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New Southern plants revive fears of Caterpillar abandoning its roots

February 25, 1997

PEORIA, Ill. (AP) _ Caterpillar factory workers endured a tough 10 days.

First, on Jan. 28, came the news that Caterpillar was opening a new plant way down in South Carolina. Then news of another plant in North Carolina. Then Kentucky. Then Mississippi.

Suddenly, it looked like Caterpillar’s future was in Dixie and the union’s future was in doubt.

Over the past five years, Caterpillar has opened, or announced plans to open, 15 new plants in the United States. Eleven of them are in the South, where unions have little strength.

``They say they don’t want a company without a union, but they’re running away from the union,″ said Jerry Brown, president of United Auto Workers Local 974 in Caterpillar’s Peoria base of operations.

Four plants will make small parts now produced in York, Pa. Citing high production costs, Caterpillar is closing its 1,100-worker York plant. Similarly, Caterpillar closed a Canadian plant in 1991 and moved the work to North Carolina.

But does that mean Caterpillar management is making a conscious effort to move production south? And will the company end up making its bulldozers and dump trucks solely in the South and overseas, as union officials claim?

Gerald Flaherty, a Caterpillar group president, scoffed at such ideas.

He pointed out that Caterpillar had about 35 percent of its workers in the Peoria area when company employment reached its peak of 89,000 in 1979. Today, with employment down to 57,000, Caterpillar still has 35 percent of its workers in Peoria.

``Caterpillar has been a significant part of Peoria and Illinois communities for many, many years,″ he said. ``I don’t see anything that tells me we won’t continue to do so for many years in the future.″

Still, Flaherty acknowledged the company’s Peoria presence is changing: more accountants and engineers, fewer riveters and painters.

Caterpillar makes far more machines and parts than it did 30 years ago and serves far more countries. Flaherty said that requires new plants to go along with traditional factories centered on Peoria.

The company also expects to add overseas factories as they push foreign sales from 50 percent of all sales now up to 75 percent in the future. But those factories will supplement U.S. operations, not replace them, he said.

Announcing four new Southern plants in a span of 10 days, he said, was a coincidence _ not evidence of Caterpillar’s long-term plans.

Flaherty said each small plant (they will employ around 100 people each) is being built in the South for specific reasons: proximity to intended customers, easy access to needed parts, training programs to provide workers.

An ``attractive business climate″ also counted. Labor and business experts call that a polite way of saying ``no unions.″

Caterpillar and the UAW have not had a contract in more than five years. They have had two long strikes, dozens of brief walkouts and hundreds of complaints of labor law violations.

Most Southern states have ``right to work″ laws barring contracts that require people to join unions after getting a job. And the South has a long history of resisting unionization. The result is that Caterpillar can run its new plants with lower pay and less union interference.

``Cat is pursuing a non-union strategy. Whatever its initial protestations might have been, I think they would prefer to be a non-union company,″ said Harley Shaiken, a labor expert at the University of California at Berkeley.

Moving jobs south tells the union that Caterpillar has no interest in repairing their damaged relationship, Shaiken said.

The UAW must worry about layoffs, such as the ones in York, and also having the new Southern factories used as an excuse to reduce union salaries, Shaiken said.

When you combine the value of their salary and benefits, Caterpillar’s UAW members make an average of $40.40. Caterpillar management will be able to point to its new employees’ much lower salaries during contract negotiations.

Union members look at Caterpillar’s Southern plans and predict a grim future. The company will keep shopping around for the cheapest labor, they say, laying people off and moving on until its presence in Peoria is nothing but an office building.

Despite Caterpillar’s protests, experts say they would not rule out the possibility.

The company has invested billions in existing factories, including major improvements in the last 10 years, but those factories must be replaced some day, said Peter Feuille, head of the University of Illinois’ Institute of Labor and Industrial Relations.

``If you’ve got to replace it anyway, do you have to replace it in Peoria? Maybe not. Maybe your next state-of-the-art factory to make big earthmovers ought to be in Meridian, Miss.,″ Feuille said.

``That,″ he said, ``would be a gut-wrenching decision to make.″

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