Andrew Coyne: Caterpillar’s EMD facility never really was ‘our’ plant

By now, the nationalist version of last week’s closing of the Electro-Motive Diesel locomotive plant in London, Ont., has been firmly established in the public mind, told and retold in a thousand accounts, roughly two-thirds of them in the Toronto Star. As described by the squadron of columnists the paper apparently keeps on hand for such events, the “London massacre,” or in more polite terms, “industrial rape,” was not merely a business decision by the plant’s owners, Caterpillar Inc., or even an egregious assault on workers’ rights.

Rather, Caterpillar was absconding with a vast storehouse of intellectual property developed at “London’s 90-year-old EMD” — patents, technology, equipment, trade secrets, manufacturing processes, the works. Worse, it was doing so with the benefit of millions of dollars in taxpayer funds. Why, “only last year,” the paper’s business columnist, David Olive, fumed, EMD received “a $5-million federal subsidy hand-delivered by Stephen Harper during a factory visit.”

It was nothing less than “highway robbery,” political columnist Martin Regg Cohn raged. Caterpillar had bought the plant purely in order to “harvest the technological know-how subsidized with government incentives and writeoffs.” But never mind the industrial rape: there are bigger issues in play. “Why underwrite our companies,” Cohn wrote, “if we willingly sell off our embedded brainpower to foreign bidders who leave Canada cash-rich, patent poor and jobless?”

And the solution to this theft of “our” industrial birthright (the word “our” appears more than a dozen times in Cohn’s column)? Surely Harper, the Star’s editorialists inveighed, “could have demanded job guarantees when his government approved the sale of the London company to Caterpillar.” Olive suggests nationalization, or as a fallback, a prohibitive tariff on all Caterpillar imports. As Olive sees it, “that might eventually bring Athabasca tarsands production, heavily reliant on Caterpillar equipment, to a halt.” You understand: that’s not an objection to his plan. That’s his plan.

It’s a compelling story — foreigners buy “our” plant, steal “our” technology, and all with our money! Except:

• EMD is not a Canadian company, and never was. Caterpillar bought it from a pair of American private equity firms in 2010; they bought it from General Motors in 2005, who bought it from its Ohio-based founders in 1930. Since 1935 it has been headquartered in La Grange, Illinois. The London branch plant was opened in 1950.
• Caterpillar didn’t buy the London plant. It bought the whole company, including its La Grange operations, which is where EMD does its design and engineering work, as well as making parts. It seems unlikely it would have stashed its most valuable intellectual property at a far-off final assembly plant. (Incidentally, as the economist Michael Moffatt points out, GM moved all final assembly work to London from La Grange shortly after the Free Trade Agreement went into effect. The jobs we’re worried about losing to the States are jobs we took from them.)
• Even if it were a Canadian company, and even if it possessed a Valhallah of patents, it still wouldn’t belong to “us.” It would belong to them: its Canadian owners, who shelled out good money for it, presumably in anticipation of selling it one day. Caterpillar didn’t steal the company: it paid for it. If its proprietary technology had any value, its previous owners would be just as capable of realizing this, I’m guessing, as any Toronto columnist, and of charging accordingly.
• EMD never received any subsidies from the federal government; certainly not since Caterpillar bought it. Indeed, looking through the hundreds of pages of “grants and contribution” in the Public Accounts, it may be the only company in the country that didn’t. The Harper visit to which Olive refers was to promote a tax break for the purchasers of locomotives, not the manufacturers. The visit occurred in 2008, two years before the Caterpillar purchase.

It’s not clear how the foreign investment laws could have been invoked to cover a purchase of an American company by another American company, or if they could, why this should be the pretext for “demanding job guarantees.” Presumably if it is wrong for a firm to close a plant or lay off workers, it is just as wrong whether it has recently been the object of a foreign takeover bid or not. Perhaps you will say we should bar all companies from closing a plant. Okay: why would they ever open one? If workers, once hired, cannot ever be laid off, why would they ever be hired?

Of course, there’s always Olive’s suggestion of a punitive tariff, through which the cost of keeping jobs in London locomotive plants could be shared by consumers and businesses across the country. (You’re welcome.) This would recreate the system of foreign branch plants that existed in the days before free trade, small factories producing exclusively for the domestic market. Rather than lament at foreigners stealing our jobs and technology, the nationalists could once again lament at being tenants in our own land.

Original Article
Source: national post 
Author: Andrew Coyne