GE cuts Erie workforce, shifts to new TX plant

[pman]

Originally Posted by track2514

To address to the issue of why Texas and not PA, I think it is a combination of factors and the community college issue is the biggest issue in my opinion. GE needs workers trained to do a specific job, and community colleges are flexible and adaptable to meet the needs of the local workforce. The taxes and wages are also problematic, but if this is strictly a cost issue why go to Texas, which is even farther from the new GE transportation headquarters in Chicago and the major overseas shipping routes (many of these trains are sold outside the U.S.)? In other words, GE might save on taxes and wages, but they are also increasing transportation and facility costs at the same time.

In terms of the interview I was discussing, I think it would be pretty bad PR on the part of GE if they mentioned a disparity as high as was reported on the local news. It seems they are taking the stance of the Erie workers are overpaid and the Texas workers are still making a great, livable wage, but the union in Erie rejected a similar salary. There may be some media sensationalism as you mentioned and some misinformation for PR purposes, but I think the truth lies somewhere in the middle. Unless we had inside information, I don't think we could make any definitive claims on this issue.

the article does specifically mention proximity to the BNSF main which they anticipate to be a major customer in the coming years, it also mentions north of $10 million vairous financial incentives (perhaps not surprisingly TX ranks #1 in incentive payments to companies). they're shifting some work to mexico, some to texas, and cutting overall output as well
GE adding 220 jobs at Fort Worth plant | Business | Dallas Business, Texas Business, For...

if its the community college, wouldn't they consider other parts of Pa or is it "since we're building a new plant, may as well be in a diferrent part of the US."..or did they pick texas because of incentives, no corp tax (let alone an asset tax)?
Philadelphia has community colleges yet the city is below average in manufacturing (taxes and unions most likely)

[trackstar13]

Originally Posted by pman

the article does specifically mention proximity to the BNSF main which they anticipate to be a major customer in the coming years, it also mentions north of $10 million vairous financial incentives (perhaps not surprisingly TX ranks #1 in incentive payments to companies). they're shifting some work to mexico, some to texas, and cutting overall output as well
GE adding 220 jobs at Fort Worth plant | Business | Dallas Business, Texas Business, For...

if its the community college, wouldn't they consider other parts of Pa or is it "since we're building a new plant, may as well be in a diferrent part of the US."..or did they pick texas because of incentives, no corp tax (let alone an asset tax)?
Philadelphia has community colleges yet the city is below average in manufacturing (taxes and unions most likely)

Why would GE build a new plant in a high corporate tax area like PA? Have you ever seen the GE facility in Erie? It is massive and I could only imagine the taxes on a facility like this in or around Pittsburgh or Philly. Erie already has the factory, workforce, and infrastructure and this is why GE has stayed as long as they have already. So to answer your question, no a community college in a more expensive area of PA without a factory, infrastructure, or trained workforce is not enough to lure GE. As I have stated previously this is a multifaceted issue and a PA community college would only benefit GE if it was in the location of their current factory, i.e. Erie county.

[Clint.]

America has a history of weak federal protections for workers, and of hostility toward production workers. That's how overvalued American CEOs and other executives can make hundreds of times more than the average workers at their companies, and people will defend management to the end while individual states offer tax incentives to poach businesses from other states. Of course labor unions can be just as short-sighted. It's especially touching when a corporation pays millions to an executive, and the company tanks under his great leadership. It's just the American way and part of the reason why real wages for average workers have stagnated and declined over the past 35 years and another aspect of the huge sucking sound in the American economy.

I hear that if UPMC is designated as for-profit then corporate headquarters will be moved to Texas post haste.

GE, Headed By 'Jobs Czar,' Cutting 950 Workers In Pa.

[trackstar13]

Good post Clint and the article you posted had some interesting information. CEO pay is an issue that has always perplexed me because I have tried to figure out how one person could provide a service for a company that was worth tens of millions of dollars a year, plus fringe and I have been unable to understand the ROI. For instance, even if a company hires a CEO at $10 million a year and that CEO increases net revenues by $100 million per year, do they really deserve 10% of the revenues as salary? I liken it to sports and because we are basically in perpetual free agency, CEOs can bounce from company to company collecting pensions and amassing millions while the average worker goes further into debt and works a second job to make ends meet.

[pman]

Originally Posted by track2514

Why would GE build a new plant in a high corporate tax area like PA? Have you ever seen the GE facility in Erie? It is massive and I could only imagine the taxes on a facility like this in or around Pittsburgh or Philly. Erie already has the factory, workforce, and infrastructure and this is why GE has stayed as long as they have already. So to answer your question, no a community college in a more expensive area of PA without a factory, infrastructure, or trained workforce is not enough to lure GE. As I have stated previously this is a multifaceted issue and a PA community college would only benefit GE if it was in the location of their current factory, i.e. Erie county.

the article did mention that GM also had or was building a plant in that area. in a lot of ways success breeds success. no, I've never seen it. I'm just wondering what the state can do to make itself more competitive. certainly phasing out the capital stock tax is long overdue (and might actually happen now that it's .89) but would lowering the corp income tax make a difference in your opinion? what would it have to be, 6.99? 3.07?
clint-for all the handwringing over the gilded age, real wages rose during that period. production began having problems, in part, due to overregulation. ICC rate making policy through countless thousands out of work as railroads cancelled locomotive works. in Philadelphia one manufacturer at one location was forced to lay off several thousand (baldwin locomotive). I do think today's corporate governance leaves a lot to be desired but I don't know that they are to blame for the country's overall inability to compete not just on wages but also on energy and taxes (the country's corp income tax is the developed world's highest). all that being said, state do compete with each other. carnegie and frick busted the unions because they were being undercut by chicago producers who were closer to where the demand was. if they hadn't, they might well have lost business to those chicago producers. in this case, maybe it's just easier to move production than negotiate wages downward with the union. regardless of how much the ceo makes, ge can't sell locomotives for 20% more than EMD just because it wants to...and federal protections are certainly better than they used to be. on the flip side, many european countries suffer from chronic unemployment and underemployment thanks to overly restrictive labor laws which also tend to reduce mobility.

[trackstar13]

pman

One thing you are missing, is that GE initially stated they were building a second facility in Fort Worth to keep up with increased demand. Now demand is suddenly down? I always wondered, why not utilize some of the extra land that is part of the GE Erie complex and just expand the facility/hire more PA workers? The facility in Fort Worth is smaller and it appears to me now that it may have been built to increase leverage with the PA union. Moving the headquarters and building a second plant make it much easier to negotiate with the union because there is now a very real fear that GE could completely pull out of Erie.

To answer your other question, lowering the corporate tax would be helpful for PA, but the true solution might be related to providing tax incentives to many small manufacturers rather than one large company because this would offer more flexibility in uncertain times and the whole economy of an area like Erie would not be so heavily reliant on one company.

Here is another article about this issue from the local paper:
Negotiations could affect size of GE Transportation layoff in Erie | GoErie.com/Erie Times-News

[pman]

I like this quote

"We have never negotiated work rules with the General Electric," he said. "It's their rules. We don't negotiate that."
What the company did negotiate in 2010 -- in exchange for the company agreeing to recall 145 laid-off workers -- was a move to reduce the number of job classifications from 25 to 16.

he's arguing semantics here, job classifications, work rules,etc. "oh, I can't do that, that's not my job classification." it's one of the worst parts about unions and certainly increases costs by reducing flexibility..the point of the job codes is to increase the number of workers for a given amount of work. although it's certainly possible that orders are down, I agree with you this is almost certainly union related and quite frankly, effective

In an interview Tuesday, Lorenzo Simonelli, chief executive of GE Transportation, said the company and the union representing production workers will enter into a 60-day period of so-called decision bargaining.


That process leaves open the possibility of union concessions that could reduce or even eliminate the loss of jobs, said Erie County Executive Barry Grossman, who spoke with Simonelli on Tuesday.