GE Transportation Layoffs: "It's Déjà Vu All Over Again"
That is probably Yogi Berra's most famous line, and is the first thing that came to mind today when I read in the local newspaper where GE Transportation here in Erie, Pennsylvania, plans to layoff 950 production and 100 management employees. An additional 200 "temporary" layoffs could also occur. Rumors have been in the works for a couple years regarding an eventual total plant closing, since a new plant with the same capability (and more) was being established in Fort Worth, Texas. The Erie location is totally unionized, and Texas is a Right-to-Work state (union membership not mandatory). In an effort to be "globally competitive," labor rates must be kept as low as possible - for everyone, not just production workers. Texas also has no income tax, which helps keep wages low as well. Property taxes in Erie are quite high, typical of the Northeast. Per public records, Mr. Lorenzo Simonelli, GE Transportation's CEO since 2008, saw his taxes go from $14k in 2011 to $22k in 2012 -- for a mid-level condo. Property taxes in Texas are significantly lower.
GE Transportation posted record sales in 2012, and in a newspaper article Mr. Roger Zaczyk, president of Local 506 of the United Electrical Radio and Machine Workers at GE Transportation, was reported as saying that he sees those numbers as evidence that a company can pay union wages and make money. Evidently not. Caterpillar, Inc., the division's main competitor, recently also announced 2,000 layoffs, and already their employees were making less than half of what the union workers are making. Along with the hourly rates are very generous benefits that cost the company a lot of money. New health care regulations going into effect in January of next year are prompting a lot of companies to use part-time labor to reduce mandatory expenses - something union contracts would never abide especially since many unions are getting exemptions from the rules.
GE Transportation builds state-of-the-art locomotives for worldwide customers. Until fairly recently, all of the units were assembled entirely at the plant and then shipped to customer locations. China has been a major customer in the last two decades and as with all of the other types of technology it gets from us and other advanced manufacturing nations, it began purchasing locomotives with the stipulation that part of the assembly be done in-country. The State Department was coaxed over time to lift more and more trade and technology export restrictions, and eventually China reached the point where they had the equipment necessary to design and build their own products rather than to buy ours (and others'). GE now only ships partial kits - and associated production jobs - to China for total assembly there. Other countries follow suit. GE Transportation also builds gear boxes for wind turbines, another part of production that will be likely be gone from here soon. Oh, and GE Transportation's management HQ was moved to Chicago last year.
During the summer of 2008 Mr. Lorenzo Simonelli was brought on as the new CEO of GE Transportation, at the height of the plant closing concern and when news of the new Texas plant was hitting the headlines. In the beginning, the company completely denied any plans to move Erie production to Texas; it was merely an additional capacity. It even announced $140 million in local upgrade plans and made $15 million in donations to the local school system. That's when I was pretty sure that Simonelli was a classic corporate "hatchet man" (I could be wrong). I've seen it before over many decades of following tech industry news - although the pattern is not unique to the tech sector. It happens over and over again in virtually the same way. Here is a job requirements list for a hatchet man that could be from any Human Resources department:
Names and numbers used in this article were obtained from publically available sources - just 'Google' any of them. Here are a few of the articles from local media .
Posted on 4/9/2013
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