Caterpillar, Globalization and Labour Relations: an Interview with Michael Lynk

I'm delighted to share an interview that I recently conducted with Michael Lynk. He's a labour law professor at Western's law school and one of Canada's foremost experts on labour relations. We discussed the ongoing lockout at the Electro-Motive Diesel plant in London, possible futures for labour relations in Ontario and the difficulties governments face in formulating responses to breaches of domestic workplace laws in a globalized economy.

The Backstory

Before we get into the interview let's briefly run through the backstory behind the lockout. Electro-Motive Diesel manufactures locomotives and was purchased by Caterpillar Inc. back in 2010. On January 1, 2012, the unionized workers were locked-out from their jobs with Caterpillar tabling an offer that would see the wages of employees at the plant slashed by between 43% and 50%. It should be noted that Caterpillar isn't a company in dire financial straights, quite the opposite with the company's annual profits jumping 83% over the last year to $4.9 billion.

On January 21, 2012, there was a massive rally in London to protest the ongoing lockout and on Tuesday Premier Dalton McGuinty made some unusually strong comments (see the video here) about how Caterpillar should "come to the table and demonstrate some flexibility". In the background of all of this is a belief in some quarters that what Caterpillar was after all along was the technology that Electro-Motive possessed and its intention is to move production to Indiana which has weak labour laws. This lockout comes on the heels of protracted labour disputes with foreign employers at U.S. Steel in Hamilton and Vale in Sudbury. Now onto the interview.

The Interview

A.L.: The lockout of the workers at the Electro-Motive Diesel plant in London, Ontario by Caterpillar Inc. comes on the heels of a number of protracted industrial conflicts at U.S. Steel in Hamilton and Vale in Voisey's Bay and Sudbury over the past few years. Is there a trend developing in private sector labour relations in Canada with employers moving towards more aggressive bargaining strategies?

M.L.: Lord Acton once said that it is difficult to prophesize, especially about the future. These strikes and lockouts might indicate several different trends: 1. One can see a move towards the Americanization of private sector collective bargaining in Canada, particularly in the manufacturing and resource extraction sectors where foreign investors are becoming more noticeable. There has been an upsurge of foreign investment in these sectors lately, and all three labour relations conflicts that you cite arose in the aftermath of recent acquisitions by foreign corporations (two of them American and the third Brazilian) of established companies with relatively stable union-management relations. The new owners have then sought to significantly re-order the collective bargaining relationships, and have been willing to endure lengthy strikes or lockouts to reach their new industrial relations goals.  Keep in mind that private sector unionization in Canada has been steadily shrinking -- it now stands at around 16% -- and private sector unionization in the US, at 7%, demonstrates that there is still more room to fall further.  2. Or it might be that these labour conflicts are the exception to the rule that mature, sophisticated and stable industrial relations reign in Canada. Until I see a more definitive pattern, I am assuming that these conflicts are the exception to the rule.    

A.L.: In the academic discourse surrounding labour relations in a globalized world there's an under-utilized concept called "exit", this is where a corporation can completely leave one jurisdiction for another that has less labour market regulation. It has been suggested that Caterpillar's end-goal is to move production to the United States. Might the final result of this lockout be the exit of Caterpillar from Ontario's economy? Is this a troubling trend for Canada's manufacturing base?

M.L.: The speculation in London, Ontario -- where I live and where the Caterpillar lockout is front-page news in the London Free Press virtually every day -- is that Caterpillar is looking to re-locate its locomotive assembly operations to Muncie, Indiana. Caterpillar has bought an enormous empty factory once owned by Westinghouse in Muncie, and has started locomotive production with a non-unionized workforce that is paid wage and benefit rates similar to what Caterpillar is offering the CAW local in London. The state legislature in Indiana is controlled by the Republican Party, and it has recently introduced "right-to-work" legislation that would restrict the ability of unions to collect dues. The state has also offered approximately $30 million in grants and tax rebates to Caterpillar to assist the Muncie plant. One curious pattern in the labour conflict in London is that Caterpillar has kept an exceptionally low public relations profile during the lock-out, issuing a static press statement, and responding only by e-mail to requests for comments; one might have thought that a company interested in staying put would be more pro-active in telling its side of the industrial relations story to the broader community.  The impact of globalization and free trade agreements over the past twenty years has been to significantly broaden the competitive space for workers and companies alike: they now have to pay attention to pay and benefit rates and labour laws not only in the next county and city, but also in neighbouring and distant countries as well.  The CAW lockout at Caterpillar is Exhibit A.    

A.L.: One of the areas that I'm interested in is the public policy response from governments to transnational corporations which can use their economic weight to do an end run around domestic workplace laws. What are the difficulties in formulating a regulatory or public policy response in the era of globalization? Do governments even have the right tools to effectively address protracted industrial conflicts given the transnational nature of capital and production?

M.L.: An obvious and visible problem, with no easy solution. The orthodox and uniform government response has been to lower corporate tax rates, harmonize the corporate regulatory environment, freeze labour and employment law reforms, and compete as the best place to do business in this brave new world. All of these factors have been cited as contributory elements to the growing rates of income and wealth inequality in the industrialized and industrializing world: see the writings of Paul Krugman and James Galbraith, among others. One emerging trend might be that as the popular understanding of economic inequality grows (the influence of the Occupy movement), this will push governments to bring in comprehensive tax reforms, maintain social spending levels and encourage tighter regulation of the national and international capital markets. What I fear is that any reforms in this direction will be modest and ineffective in scope (given that every major Western government is either ruled by a conservative party, or, in the US, the combination of Republican control of the House, and the unchecked rise in corporate political funding will checkmate any reforms), and the dominant trend towards, at best, a loose regulation of transnational capital will prevail.   

A.L.: You've previously commented that Caterpillar's tactics are a throwback to the early days of industrial America. What lead you to make those comments and are we seeing tactics being deployed in this lockout that similar to those used in pre-Wagner Act era labour relations in the United States?

M.L.: In modern, mature industrial relations, unions and corporations accept and respect each other's presence and each other's mission. They might fight over concessions in hard times or innovative employee-friendly proposals in good times, but this is all within a stable framework that ensures the union has a permanent place in the workplace, and the prevailing collective agreement is the general standard for future wages and benefits. I cannot recall an industrial relations fight in Canada where a large company was looking for such a drastic overhaul of the collective agreement, even in rough economic times. In these circumstances, Caterpillar has just posted record company profits over the past two years, the locomotive market for the foreseeable future is bright, and the current CAW collective agreement is comparable to prevailing industry standards (Caterpillar's main competition is a GE locomotive plant in Erie, Pennsylvania, with a similar wage and benefit structure in its newly-renewed collective agreement). An inquiring mind might ask whether Caterpillar's bargaining proposals are consistent with the legal duty to bargain in good faith, in that it would have to offer a persuasive industrial relations justification for its extraordinary final offer in order to comply with the duty.