BY ANDREA HOLECEK, Times of Northwest Indiana
holecek@nwitimes.com
Union Tank Car Co. is making the right business decision by closing its antiquated facility in East Chicago, a former top employee of the company says.
"Most of the (East Chicago) plant is 100 years old," said the former employee, who asked to remain anonymous. "It can't be run in the most efficient manner. It was designed for operations as they were 100 years ago. It was inevitable. It is definitely the right business decision."
The plant is scheduled to close May 30, putting a combination of about 440 salaried and hourly employees out of work.
Chicago-based Union Tank Car has plants in Sheldon, Texas, and Alexandria, La. The $100 million Alexandria plant opened in the summer of 2006 with the help of huge tax incentives from its state and local governments.
Both plants in the South were designed for modern manufacturing operations and process flow, the former employee said.
"In East Chicago, it's hard to move cars around," he said. "They're not in sequence like in Alexandria."
The former employee said the company built the Alexandria plant, knowing it someday would replace the East Chicago plant it purchased in 1968, when it already was more than 50 years old.
Union Tank has consistently claimed the new plant was built to increase production capacity rather than replace operations in East Chicago.
"We don't have any plans to close East Chicago," company spokesman Bruce Winslow said in 2004, when plans for the Alexandria plant were announced. "This new plant is an expansion in capacity we need."
Tuesday, Winslow said the decision to close the plant was based on a decline in orders.
"... Current and projected market conditions require the company to consolidate our manufacturing operations," he said. "Because of overcapacity in the industry, we are reducing production overall, not shifting production to other facilities."
The former employee agreed Union Tank needed to increase production when it built the Louisiana plant, however, he said the rail car industry is cyclical, with production rising and falling depending on customers' need to lease or buy new tank cars, or replace them.
In 2006, Union Tank conducted work fairs to hire three dozen workers because of increased orders to build tank cars for the ethanol industry. A year later, it began a series of layoffs that reduced the work force to its current level of 345 hourly employees.
"The plan was that once the boom started tailing off, the plant in East Chicago would go down," the former employee said. "It's not surprising that it's closing, but we (plant officials) all thought it wouldn't be until '09 or '10."
The East Chicago plant has the most expensive fixed costs, including taxes and utilities, and its labor costs are higher than those in the nonunion operations in the South, he said.
"Business-wise, the plant is very expensive to run," the ex-employee said. "Add the union labor costs, and it priced itself out of the market."