Jim Dey: Business as usual is not good for business

Jim Dey: Business as usual is not good for business

Caterpillar Chief Executive Officer Doug Oberhelman recently delivered some good news to Illinois residents.

"We are staying in Peoria," Oberhelman said of the company that has been headquartered in Illinois for 85 years.

But he was clearly ambivalent about the decision. Oberhelman said the company's roots in Peoria are too deep to make moving elsewhere practical, even though Cat received numerous solicitations after he announced that the company is looking to replace its current headquarters.

Residents of Illinois are allowed to be pleased about Cat's decision but certainly not triumphant. Cat is not staying because the Land of Lincoln is either a great place, or even a good place, to do business or attractive to a company looking to relocate or expand.

Oberhelman said as much when he compared nearly identical company plants in Illinois and Indiana and noted that the worker's compensation costs in Illinois are nearly five times as much as they are in Indiana. And he laid the responsibility for the state's hostility to job creators at the feet of the state's political establishment when he asked a question voters in the upcoming election would do well to ponder.

"I just, for the life of me, struggle with why we elect the same people year after year," he said.

This is not the first time corporate and business types have raised questions about Illinois' political leadership, and it's no surprise why they do.

Ineptitude and corruption have long been the hallmark of both Democrats and Republicans as they took turns running this state. But for the past 10 years, Democrats have dominated state politics, and the result has been unrelenting fiscal chaos and effective bankruptcy, even though state corporate and personal income taxes have been dramatically increased.

In times that demand change, Illinois has clung to an unacceptable status quo.

Although the warnings and complaints of our business leaders have largely been ignored, they have not gone unnoticed. Some have suggested that Illinois must become more hospitable to job creators if it's ever to get enough people working and paying the taxes necessary to put the state's fiscal house in order. But others take the criticism personally and respond in anger — essentially telling those who don't like it here to go elsewhere.

The vitriol directed at Jimmy John Liautaud, the founder of the Jimmy John's sandwich franchise who's made many of the same points as Oberhelman, is just one example.

No doubt, similar anger will be directed at Oberhelman for his pronouncement.

But here's the ugly reality — Cat may be staying in Illinois, but it has taken its new factories and the jobs that go with them elsewhere.

The Wall Street Journal recently reported that "in the aftermath of the 2008 recession, Caterpillar embarked on an aggressive strategy to increase production capacity. The company added assembly plants in the U.S. to free up production space overseas, especially in China."

The Journal reported that Cat "continues to construct a new plant in Athens, Ga.," and is ramping up production at a "newly completed plant for large excavators in Victoria, Texas, and at another plant near Winston-Salem, N.C."

There's nary a mention of Illinois in those references to Cat's expansion and the thousands of new jobs that are going with them. Caterpillar spokesman James Dugan said his company has increased its worldwide employment over the past 10 years from 70,000 to 129,000, with its domestic employment increasing from 37,000 to 55,000 jobs. Meanwhile, its employment outside the U.S. has more than doubled from 33,000 to 74,000, a figure that reflects the fact that, according to Oberhelman, "95 percent of our customers are outside this country."

Cat's foreign plants play a big role in meeting the international demand for its products, but so do its domestic plants.

Dugan said that 80 percent of the bulldozers manufactured at its East Peoria plant are exported overseas, and 90 percent of the mining trucks manufactured in Decatur also are shipped abroad.

But while Cat's domestic and foreign employment have boomed, its Illinois-based employment has remained relatively flat.

Dugan said that 10 years ago, Cat employed roughly 22,000 people in Illinois. Today, Cat employs roughly 25,000 people in Illinois, but 2,000 of those 3,000 new jobs came a couple years ago when Cat purchased LaGrange-based Electro Motive Diesel Inc.

So when Dugan states that "we've grown dramatically," he's referring to the company as a whole, but not in Illinois where Cat's job growth has been anemic by choice.

Take your jobs elsewhere? Illinois virtually insists.

Dugan said a partial list of new Cat production facilities in this country include three factories in Texas, one in Indiana, one in North Carolina, one in Arkansas and one that's currently being built in Georgia.

Dugan said Cat has not neglected its Illinois facilities, spending roughly $2 billion over the past few years on renovation. But those are fixed assets that cannot be moved. The new facilities are going out of state.

Is that what Illinois — with an unemployment rate above 9 percent — really wants? People may say no, but, encouraged by political shenanigans like the gerrymandering of state legislative districts, they vote an emphatic yes.

Given the realities of Illinois politics, it's hard to imagine they won't do the same thing again on Nov. 6. After all, only a handful of Illinois House and Senate races are even being seriously contested, and House Speaker Michael Madigan and Senate President John Cullerton, the Chicago Democrats who've helped mastermind Illinois' current misery, will remain firmly in charge.

Jim Dey, a member of The News-Gazette staff, can be reached by email at jdey@news-gazette.com or at 351-5369.

Sections (2):Editorials, Opinion
Categories (2):Editorials, Opinions

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Sid Saltfork wrote on October 27, 2012 at 10:10 am

If you are going to use Cat's move to build in plants elsewhere, you should be honest in explaining why Cat is doing that.   Cat made it clear that the new plant in Georgia, and elsewhere was due to the proximaties of sea ports.   Illinois does not have a seaport.  

You can rant about the Democratic party ruining Illinois' economy; but at least be honest in the examples that you use.  Be honest about Jimmy John's move also.  The fact that he has had a house in Florida for some time now should be made.  Of course, he wants to live in the close proximaty of his business headquarters.   He, also, benefits currently from a lower tax rate there.  He will move to where it is warmer, and the taxes are lower.  If Florida raises it's tax rate, he will move to Texas.

Illinois cannot keep giving tax breaks to corporations to keep them here, or motivate them to move here.  Eventually, all of the states are going to be faced with the same thing.  Perhaps, North Dakota will be different; but the transportation costs for manufacturers would be a problem, and who wants to live there.