The province is partly to blame for Kellogg’s plant closure in London, Ont.

The consequences of corporate welfare

by Mike Moffatt

The Kellogg Company announced today that it is closing its London, Ont., plant. The plant has over 500 full-time employees, though only 400 are losing their jobs from this action as last month it was announced that 110 workers would be laid off in January. This is terrible news for a city that has suffered greatly over the past few years with the closures of Electro-Motive Diesel and McCormick-Beta Brands, and particularly for the local food-processing industry with the closure of the Heinz factory in Leamington fresh in everyone’s minds.

Whenever a plant closes there is an undeserved knee-jerk reaction to blame governments at all levels. However, this case may be the exception where such a reaction could be warranted. Questions need to be raised about the Ontario government’s possible role in this plant closure. On the surface it would appear that at least some of the lost London production went to Belleville, Ont., thanks to a $9.7-million interest-free loan in 2008 from the province and $4.5 million in additional provincial funding in 2011 (it is not clear if this money was a loan or a grant). The net effect of this expenditure of taxpayer dollars appears to have been to shift production from higher wage employees in London to lower wage employees in Belleville (though their jobs may not be safe either). This incident is an extreme example of the potential unintended consequences of corporate welfare.

This will not be the last plant closure in Southwestern Ontario, and I suspect the provincial government’s funding of the Belleville plant only sped up the inevitable in London. With the U.S. population gradually moving south and west, Ontario lacks a geographic advantage when it comes to mass consumer manufacturing. Geography gave the region an advantage in the past for goods that are relatively expensive to ship relative to their value, such as breakfast cereal. But as American populations move from Michigan and Ohio to Texas and California, Ontario’s transport-cost competitive advantage over areas such as the U.S. southeast and Asia diminishes, making those areas more attractive due to their lower labour costs. London’s suffering is likely far from over.




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The province is partly to blame for Kellogg’s plant closure in London, Ont.

  1. Thanks again Liberals of Ontario. You asked for these incompetent crooks….and now workers are paying the price.
    vote Liberal….who needs a job anyway?

    • Sure. The only thing worse than Wynne would be Hudak, tossing dollar after dollar at power plant closings, subsidizing horse racing and farmer’s waste produce.

      • Please note, you left this comment PRIOR to seeing the AG’s report on how the Liberals have been Monitoring Ontario Power Gen?
        Everything these Liberal jokers touch turns to crap…and we’re stuck paying for it.
        Anyone who votes Liberal in the next election…..is a complete and utter idiot. Or they have never watched the news.
        Either way…it’s the Low Information voter who is to blame.

        • I’m educated, I vote, and yet the woman’s shelter in my neighborhood is still shutting down. I suppose I should have voted differently or spent more time studying. My mistake. To blame a political party for something is old school. Individuals are making power moves and hiding behind a party diverts anyone from blame. Thinking “Liberals did this we should have voted Conservative” instead of “Joe Jones did this” simply allows government to continue making mistakes. They know half the country will blame the politics instead of holding people accountable for decisions that hurt society. It’s not a “low info voter” who is to blame its the individuals in power making mistakes.

  2. What a partisan bit of nonsense from James R. Halifax. I don’t vote Liberal, but I wouldn’t hold them responsible for a plant closing that is due to globalization. Kellogg is also closing a plant in Australia, but I’m guessing Halifax wouldn’t say the right wing government there caused the closure. Note that Kellogg is expanding its operations in Thailand, so we see the race to the bottom in wages that was predicted when governments – Liberal and Conservative – signed one socalled free trade agreement after another.

    Partisan nastiness like Halifax’s does not help us understand what is happening to Canada, it just leaves us with unfocussed and uninformed rage.

    • Did you read the article? It was pointing out that this was one time where the Liberals are likely largely responsible for this factory shut down. Care to refute any of the authors points?

      • “The net effect of this expenditure of taxpayer dollars appears to have been to shift production from higher wage employees in London to lower wage employees in Belleville “

        So the company comes to the government and says, “Oh! Oh! we need subsidies else we’ll lose Jobs! Jobs! Jobs!”

        So some jobs were saved. And thats vile because it’s against Ideology, so that’s the governments fault.

        So the corporation says, “Profits! Profits! Profits! We need lower wages so we can stay in business!” and that is Ideology, so that is good. So the company leaves, and that is the governments fault.

        • Yes. Why the hell can’t the government just leave the private sector alone? The jobs are now gone. So what did the government buy with those subsidies? Some time? Of which they used none to prepare for these job losses?

          Brilliant! Let’s just not blame the Liberals for anything, since they’re trying really really hard.

        • Government can’t save or create jobs, its a myth of the corrupt and ignorant. If you tax the crap out of people to buy jobs elsewhere, you really have a lot of over taxed people spending less elsewhere for the job loss to match or exceed the job created.

          But hey, when it comes to Canada, we love our economic myths of failed socialism and corruption waste.

          Government can’t solve the economics problem as it is their corruption, waste, corporate welfare, money for nothing programs and inflated contracts and wages causing the problems. Producers have more governemtn than we can afford, government consumption has outstripped the productive societies ability to support it.

          And why I am now invested 60% offshore. Until this country is better managed politically, its on a downhill ride.

      • Ha! I knew you were here.

      • Yes, if you look at it from a narrow perspective, efforts to save/create jobs in one area can mean corporations just pick up the incentives and close down elsewhere.

        But my point was to look at the bigger picture, where if you give up fair trade agreements like the Auto Pact in favour of eliminating tariffs on low wage, low standard counties you are always going to get a loss of decent jobs domestically. We could take our taxes – and health, education, and social services – down to zero and we still would not be able to compete given the slave wages paid in China.

        We were told not to worry about this loss of manufacturing jobs. That the service economy would not be all about MacJobs and barristas, it would be the sign of an advanced economy. Tell that to young people.

        • Anybody who’s paying attention knows that the loss of manufacturing jobs in Ontario has infinitely more to do with the Liberals failed energy policies than anything else. Globalization doesn’t help that, but it’s not even close to the main driver.

          • That’s an amazing, and again overtly partisan, claim. If the loss of manufacturing jobs in Ontario recently is due to the Liberals, then the loss of manufacturing jobs under Harris must have been the fault of the Conservatives, the massive loss of US manufacturing jobs that accelerated under Bush was the fault of the Republicans, etc. Conservatives and Liberals alike sign on to ever more sweeping trade agreements and the inevitable race to the bottom that results.

            Unless people pay attention to the underlying causes of their misery, they will swing blindly around and hit the wrong target.

      • Its a combination of factors from city, province, Ottawa and unions.

        Weak dollar means the plants feed stock is 6.38% more. Its a myth that low value money fixes inefficiency, in fact it highlights the need for swift action and lay offs if not closures. People with less value money and price hikes get less goods, and that means less jobs.

        Add in city taxes, utility taxes and expensive electricity that is double the US counterpart. You don’t cook corn flakes with political and union hot air.

        Then there is hidden issues such as tariffs on corn, CBSA insatiable paperwork, inflated salaries….just was not worth keeping this plant open.

        But we have big bloated government that is technically bankrupt borrowing more no value money from the BoC. Have to have governemtns come before the people who support it.

        As the reality is people get paid too much but can’t survive after taxes and inflated pricing this country has.

        • So there were no city taxes/utility costs/workers wages before? Just showed up..right. THE SIMPLE CONCEPT IS USUALLY THE RIGHT ONE. YOU WILL NOT COMPETE AGAINST CHINA AND BANGLADESH AND VIETNAM..ETC. ETC. UNLESS YOU LOWER YOUR STANDARD OF LIVING OR INSTEAD OF BUYING YOUR KID ANOTHER i-PAD FROM CHINA YOU BUY APPLE STOCK. AND YOU BUY KELLOGG AND HEINZ STOCK AND SO ON. JUST LIKE THE RICH DO. AND KEEP GETTING RICHER. EXCEPT FOR ONE THING…. THEY ALREADY GOT THEY”RE CEREAL IN THEY’RE BOWL FOR BREAKFAST. AND THAT GRILLED CHEESE FOR LUNCH..THEY ALREADY HAVE THE HEINZ. YOU’LL HAVE A STOCK OPTION..MMM TASTY.

    • Since Conservatives are the kings of corporate welfare it wouldn’t have been any different under them. In fact it would have been worse. Take the oil sands. Even with massive oil profits they still get welfare from Ottawa and Alberta taxpayers.

    • Question. Do we have a free trade agreement with Thailand? (Pssst, we don’t.)

      • How frustrating that there is so little knowledge about the web of trade agreements Canada has become ensnared in. Canada and Thailand are involved in multiple trade agreements through their membership in the World Trade Organization. The WTO should really be called the “Race to the Bottom Organization” or the “Corporate Power Organization” because it allows corporations to shift production anywhere that has miserable wages and no regulation. Herb Grubel, MP for the Reform Party that morphed into the federal Conservative Party, once said that trade agreements were great because they would destroy union jobs. And that’s exactly what we’ve got with Kellogg’s closing of their London plant.

  3. too much taxes closing everything in Canada, that increasing poverty in Canada and beurocrates want more taxes?

    • stupid living wages and first world social programs!

      • Yeah….forcing companies to pay higher compensation and benefits than the job warrants is sound fiscal policy. Creating social programs that are overtly generous is a nice thing to do….but unfortunately, they are often unaffordable. (See Quebec Daycare)
        It didn’t hurt Detroit……

  4. this has nothing to do with what our government does. The obama call to come home is being heard

    • Obama’s home is in Thailand? Kelloggs is shifting production from Canada and Australia to Thailand. It has nothing to do with the US.

  5. Yeah, the Belleville Mini Wheat kid took the Greyhound down to London last night. He managed to snuff out Snap and Crackle, but Pop got away, hiding behind the pick in the 100 year old rice silo, the newer part of the plant.

  6. California only has average population growth in USA. Not sure the exodus from Michigan and Ohio is ending up there.

  7. California only has average population growth in the USA. Not sure that those leaving Michigan and Ohio are headed there.

    • Posting the same comment under different profiles eh? Cool.

      • I have to. Gordon, Moffatt, and Leach can’t handle a little constructive criticism, so they keep banning my account.

  8. The reality is that power has been separated from politics. Capital flows globally, politics remains local. Politicians have no power to stop things like this from happening, although they continue to spew rhetoric that they can. Any blame towards politicians is misguided. Yes, the Liberals helped Kellogg’s fund a non-unionized plant in Belleville (I am sure the Conservatives would have done the same) and essentially destroyed the lives of 500 unionized workers in London, but if they hadn’t done that, Kellogg’s would not have set up shop on this side of the border at all. Instead of directing blame at political parties, blame needs to be directed at the system as a whole. Capital flight must be put in check.

  9. Oh puleeze…it has nothing to do with the Libs.

    Another Kelloggs is closing in Australia, and they are expanding one in Thailand. It’s not local.

    http://www.thestar.com/business/2013/12/10/kelloggs_to_close_london_plant_500_jobs_lost.html

    Globalization is changing the economy of the entire world….and since we’ve just signed two more major trade deals….and a third biggie is about to happen…..expect more of it.

    Leave partisanship out of places it doesn’t belong.

    • Nothing to do with the Libs. LOL. Take a good hard look at the insanely high tax and hydro rates in Ontario. Businesses can’t wait too get out of here globalization or no globalization. Meanwhile Wynne is nowhere to be seen during any of the recent closings at Heinz and Kelloggs and she is also the Food and Agriculture Minister for crying out loud. This type of government and anti-business climate makes the decision to close plants and move them over seas real easy. The Liberals didn’t even attempt to stand up for these workers. Disgraceful.

      • I live in Ont and there are no ‘insanely high tax and hydro rates’. Businesses are also moving in here. DO stop with the partisan crap.

        • Every single province and US state bordering Ontario has electricity that is already significantly cheaper than Ontario currently has and costs here are still expected to rise up to 50% over the coming years. Add Bill 91 to the mix and yes those were legitimately part of the reason this factory is gone.

          • Sigh….and the plant in Australia? And the expansion in Thailand.

            It’s not local…it’s global

          • Those plants have nothing to do with London. London’s production is being picked up by Kellogg facilities in Michigan and Pennsylvania – not the Thailand plant.

          • It’s global, not local.

          • Are you a parrot?

          • One has to be when speaking to the dense.

          • Resorting to petty insults = waving the white flag. I accept your surrender.

          • And then there are the super-dense…..

          • and Emily just became self aware

          • Peter, I am not the topic here.

            If you can’t discuss something sensibly, don’t bother posting to me again.

          • You sound upset. How are you posting here anyway? Is there a computer in your kitchen?

          • Bingo!

        • Emilechka my sweet. Did you see the report out today that they did some DNA tests and found three unknown grandsons of John Diefenbaker

          Old Dief is turning out to have been quite the lad. Don’t kick a kid on the street it might be one of Dief’s.

          Nevertheless having found out that your mother is Gerda Munsinger, it leads to an obvious question. And here I was blaming it on Mitchell Sharp.

          But extortionate Hydro charges are one of the principal reasons for the flight of Kellogs. Warren Buffet wants no truck with that..

        • Clearly,
          Emily lights her home with candles…and doesn’t pay taxes.

          • LOL another OTT view

    • Wrong. The high cost of labour, electricity, an aging plant and now this:

      “It’s called Bill 91, the Waste Reduction Act. This week PC environment critic Michael Harris denounced it again as “a massive new regulatory scheme” that will impose “massive new costs” on food producers, manufacturers, and consumers. Just as Ontario’s Green Energy Act killed four jobs for every job it created (according to former Ontario auditor general Jim McCarter), Harris predicts that Bill 91 will likely cost Ontario many more of its 83,000 food and household goods manufacturing jobs than just the 740 now gone in Leamington.”

      The OLP are very much a part of why this plant is closing.

      • Obviously you aren’t paying attention.

          • I know you’re trying really really hard on your partisan comments….but Kelloggs is globalizing.

            I can’t believe how many times I have to ‘connect-the-dots’ for Con posters.

            Apparently you’ve missed all the manufacturing that’s left Ontario over years now….the jobs are gone and they aren’t coming back. The govt of the day is irrelevant.

          • The high cost of government overall is the problem, we’re carrying too much overhead and running too many pie in the sky government projects like that crazy Avro Arrow.

            Your dad Emilechka, was the only person in Canada with the broad perspective and wisdom to cut the losses immediately the minute we saw them coming.

          • Keep sticking your head in the sand Emily. The current Liberal government has driven more jobs out of Ontario with their policies than any government in Ontario history. To deny this is either blindly partisan or willfully ignorant.

  10. Again, governemtn and unions losing jobs.

    How did the low value loonie help ya all? Hey, 6% drop in loonie vale means in terms of CAD you have to pay 6.38% more for corn stock from the USA, and you wanted raises to live in tax inflated inflated Canada?

    Its a myth that a lower value loonie is good, as people with less value money get less goods and services, which also means less jobs. Come Feb/Mar/Apr the real picture will emerge, Canada is economically in huge trouble.

    Hey, I am profiting by it, I invest offshore and only in stocks with 50% or more of activities outside of USA, Canada and Europe. Up big time in the last 3 months while most get devalued money. Besides, returns are better too, get better dividends and a currency bump.

    Keep it up gov-statism types, as when enough of the economy fails, they will realize the false promises of over sized over taxing government bloat.

    Might want to ask who closes next. As government/union economics is pure garbage.

  11. It happens when unions need wage increases yet with devalued money stuff costs the plan 6.38% more to buy the grains.

    How is the low value loonie, union and high priced hidden taxes in electricity, city taxes and BoC money print for debt work’in for ya all?

    Maybe when politicians get some real clear thinking leadership that know some 101 economics, we might then get a turn around. Don’t forget your taxes now, as Air Canada needs a bailout and CBC wants more too…..and government is itching for a strike….working on triple pay for less work.

  12. This incident is an extreme example of the potential unintended consequences of corporate welfare.

    It’s not even an extreme example, it’s merely a detectable consequence. True opportunity costs can never really be measured (despite some econometrician’s insistence that they can be). And if you wish those opportunity costs to include the misallocations of investment and the resulting loss in productivity from that, good luck ever getting a decent handle on it. The real damage is always far beneath the surface, never to be measured, and rarely even noticed.

  13. Mayor Fontana to the rescue!

  14. @Rick Omen, @James R. Halifax – Lowering taxes like the GST to the point where you have a structural deficit is a form of corporate welfare. Having one of the lowest corporate tax rates in the developed world is another form of corporate welfare. Off loading all the risk of a real estate bubble onto the CMHC, like the CEO’s of Canada’s banking oligopoly have, is another.

    Sponsoring a Temporary Worker Program that pays foreigners less than Canadians is not only another form of corporate welfare, but also distorts any free market economy, and borders on state-sponsored slavery.

    I could go on. All political parties in power pander to the rich-kid, trust-fund, $100K/table charitable foundations. Just ask the Alberta government.

    Can’t wait for the Herringbones to do a cover of Queen’s We Are the Champions.

    We will probably have to wait awhile. #PMSH never admits to a mistake. He has made that very clear.

  15. I guess it’s too much to expect Maclean’s to mention the ON auditor general’s report? Still protecting their Fiberals at all costs I see

  16. I don’t disagree the OLP has had a very large role to play in the downfall of manufacturing in SW Ontario. However the majority of issues noted above are direct results of failing capitalist system where the corporate leaders won’t be satisfied until the middle class is extinct and everyone possible below the “elite” are making poverty level wages.
    You have to look no further than the strategy of Walmart to prove my point. They have single handedly made it so that people are glad “at least” to have a job with them.

    If you are serious in helping stop the job drain going on, reduce your consumerist addictions and buy everything that you can as local as you can or from businesses that you know pay a fair wage.

    IMO one of the major roles that is playing out in this job drain is right wing “right to work” propaganda.

  17. Hit these companies back by not buying any of their products. I and my family have decided not to buy the following items due to Kellog ownership. They sell cereal and Keebler, Pringles, Pop-Tarts, Kashi, Cheez-It, Eggo, Nutri-Grain. There are enough alternatives that we can send a message to these greedy corporations that hurting our local economies and families will not stand! Join me and others.

  18. Kellogg built a huge new plant right on the U. S. Mexico border two years ago and totally renovated their old plant. They have been transferring production from the London & Memphis plants to the Mexican plants for the last year.

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