The Wall Street Journal and Bloomberg both reported that GE transportation head Lorenzo Simonelli revealed in interviews that reductions at the factory in Erie, Pennsylvania, were slated to start in six months, pending 60 days of talks with union officials.
Simonelli cites weaker North American locomotive demand for cutting roughly 17% of the Erie workforce.
"What we are seeing is a reduced demand outlook in North America from a coal perspective,"
Simonelli told the Wall Street Journal.
Simonelli said much of that was caused by a 15% drop in coal prices, with customers parking as many as 3000 locomotives, or about 11% of the GE’s fleet.
"It just so happens that the segment we are in is under pressure,” Simonelli said.
He said the plant in Fort Worth, Texas, where about 160 workers are expected to be relocated, is about 20% more efficient than the Erie plant, which is more than 100 years old.
The cost advantage coupled with the lower sales outlook prompted the move, the Wall Street Journal reported.
Bloomberg reported that as well as the shift to Texas about 10% of the work handled at Erie would be moved to Mexico and third-party manufacturers.
“Cost is becoming more and more of a factor,” Simonelli told Bloomberg.
“We’ve got to match our competition and that’s what we’re trying to do.”
The United Electrical, Radio and Machine Workers of America represents about 3500 of the 5500 GE workers in Erie and will use the next 60 days of talks to fight the cuts.
Texas, a right-to-work state, forbids requiring union membership as a condition of employment but Simonelli said the Fort Worth plant’s lack of organized labor wasn’t a consideration in the decision to cut jobs in Erie.
GE has made considerable and rapid moves into global energy over the last 12 months, acquiring Virginia-based underground mining machinery producer Fairchild International, Australian mining equipment manufacturer Industrea and, only a few days ago, oilfield services provider Lufkin.
There was also speculation that GE was going to increase the strength of its foray into the booming industry with the takeover of Joy Global in a similar move to Caterpillar’s 2011 purchase of Bucyrus, one of Joy’s main competitors in the underground coal and surface mining market.
What GE’s next move will be remains unclear but check back with ILN for updates on this story.
