I was delighted to see Martin Regg Cohn write on the closure of the Electro-Motive plant in London, Ontario. Unfortunately the piece suffers from a number of commonly held misconceptions.
The London plant opened up in 1950 as part of General Motors Diesel. The plant was mainly used for domestic Canadian production, as to avoid import duties from shipping production from the US. The plant eventually produced more than trains, including military hardware and buses.
(As an aside, I grew up in the area, right around the corner from the Accuride plant. I used to ask my Dad what each factory produced, and when we passed the GM Diesel plant, he told me it produced buses. I've caught myself on more than one occasion talking about this dispute as being about buses, not trains. Old habits die hard.)
After the U.S.-Canada Free Trade Agreement, GM Diesel closed their La Grange, Illinois plant and consolidated their production to the London plant, though kept the head office, research, design, and manufacturing of some components in La Grange. EMD London was a direct beneficiary of the U.S.-Canada Free Trade agreement, something I have yet to hear in the media. The domestic locomotive market, by itself, would not have supported the level of production we have seen over the last two decades.
In 2005, GM Diesel sold the Electro-Motive Division (including the GM Diesel plant in London and the head office in La Grange) to a couple of U.S. private equity firms, who re-named it Electro-Motive Diesel. In 2010, those firms sold EMD to Caterpillar.
Clever multinationals — and this is one cunning Caterpillar — don’t spend hundreds of millions of dollars to buy a factory only to shutter it. So what was the plan?
The big bad Americans saw past our myopia — beyond the cash value of the plant’s physical property to size up and seize the company’s intellectual property: the innovation, trade secrets, manufacturing processes and R&D residing in London.
We need to keep in mind that:
- EMD has always been a U.S. corporation.
- The intellectual property from research and design, etc. was from the head office in La Grange, Illinois.
So that leaves "know-how" which Cohn mentions in a follow-up paragraph. On Twitter, Colby Cosh asked: "Cohn talks about "know-how" but (a) know-how isn't IP and (b) Cat doesn't seem to have much use for the workers who have it, do they?" Caterpillar, however, did send a number of employees from London to their new plant in Muncie, IN, to train newly hired workers. I am Facebook friends with an EMD worker and I remember him objecting loudly to this last fall. But did Caterpillar really buy EMD so that it could obtain the talents of a dozen guys to teach advanced welding techniques?
There are a lot of narratives to this story, many of them unpleasant. A narrative about a U.S. company buying Canadian IP at 15 cents on the dollar does not pass the sniff test, however.
Additional resources: CBC As It Happens, Postmedia, Toronto Star, Globe and Mail, Toronto Sun, CBC News, Sun TV, Wall Street Journal, London Free Press (here, here and here), iPolitics.ca, Huffington Post and my chat with Jim Stanford. I've been pretty active this week. Was also on Lang & O'Leary Exchange with friend of WCI Erin Weir.