TORONTO, Feb. 10, 2012 /CNW/ - CAW National President Ken Lewenza calling on the federal government to release detailed financial data associated with Caterpillar's 2010 acquisition of Electro-Motive Canada.
That acquisition went ahead without being formally reviewed under the Investment Canada process, purportedly because the Canadian company was too small under the regulatory threshold (which was $299 million for that year). But no public, independently verifiable data was provided to support that claim, and it is not clear that federal officials ever checked the accuracy of the claims submitted by Caterpillar (through its subsidiary Progress Rail).
Lewenza noted that Caterpillar's own financial statement reported $1.3 billion (U.S.) in assets associated with its takeover of the entire Electro-Motive business. Electro-Motive's Canadian subsidiary represented its largest and most strategic asset, and almost half of its total employees.
"Unless this data is divulged and independently authenticated, we're simply taking Caterpillar's word for it that this acquisition was not subject to Investment Canada review," Lewenza said. "That's no way to deal with powerful, self-interested corporations like Caterpillar. Corporations cannot be left to police themselves."
In a letter to federal Industry Minister Christian Paradis (who oversees the Investment Canada process), Lewenza has asked for the public release and independent verification of the data associated with the purchase. If that data turns out to be inaccurate, Lewenza noted, the government can impose penalties on Caterpillar up to and including annulling the acquisition.
The letter pointed out that the Minister and the federal government retain considerable policy flexibility to intervene in foreign investments that pose a danger to Canada, as demonstrated by its ad-hoc interventions in previous controversial acquisitions (such as MDA and Potash Corp.).
Lewenza's letter also called on the government to strengthen regulations over foreign investment, including by:
- Improving transparency of the ultra-secretive Investment Canada process.
- Allowing broader stakeholder input to reviews.
- Closing loopholes that exempt most takeovers from scrutiny (including takeovers that are "too small" or reflect "indirect purchases" of companies).
- Strengthening and more clearly defining the "net benefit" test.
- Ensuring that government can enforce commitments attached to approved takeovers.
The government must address the immediate circumstances of the Caterpillar case, while also taking on the longer-run task of strengthening the regulations, so that the terrible situation at Electro-Motive does not continue to repeat itself in other locations.
"Failure to act by your government reflects not legislative weakness, but a political unwillingness to defend Canadian citizens," said Lewenza.
Lewenza's full letter to Minister Paradis can be read here: http://www.caw.ca/en/10948.htm
For further information:
CAW Communications Shannon Devine (cell) 416-302-1699 or Angelo DiCaro (cell) 416-606-6311