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Electro-Motive Canada employee and welder Kelly Gordon in a building called "The Cottage" on the picket line outside the subsidiary of Caterpillar in London on Feb. 8, 2012, that is filled with names and signatures of the workers. (Deborah Baic/The Globe and Mail/Deborah Baic/The Globe and Mail)
Electro-Motive Canada employee and welder Kelly Gordon in a building called "The Cottage" on the picket line outside the subsidiary of Caterpillar in London on Feb. 8, 2012, that is filled with names and signatures of the workers. (Deborah Baic/The Globe and Mail/Deborah Baic/The Globe and Mail)

Manufacturing

In the Electro-Motive shutdown, an unsettling message for Canadian industry Add to ...

On Feb. 3, 2012, Caterpillar’s Progress Rail Services unit announced it would cease operations at its Electro-Motive Diesel locomotive assembly plant in London, Ont. Coverage of the news has garnered immense response from Globe readers, with thousands of comments posted on stories since the announcement. This is a story The Globe and Mail will follow as the year unfolds, through the prism of the lives of half a dozen workers affected by the plant’s demise, and the community members who are bracing for the ripples. Follow the story and join the conversation at tgam.ca/manufacturing.

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It’s a wintry Wednesday afternoon, and Vince Gugliotta and his son are playing ball hockey. Five-year-old Orlando slaps the ball, and once again it sails high over the fence behind his dad, landing in an inaccessible parking lot beside a battered toy dump truck.

“No high slap shots!” Mr. Gugliotta says. His son smiles. But he knows the balls are not retrievable. They’ve landed in the lot of Caterpillar Inc.’s locomotive factory in London, Ont., a 62-year-old plant the company abruptly closed on Feb. 3.

Mr. Gugliotta, who still drops by the picket line outside the shuttered plant, lost his job as an assembler that day. The worst of it? His wife, Sarah Smith, who also worked in the plant, lost her job too. And just like that, the family with four children between the ages of 1 and 8 slid from solid middle class to no income at all.

The swiftness of the closure has left them reeling. Electro-Motive Canada (a subsidiary owned by Caterpillar ) initially cut its work force last summer. The company then asked its staff for a wage cut of up to 50 per cent. When workers said no, it never returned to the bargaining table, despite entreaties from London’s mayor and the union.

On Jan. 1, the company locked the workers out. On Feb. 3, citing the need to be cost-competitive in a global market, Caterpillar closed the plant for good, putting 700 people out of work.

“No one should be asked to take a 50-per-cent pay cut,” says Mr. Gugliotta. “It’s morally wrong, what they did.”

The family is now scrambling to draw up a survival plan. They’re applying for jobless benefits and drastically cutting costs – clipping coupons, renegotiating bank and car loans, ruling out restaurants and movies for the kids and all extra-curricular activities.

Mr. Gugliotta’s isn’t the only family struggling in the days after the closure. Some older workers thought they were on the cusp of retirement. Others are immigrants who came to Canada for a better life. They volunteer in their community and donate to charity. They bought houses and cars and clothes and paid their taxes. They went out to movies, ate breakfast at the diner before their shift and bought boots at the local workwear shop.

This isn’t just a story about the 700 people who lost their jobs that day. It’s also about the 1,000-plus who will follow because their jobs as truckers and suppliers depended on the plant, and the impact on a community that already has one of the highest jobless rates in Canada.

It’s a story of the harsh side of global competition and its impact on the middle class. It raises unsettling questions about competitiveness in Central Canada and the future prospects of Ontario – the country’s most populous province and home to 40 per cent of its economic activity.

Caterpillar’s is an extreme and brutal example. But it’s also the latest in a string of closures, from AstraZeneca’s research facility in Montreal (132 jobs) to heavy-truck manufacturer Navistar in Chatham, Ont. (1,100 jobs).

The London area has been particularly hard hit: Ford Motor Co. of Canada closed its doors in nearby St. Thomas last year (1,200-plus jobs) while 3M Canada has trimmed its manufacturing work force in London to 235 people from 400 five years ago.

The closures are the result of fierce global competition, automation, and a currency that trades at parity compared with 62 cents to the U.S. dollar a decade ago, obliterating a key cost advantage.

In years past, the jobs have flowed to cheaper manufacturing hubs like China or Vietnam. Now, they’re just as likely to shift south. Global competition isn’t just between multinational companies. It’s also between regions, desperate to attract jobs to areas where unemployment is high and local economies have been ravaged.

In this case, the locomotive jobs appear to be moving a scant six hours away, to Muncie, Indiana, where wages of $12 to $16 an hour are half those of the London plant. Muncie’s own jobless rate is 9 per cent, though officials figure the real rate is double that.

Talk to anyone on London’s picket line, and they will tell you this is a race to the bottom.

THE EMPLOYEES

It’s a blustery day on the picket line. Workers have been out in the cold since Jan. 1, when the company locked them out. But they remain in front of the shuttered plant around the clock, tending the fire, huddled in groups exchanging news.

Down the road, workers have erected a graveyard of wooden crosses. “Job cemetery,” reads one.

Outside, Kelly Gordon, a welder and single mother, says her daughter’s grades have suffered as a result of the stress. Ross Seeley, who worked 29 years at the plant, is revisiting his retirement plans. “I could retrain. But who’s going to hire me now?” he wonders.

Half an hour away in the village of Belmont, Ralf Zapke has a chemo bag belted around his midsection, gauze on his upper arms.

Last May he collapsed at work and was rushed to hospital. The 49-year-old was diagnosed with Stage 4 cancer in his esophagus, stomach, lymph nodes and liver. Doctors gave him six months to live.

He’s been on sick leave since then, and has already outlived the prognosis. He is a determined spirit, working out, eating healthy food, and in fact the cancer is retreating. More than anything, he wants to go back to work.

This month Mr. Zapke lost his job as a crane operator, and with it, he says, any hope of future employment. His wife, Lise, works at the local Beer Store, but it’s only part time (hourly wage: $16). They have put their detached home up for sale, hoping to downsize into something smaller and closer to hospitals.

Without benefits, they don’t know how they’re going to pay for his medication, home health care, or any of their basic needs.

The picket line remains in place, though its numbers are diminishing as people look for work, move or drift away. On Tuesday, the company said it had reached a tentative deal for the “safe and orderly” shutdown of the plant, which is subject to a ratification vote Thursday by union members.

Outside the plant gate, a Canadian flag still flutters in the wind.

THE TOWN

London’s effusive mayor, Joe Fontana, would much rather talk about the city’s opportunities – Dr. Oetker, for example, a German food maker, will soon produce five million pizzas a year out of a new plant.

But there’s no getting around the fact that Caterpillar’s closure is a blow. He figures the move wipes out $1-billion from the city’s GDP of $17-billion.

London’s jobless rate was 9 per cent even before Caterpillar closed the Electro-Motive Canada plant, well above the national average of 7.6 per cent. The mayor worries the closure will send it higher.

“Southwestern Ontario, which is the economic locomotive of the Canadian economy… is still struggling,” says Mr. Fontana, adding that he’s frustrated that the manufacturing industry doesn’t seem to have a champion in the current federal government.

Plants have come and gone over the years. This time seems different. For one, Electro-Motive Canada isn’t facing economic hardship. It just posted a record quarterly profit, as any of its 700 former workers will say. The plant is – or was – productive, profitable and reliable, with a stellar safety record.

The company, through an outside PR firm, declined repeated requests for comment.

Local businesses have already been hit. Around the corner from the shuttered plant, K’s Sports Lounge and Grill is quiet on a Wednesday night but for a few men sitting at the bar. Manager Kay Phouttharath says business is down 20 per cent.

Paul Giannopoulos, owner of James Place Restaurant, a diner that serves breakfast and lunch to people who work nearby, says he’s lost 30 to 40 customers a day since the Caterpillar closure. Frank Rondinelli, president of Charterhouse Auto Body and Collision, says January was the slowest month in 40 years because few people are driving, and fewer still are getting their cars fixed.

Charities have already been affected. Sarah Smith and her husband, Vince Gugliotta, used to donate $100 a month from their paycheques to the United Way. “I never thought I would be using the services that we were lucky enough to be able to contribute to,” she says.

The United Way of London estimates it lost $108,000 as a result of the Electro-Motive closure. The funding has evaporated just as the need for services such as mental-health and financial counselling is growing.

“We’re trying to break cycles of poverty, but as the dollars decrease, so too does our capacity,” says CEO Andrew Lockie.

THE INDUSTRY

Factories were once Canada’s largest source of employment. That has slid, and today the number of people who work in factories hovers near a 30-year low. But it’s still sizable – almost 1.5 million Canadians work in manufacturing, the third-largest employer after the health care and retail sectors.

Last week’s Drummond report on the state of Ontario’s finances minced no words about manufacturing’s role in Ontario. The sector has dwindled as a share of the province’s output and employment base, it said, and this trend will continue as the manufacturing industry is hammered by a strong dollar and uneven U.S. demand.

Statistics help tell the story:

- Factory employment – traditionally a source of high-paying jobs – has faded to just 11.8 per cent of total employment, half the levels they were in 1976.

- Census numbers this month show just how dramatically the country is tilting. Alberta tops the country’s population growth, followed by British Columbia. Ontario’s rate of growth is below the national average for the first time in a quarter of a century.

- London tumbled out of Ontario’s top-10 big city list.

Much talk on the picket line at Electro-Motive Canada centres on Alberta. One former worker left for Fort McMurray last week. Others are contemplating a similar move. For them, the Made-In-Canada era is over.

If Central Canada’s cost advantage is fading, and if corporate taxes have already been cut to below those of the United States, what else can the industry do?

Ontario has the most educated skilled workforce in the world. It is multilingual and multicultural. The best way for it to compete is on quality, investment in new technology and better use of its labour force, says David Wolfe, a University of Toronto professor who specializes in manufacturing.

It may not be the source of well-paying jobs it once was, but manufacturing is hardly fading into the sunset, says London Mayor Joe Fontana, who is witnessing plenty of vibrancy in the food manufacturing, bio-medical and technology industries.

“If we believe as a country you should produce things, and that it’s not just about oil and natural resources, where do you go?” Mr. Fontana says. “You’ve got to go to our manufacturing base.”

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