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Severance Deal Reached in Stained Caterpillar Rail Diesel Closure

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7 March, 2012

With 95% approval yesterday, Local 27 members of the Canadian Auto Workers (CAW) ratified a closure agreement with Electro-Motive Diesel (EMD), part of Caterpillar Inc.’s Progress Rail Services, in London, Ontario. The sizeable financial settlement ends a morbid chapter of labour relations abuse by a company, and leaves an economic wound befitting the worst corporate ill-will that can be served up.

The loss of 465 union jobs is tragedy enough in London, Ontario. EMD proposed in collective negotiations that CAW members reduce wages from C$35-per-hour to C$16-18, and give up a 50% equivalent of all benefits. When workers said no, on 1 January Caterpillar and EMD locked them off their jobs at a rail locomotive manufacturing plant.

Thirty-four days later Caterpillar/EMD announced it would close the operation, move production to a start-up plant in the low-wage – US$12-16-an-hour – city of Muncie, Indiana, six hours to the south of London, where Caterpillar had already assembled a virulently anti-union management team.


Ken Lewenza

Angry Canadians could only beg the answer to the question: What are our federal and provincial governments doing on such brazen desecration of our manufacturing base. Caterpillar had bought the London plant in third quarter 2010 and it came with a bed of government tax breaks. Eighteen months later, the plant is shuttered and Canadian-made machinery and technical know-how is now leaving the country.

CAW President Ken Lewenza said Canada is in desperate need of a manufacturing jobs strategy. He stated that the free movement of global capital from country to country must be stopped because it is undercutting workers’ wages.

Severance packages exceeded what were required by law, partly driven by public indignation of Caterpillar’s conduct and mostly by CAW’s resolve to get the best possible close-out deals for workers. EMD workers will get three weeks’ pay for each year of service and a C$1,500 lump sum payment. (See the CAW closure agreement here.)

For one-third of the workforce, that means severance payments of 60 weeks’ pay or more, while many will average 20-25 weeks. Workers will gain a measure of extended health care coverage, their pension fund will be fully funded, and EMD agreed to settle all claims and grievances with CAW Local 27. That will amount to a C$350,000 payment to the union within 30 days of yesterday.

Province of Ontario law says that workers with five years of work service must get one week’s pay for each year worked, with a cap of 26 weeks. In a company statement on the closure and severance agreement, Caterpillar/EMD boasted that 75 workers, who would not receive pay-outs under the Ontario minimum, will do so now in the negotiated agreement.

That hollow boast fades in juxtaposition to the wider swath of economic carnage Caterpillar has left on southwestern Ontario. Besides the 670 union, clerical and management direct jobs lost, CAW expects the plant closure to impact another 2,100 peripheral jobs.

(See previous ICEM 2012 reports on Caterpillar in London, Ontario, here, here and here.)