Global Policy Forum

The Human Effect of Globalization


By John Ketzenberger

August 30, 2009

A large American flag dominates a wall at Pratt & Whitney's International Aerospace Tubes plant on Kentucky Avenue.

Beneath the flag, a hundred Hoosiers use sophisticated dies and machines to make 7,000 different tubes for jet engines. Most of them have more than 20 years of experience; many have 40. Pretty soon that won't matter.

Pratt & Whitney, which gained full control of IAT in 2006, has decided to consolidate the local operation into a fairly new plant in Singapore. A closing date isn't set yet, but plans are already far along to pack up one of the city's most sophisticated machine shops and ship it all overseas. All except the good jobs that pay well. Those are being eliminated.

"There is a double hit here," said Mike Klonoski, a Chicago real estate investor who owns IAT's building. "It's one thing to sneak the jobs out of the country. It's another thing to disassemble a good plant without telling the city or the state." Getting help from the city or state, which has not granted any tax abatements or other incentives to Pratt & Whitney for the IAT operations, didn't matter.

"We would have worked with city or state officials if we felt it could have changed the outcome," said Greg Brostowicz, a Pratt & Whitney spokesman. "But in the end, this was a business decision." That's cold comfort to the 104 employees losing their jobs. It's the same thing that 400 Cummins employees in Iowa heard last week. Their jobs are being lost to Mexico. And Whirlpool will eliminate 1,100 jobs in Evansville by mid-2010. The work is moving to Mexico.

This is the very real and very human toll of globalization. Brostowicz wouldn't say whether the local plant was profitable, but parent company Pratt & Whitney saw a 6 percent increase in profit in 2008.

"Due to the continuing changes in the global aerospace industry, the reallocation of this work is necessary," Brostowicz said. That means Pratt & Whitney, which isn't shy about touting its Americanism in advertising and on its Web sites, thinks the future is in Asia.

Klonoski just shakes his head when he reconsiders the plant's closure. It made him do something he'd never considered: He has written letters to President Barack Obama, Sens. Richard Lugar and Evan Bayh, Rep. Andre Carson, Gov. Mitch Daniels and several state legislators.

"Given the state of the local and regional economies, the foreign relocation of a company with net income of $4.7 billion and $7.7 billion in U.S. contracts is indeed unfortunate and contrary to the spirit of the times," Klonoski wrote. "While the recession has created a need to reduce expenses, I believe that the small savings achievable by this relocation will not significantly improve (Pratt & Whitney owner United Technologies') $6.2 billion in cash flow and will be far outstripped by the loss to the local, and ultimately national, community."

Pratt & Whitney's decision to move out of Indianapolis affects domestic companies such as Texas Aero Engine Service that rely on IAT tubes to rebuild jet engines. They'll have to find another supplier, which is a long shot, or hope the Singapore plant can produce the tubes they need and ship them to the U.S.

"This is some bean-counter decision, but it has a huge impact on the people who work there," Klonoski said of the IAT closure.

Klonoski will be fine financially. The lease runs for nearly two more years, so he'll get nearly $1 million in rent. He was willing to forgo $250,000 in rent if it would have helped retain the plant in Indianapolis.

Pratt &Whitney also is responsible for paying to put the building back the way it was when the company moved in more than eight years ago. Restoring it to a warehouse will cost at least $3 million, Klonoski said.

He'd rather Pratt & Whitney find another manufacturer to take over the lease.

"To tear this plant apart is a shame," he said. "It's like restoring a 1965 Corvette and in a fit destroying it with a sledgehammer."

During a recent tour of the building, Klonoski said he was struck by how clean, bright and jam-packed with machinery the place was. The plant was Six Sigma certified and, he said, workers clearly had pride.

"It's not as if they had some labor force that was belligerent, didn't show up or caused problems," Klonoski said. "These are highly skilled people who work in a high-tech manufacturing plant."

Not for much longer. The company told employees it would be 12 to 18 months before the plant closed, but three weeks ago company officials called Klonoski down for a meeting. They want to fast-track the closure, he said.

The global economy, it seems, waits for no one.

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