So we finally have heard officially that Caterpillar's EMD division had a loss of $16 million in 2010, although it is not known if this was directly related to the London plant or not. I am disappointed in the London Free Press that it took them 30 days from the start of the lockout to report this, but now is better than never.
EMD is ultimately responsible to Caterpillar. Caterpillar, like any business, is not going to tolerate continued losses from any of its divisions. EMD is not a charity, non-profit organization, or Crown corporation, so Caterpillar cannot be expected to subsidize EMD's losses. EMD has to do something to improve its profitability. They could raise their prices, but that could lead to a revolt from customers. That leaves them forced to cut costs in order to improve their profitability. Because of Canadian economics, the cost of labour is one of the few things international companies are able to control in Canada.
If you were in management at EMD and were told by Caterpillar that you must improve profitability in light of a $16 million loss in 2010, what would you do? Remember, your career is on the line, and your bosses have to answer to shareholders at the annual meeting.
Added 31-Jan: Another problem facing manufacturing in Ontario as a whole is Dalton McGuinty's expensive hydro program, which has rendered energy costs among the highest in North America.
Last edited by manny_santos; Jan 31, 2012 at 4:54 PM.
|