Bloomberg News

Caterpillar Plant Closing Deal Ratified by Canadian Union

February 24, 2012

(Updates with pension funding in sixth paragraph.)

Feb. 23 (Bloomberg) -- Caterpillar Inc.’s settlement with workers at an Ontario plant was ratified by the Canadian Auto Workers union, marking the end of 10 months of negotiations as the company closes its locomotive factory.

Caterpillar, the largest maker of diesel-electric locomotives, will give about 465 union workers three weeks of pay for every year of work and a C$1,500 ($1,502) bonus, Shannon Devine, a spokeswoman for the union, said today in an e-mail. That’s more than the minimum required by Ontario law, the union said. The settlement was approved by 95 percent of voting members.

Caterpillar, based in Peoria, Illinois, will move assembly to other plants in North and South America because of high costs at the plant acquired in its 2010 purchase of Electro Motive Diesel Inc. The closing is part of Caterpillar’s effort to boost profit as it expands in the growing rail market and competes against companies such as General Electric Co.

“We are incredibly saddened today that 465 middle-class jobs have been taken out of the community,” Ken Lewenza, president of the CAW, said on a conference call today.

Severance payments will range from about C$13,000 for three years’ service to a high of about C$148,000 for about 30 years, Caterpillar’s subsidiary Progress Rail Services said in a statement today. Local law mandates one week’s pay for each year of work up to 26 weeks for employees with more than five years’ service, it said. Those with less than five years get nothing.

Union Costs

Caterpillar also will complete funding of the employees’ pension trust and will pay the union C$350,000 to fund settlement of all grievances, establish an adjustment program and cover representation costs for bargaining unit employees.

Severance plans for the 300 non-union workers at the plant haven’t been determined yet because many of the salaried management employees will be involved in the wind down of the factory, which may take weeks or months, Anne Marie Quinn, an outside spokeswoman for Caterpillar at Fleishman-Hillard in Toronto, said in an e-mail today.

The union and the company began negotiating a work agreement in April. Caterpillar locked out workers on Jan. 1 after contract talks failed and on Feb. 3 said it would close the factory because costs put it at a competitive disadvantage. Caterpillar had demanded a 50 percent cut in wages to reduce costs, union officials said.

Lewenza has criticized the company for its cost-cutting measures after Caterpillar posted record net income of $7.40 a share on sales of $60 billion in 2011. Caterpillar on Jan. 26 forecast a 25 percent rise in earnings this year to about $9.25 a share as demand rises for shovels and trucks. While 2011 sales for Electro-Motive Diesel rose by $861 million, profit declined by $7 million.

Caterpillar is also the world’s largest maker of construction and mining equipment. The shares rose 0.3 percent to $116.20 at the close in New York.

--Editors: Simon Casey, Jasmina Kelemen

To contact the reporter on this story: Shruti Singh in Chicago at ssingh28@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net


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