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London Ontario- January 2, 2012. Locked out Canadian Auto Worker union members gather around a fire to keep warm as they walk a picket line in front of the Electro Motive plant. (Mark Spowart/Mark Spowart for the Globe and M)
London Ontario- January 2, 2012. Locked out Canadian Auto Worker union members gather around a fire to keep warm as they walk a picket line in front of the Electro Motive plant. (Mark Spowart/Mark Spowart for the Globe and M)

Globe Editorial

Job loss at Electro-Motive Diesel tragic, but companies cannot be forced to stay in Canada Add to ...

Dalton McGuinty, the Premier of Ontario, is right to advocate a review of the Investment Canada Act – an exercise that the federal government has abandoned after a cabinet shuffle – but wrong to propose changing Canada’s foreign-takeover policy so as to obstruct or prevent enterprises from going out of business. That would discourage companies from investing in the first place.

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The closing – after a lockout – of Electro-Motive Diesel Inc. in London, by its owner, Caterpillar Inc., which bought it in June, 2010, was the occasion for Mr. McGuinty’s statement on Monday. “If your intention is merely to buy an Ontario business so you can shut it down and strip out the jobs and the intellectual property,” he said, “that’s not on.” He directly attributed such an intention to Caterpillar: “This company, we have learned, had no sincere interests in a long-term presence in that community.”

As it happens, Electro-Motive Diesel Inc. has always been a subsidiary of American corporations.

The real trouble with the Investment Canada Act was seen in the federal government’s finding, in November, 2010, that the proposed purchase of Potash Corp. by BHP Billiton Ltd. was not of “net benefit” to Canada, in the midst of many claims that the potash deposits of Saskatchewan were a strategic Canadian asset – a phrase absent from the ICA. That led to an uncertainty about Canada in the international investment world, which needs clarification.

Mr. McGuinty seems to think the ICA should routinely require foreign applicants for takeovers to commit themselves to stay in business for some fixed term – come what may.

Back in 2007, Canada set some such conditions on the takeover of Stelco Inc. by United States Steel Corp. It proved hard to comply with these in changing economic circumstances. Though the federal government was right to sue U.S. Steel for breaking its promise, it was also right to eventually settle the dispute, in December, 2011.

The loss of 450 jobs at EMD, in a region that has already lost many manufacturing jobs, is tragic. But the changes that Mr. McGuinty wants to the ICA are not viable. A government agency in Ottawa cannot impose business judgments on real businesses.

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