is still going; The candies are made in Brazil and imported into Canada by a company in Laval, Quebec. Some bags show a picture of the old London plant and others carry a write-up detailing the McCormick history.

London's biscuit and candy factory died from changes in ownership and the resulting supposed synergies. It died from outsourcing. And there are those who would argue one more cause must be added to the list: greed.

Locomotives, pickles and coffee: all share one story

Recently I was told concerning the EMD lockout:

"For all the union bluster and condemnation about the enormous greed of Caterpillar, it is doing what all large corporations are required to do in law: act in their own self interest."

Well, that explains the recent pull-out of Bick's from Ontario by Smucker, the American owner. They didn't willingly choose this move, so destructive to the people of Dunnville, their hands were tied. They were only doing what is required in law. (What bunkum!)

Ontario tried coaxing the pickle company to stay in the province with sweet words made even sweeter by a $2.2 million Rural Economic Development (RED) grant. Smucker nibbled but didn't bite. They returned all the funds initially accepted and declined the remainder. They closed the Dunnville plant leaving up to 150 fulltime factory workers, 70 part-time staff, plus some seasonal workers out of jobs. Also affected were hundreds of area farmers and a state-of-the-art tank farm in Delhi.

According to Toby Barrett, MPP Haldimand-Norfolk, this was the last major industry in Dunnville. In the future, all Bick’s pickled products will be packed by unnamed “third-party manufacturers” and in expanded Smucker factories in Ripon, Wisconsin and Orrville, Ohio. All agricultural support moves to the States in 2012.

The National Post reports:

Bick's was founded in 1944 by Walter Bick, a young German Jew, 27, who had fled Europe just ahead of the Second World War. Walter and his wife Jeanny sold barrels of pickles to restaurants and army camps in the Toronto area before moving into retail in 1952. The company was sold to Robin Hood Flour in 1966. Robin Hood was taken over by Smucker in 2006.

"The plant closing has struck a sour note with former Bick’s employees. 'Americans come to Canada, buy a Canadian company, close it, and move it to the U.S.A. Shop for other brands, don’t help them screw us over,' reads a statement on Boycott Bick’s Pickles, a Facebook page created by disaffected former Bick’s employees."

The Electro-Motive Diesel lockout is grave but the story is not unique. I doubt it will be solved by the intervention of any well-meaning negotiators. I have watched this tale unfold in various permutations over and over, and not just in Ontario. Thanks to Google, I know that the story is even unfolding in Orrville, Ohio. Now, that's a surprise.

Orrville, Ohio has an expanded Smucker plant which replaced a 60-year-old facility, but the ''new technologies and efficiency improvements" results in more product being made by fewer people. Millions in capital investment eliminated 180 jobs or 40% of the Orrville work force. As production is ramped up at the modern plant through the summer of 2013, facilities in Memphis with 161 employees and in Quebec with 101 employees will be closed.

Robin Hood Flour and Bick's are not the only well-known brands to have been assimilated into the Smucker fold. Since 2001, Smucker has acquired Folgers coffee along with food brands Jif, Crisco, Pillsbury, Hungry Jack, Eagle Brand condensed milk and Europe's Best Inc., a private company headquartered in Montreal. (I've noticed that some of Europe's Best is packaged in China.)

Unfortunately, growing the brand has meant shrinking the jobs. Take Folgers. Smucker acquired the coffee company from Cincinnati-based Procter & Gamble in 2008 for $3.3 billion. By 2011 the phase out of the Folgers Kansas City operation, with more than a hundred years of history and 179 employees and its Sherman plant with 95 jobs, was underway.

Missouri state Rep. Mike Talboy called the closings "extremely unfortunate" and said he hoped Folgers would reconsider. Talboy said he'd be working with the Missouri Department of Economic Development to see if there's anything that can be done to keep the plant open and keep the jobs in Kansas City. "I'm going to do everything I can to protect Kansas City jobs," Talboy said.

More nice thoughts. Nice thoughts by politicians, union leaders and newspaper columnists seem to surround and cushion these closures. As I wrote in my last post, folk like these should hold onto their nice thoughts, and they don't have to hold on too tightly. Those thoughts aren't going anywhere.

The Folgers KC closing also is accompanied by its own Facebook page.