Caterpillar Shutting Down Locomotive Plant

Cost structure cited; Indiana plant may gain reassigned production

Caterpillar Inc.’s Progress Rail Services Corp. subsidiary is closing its Electro-Motive Canada diesel engine assembly plant in London, Ont., affecting 475 workers who had been locked out since January 1, as well as 300 salaried employees. The company’s brief statement did not indicate the schedule for closing the plant.

“The company stated it is regrettable that it has become necessary to close production operations at the London facility,” according to the Progress Rail release. “The cost structure of the operation was not sustainable and efforts to negotiate a new, competitive collective agreement were not successful.”

The previous labor contract expired December 31. Negotiations toward a new agreement had not been promising to that point, according to leaders of the Canadian Auto Workers union that represents most of the hourly workers, as well as Electro-Motive. “The collective agreement and cost structure of the London operation did not position EMC to be flexible and cost competitive in the global marketplace, placing the plant at a competitive disadvantage. While the company’s final offer addressed those competitive disadvantages, the gulf between the company and the union was too wide to resolve and as such, market conditions dictate that the company take this step.”

CAW officials alleged Progress Rail wanted to cut hourly wages in half and reduce workers’ benefits. They charged that Caterpillar plans to reassign the Ontario plant’s workload to a newer operation in Muncie, Ind. – because Indiana recently adopted a “right to work” law, making it more difficult for unions to organize workers in that state.

Electro-Motive is one of the largest manufacturers of diesel locomotives in North America. In Caterpillar’s recent annual report it stated Electro-Motive’s sales rose $861 million in 2011, on strong demand, though its profits fell by $7 million.

Progress Rail indicated that customers’ deliveries of new locomotives will not be delayed, and that production will be reassigned to other plants in North and South America. In addition to the Muncie plant it is building a new operation in Sete Lagoas, Brazil.

Caterpillar bought Progress Rail in 2006; it manufactures, repairs and refurbishes freight cars, locomotives, and rail track for Class 1, short-line and transit railroad companies, as well as private car owners. Progress Rail acquired Electro-Motive Diesel in 2010, and then invested a reported $50 million to remodel a plant in Muncie, Ind., to assemble locomotives.

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