5 Caterpillar talking points: Profits, tax breaks & relocation threats

On January 1st, 2012 Caterpillar, Inc locked out 465 workers at Electro-Motive, its London, Ontario locomotive plant, after offering a contract that would cut workers’ wages & benefits by more than half (to approximiately $16.50/hr).

On January 1st, 2012 Caterpillar, Inc locked out 465 workers at Electro-Motive, its London, Ontario locomotive plant, after offering a contract that would cut workers’ wages & benefits by more than half (to approximiately $16.50/hr).

Picket lines have been set up (photo), a long lockout is expected, and there are indications that Caterpillar is simply using this situation to both break the union (Canadian Auto Workers Local 27) and move the plant to Indiana (home of the pending ‘Right to work’ legislation). On Saturday January 21st, 7,000 – 10,000 people rallied in London is support of the Caterpillar workers (photos).

Here are a few talking points of background on Caterpillar, as well as some info on the Canadian Government’s role. I aimed to make this into a brief snapshot of the company, so I’ve added many links throughout for further information.

#1. Money is Available

Caterpillar’s wage cut demands of 50% are not a matter of need, as the following figures illustrate:

  • Profits (3rd quarter,2011): $1.141 billion [up 44% from the 3rd quarter of 2010]
  • Sales (3rd quarter 2011): $15.716 billion [record year]
  • Current CEO’s pay: Doug Oberhelman received a $10.4 million compensation package of salary bonuses, stocks and options as the new CEO in 2010.
  • Former CEO’s pay: Former chief executive Jim Evans’ 5-year compensation totalled $43.2 million (he left in 2010). In 2010, Caterpillar’s  top 8 executives were paid $67.6 million.

– A Chart of Caterpillar’s Quarterly earnings and sales, 2009-2011

#2. Harper gave $5 million in tax breaks to Electro-motive

On March 19th, 2008, Prime Minister Harper went to the Electro-motive plant to announce a $5-million federal tax break for the company (as part of $1billion in tax breaks for industry in general). Less than 3 years later, they are are looking to cut wages in half and threatening to leave Canada. Harper is now conspicuously silent on the issue.

#3. Caterpillar has a history of relocation threats

Threatening to cut and run if they don’t get what they want is not a new approach for Caterpillar. Here are just two examples:

Iowa 1986: Give us money, then we’ll close

Caterpillar threatened to close their Davenport plant, forcing Iowa to give them incentive packages exceeding $1 million and a favourable tax assessment which reduced their tax bill by a further million.  Nevertheless, one year later Caterpillar announced it would close – prompting yet another round of incentive offers.  This time it didn’t work, Caterpillar closed up shop and laid off 35,000 workers. Then-mayor Thom Hart responded, “I’m totally beyond anger. Anger is such a shallow word to describe my feelings”

Illinois 2011: Relocation of Caterpillar’s Headquarters?

Caterpillar was upset about changes being made to Illinois tax and regulation policy, including a new corporate tax hike. It was also pushing for changes to the state’s workers’ compensation law.  This prompted Caterpillar to follow it’s tried and true method of ‘negotiation’, this time threatening relocation of their headquarters. Caterpillar CEO Doug Oberhelman wrote Illinois governor Pat Quinn as follows: “Before, I never really considered living anywhere else and certainly never considered the possibility of Caterpillar relocating. But I have to admit, the policymakers in Springfield seem to make it harder by the day.”  Oberhelman later said Caterpillar wasn’t planning to leave Illinois, that he was just trying to ‘spark discussion’.

#4. Donations, subsidies, earmarks

In 2010, Caterpillar received an $8.5 million subsidy to open a plant in Texas through the Texas Enterprise Fund, created by the Texas Legislature at Governor Rick Perry’s urging. Peter Holt, Texas owner of the largest Caterpillar dealerships in the U.S., had contributed over $420,000 to Perry in the previous years (his second largest contributor).

In 2008, Rep. Ray LaHood (R – Illinois) earmarked $7.8 million for Caterpillar to help them develop technologies for potential future military contracts.  Caterpillar is Ray LaHood’s biggest campaign funder having donated more than $190,000 since 1998. [LaHood is currently President Obama’s Secretary of Transportation]

#5. Net benefit?

As a foreign company buying a Canadian firm, Caterpillar’s 2010 purchase of Electro-motive was automatically reviewed under the Investment Canada Act.  The Investment Canada Act “requires consideration of a “net benefit” to Canada when approving foreign takeovers”.   The Harper government has yet to disclose the terms of the purchase.

There are many indications that this dispute will end with Caterpillar simply closing up shop and throwing 465 skilled workers out of work.   With this in mind, the Canadian government should be disclosing details of the purchase and how it passed the ICA’s ‘net benefit’ provision. ***

—Darren Puscas, Toronto, ON

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Further reading and viewing:

What’s Wrong with Caterpillar? by Laurel MacDowell

Electromotive Vs. Caterpillar Corporate Greed – London, Ontario

Caterpillar Political Transparency and Accountability Profile Centre for political accountability (2011) (PDF)

Caterpillar flexing its muscle, London Free Press, January 16th, 2012

1992 Caterpillar Strike Ends

Caterpillar Lockout: Harper Turns Back on Canadian Workers by Irene Mathyssen, Member of Parliament, London-Fanshawe

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***It’s important to avoid reactionary and ill-conceived division between ‘good’ Canadian companies and their ‘evil’ foreign counterparts – net benefit should be considered regardless of a company’s national origin.  Nevertheless, this more limited ICA process exists in Canada, and it needs to be called to account.

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