Submitted by: Veronica Coffin
We are collectively writing to make the President Elect’s Transition Team, as well as the President Elect Donald J. Trump, aware of the details surrounding a closure in Alliance, Ohio. This closure will be devastating to roughly 500 families and further depress manufacturing in the United States. Although this shutdown is being touted as temporary shut down by the local Union, local Mayor and local Management, it is evident that this is simply a form of distraction from the primary intention of replacing order flow from Alliance Castings to their counterpart in South America.
Although there is a very widespread enthusiasm surrounding the remarkable intervention with the Carrier Plant, this same form of conduct must continue and be utilized with each Corporation that chooses to relocate to non-U.S facilities.
This plant is indirectly owned by Carl Ichan. Specifically, Ichan Enterprises-Ticker IEP. To understand why IEP would have an interest in a company as small and seemingly insignificant as Alliance Castings, it is helpful to understand the primary intention of IEP from the start. More specifically, the intentions of the two largest investors in the U.S-Carl Ichan and Warren Buffet. Both men are betting on the continuance and expansion of the rail industry. This bet is specifically related to the rejection of the Keystone Pipeline in 2012 by President Obama and the current presidential interference with the Dakota Pipeline. Both lines would in effect reduce the increased need for rail transportation of fuel. Therefore, having a President who is vehemently against the creation of any pipeline productivity would further guarantee long term profitability in the rail car industry. This industry includes manufacturing, leasing, maintenance and all facets surrounding their continuation. With this basic information, it is important to look at both the creation of numerous holding companies, subsidiaries and joint ventures. Additionally, it is important to look at the timeline associated with their formation. The following is a breakdown of this tangled web brought to light:
–Alliance castings-formerly known as American Steel Foundries– Five years ago-2011- the Alliance Casting Company re-opened its plant with hopes for a bright future making parts for railroad cars. However, since the opening they have already laid off 75 workers and reduced the work weeks for its 370 hourly employees. Now, because of “tough economic times” ,
THEY ANNOUNCED ON 12/01/2016 THAT THEY ARE CLOSING THE ENTIRE PLANT UNDER THE GUISE OF A TEMPORARY SHUTDOWN.
-Although a temporary shutdown is usually done to reduce fixed costs and accumulate additional orders with the expectation of resuming production when the potential profit from order flow outweighs the fixed costs, it appears through the numerous holding companies, length of contract with employees and secondary ventures by IEP show a different outcome to this tale.
-Alliance castings-formerly known as Amercian Steel Foundries Alliance, Ohio
-Consortium known as Ohio Castings purchased Alliance Steel Foundries
-Ohio Castings is owned by three joint-venture partners that acquired the former American Steel Foundries in 2003, including ARI (formerly ACF Industries Holding Corp.), AMSTED Rail-ASF-Keystone Inc., and The Greenbrier Companies, all of which are involved in manufacturing, owning, and/or leasing of rolling stock. Ohio Castings supplies the partner companies with castings “at a favorable price,” per ARI. When Ohio Castings A.K.A Alliance Castings entered into 5 year deal with the local Union 2211 and reopened the facility again, the timing of the deal was specifically set to parallel the election. This is not speculation, but fact. The creation and potential to shutter the facility run parallel with the reason IEP had an interest in this company. It was simply a hedge against the election and a clean way for a publicly traded Parent company, or in this case companies, to circumvent a continuation of utilizing U.S labor and transition to labor in South America to reduce fixed costs.
– Ohio Castings Company llc operates as a subsidiary of ACF Industries Holding llc
– ACF Holding llc operates as a subsidiary of Starfire Holding Corporation
– Starfire Holding Corporation-formerly known as Ichan Holding Corporation & changed its name in 1995
– It was incorporated in 1982 and Carl Ichan is Chairman, Chief Executive Officer, Chairman of ACF Industries Holding Corp and Director of ACF Industries Incorporation.
-ACF is renamed, re-chartered and becomes the American Railcar Industries (formerly ACF Industries Holding Corp).
-ARI -American Railcar Industries-Ticker ARII is a publicly traded and managed by Carl Ichan.
Therefore, through holding companies, Carl Icahn-IEP, fully owns Alliance Castings and Engineering.
-ARI (American Railcar Industries-ARII) and Greenbrier (Greenbrier Companies-Ticker GBX) are both publicly traded companies.
-Amsted Industries, the third proprietor of the consortium that owns Ohio Castings (aka Alliance Castings and Engineering) does so under its Privately Held Company Amsted Rail.
-Therefore, two publicly traded Companies who wish to avoid a reputation of farming labor to South America, enter a joint venture with a Privately Held and non-reporting entity that was expanding its footprint in South America.
-To further break down the venture-Alliance Castings had primarily one customer- Amsted Rail.
-Amsted Rail had agreements with its joint partners (ARII and GBX) to accept castings from Alliance Castings, as well as other Amsted casting companies-sister companies located in both Brazil and Mexico.
-Amsted Industries is incorporated and located in Chicago Illinois. It represented as a Global Conglomerate that serves the various industries. In the case (both ARII and GBX-Amsted Rail) is the primary distributor of parts for both ARII and GBX.
-Thus, both companies are getting their parts from a U.S based company (Amsted). Furthermore, since Amsted is a Global supplier, they can effectively shutter the consortiums joint venture of Alliance Castings under the guise of reduced order flow since Amsted is the primary customer and partial owner.
-By doing so, it accomplishes two things-Amsted still remains the supplier of both publicly traded companies-“a U.S supplier” and Amsted can now effectively maintain lower fixed costs at the expense of U.S labor and place all of its orders with its South American manufacturers.
-To date, Amsted has been sending their overflow to Alliance Castings and uses South American labor as their main Castings source- Amsted Maxion (formerly known as Iochpe-Maxion prior to Amsted Rail assuming their operation).
To further understand the timeline of Amsted and their coincidental buildup of this South American labor force, see the following overview of their entry in Mexico/Brazil. Amsted Maxion (formerly known as Iochpe-Maxion) has provided this breakdown as follows:
“As from the 1990s, we started to focus our operations on the segments of auto parts and railway equipment, with the disposal of a major portion of the assets and equity interest not linked to these segments. In 1998, we initiated an operational restructuring process, including definition of our business portfolio.
In early 2000, 50% of our railway equipment business was disposed of to Amsted Industries, giving rise to the incorporation of the joint venture Amsted Maxion. Once the operational restructuring initiated in 1998 was completed, the Company started to conduct its business by means of two companies, the subsidiary AmstedMaxion, in the railway segment, and Maxion Sistemas Automotivos, which has two divisions: wheels and chassis, and automotive components.
In January 2008 we converted our preferred shares to into common shares with the purpose of entering the Novo Mercado trading segment of BM&FBOVESPA, the São Paulo Stock Exchange. In July 2008, aiming at simplifying our operational and corporate structures, the Maxion Sistemas Automotivos merged into the Company, thus resuming its operational nature, concentrating all major operations in Brazil, except for the subsidiary AmstedMaxion, in one single legal entity.
In August 2009, the Company purchased the wheels business of ArvinMeritor in Brazil, Mexico and the United States, which was then named “Fumagalli Division”.
In December 2010, aiming at increasing its production capacity in Mexico, the Company purchased the assets relating to the wheels business of Nugar S.A.P.I. de C.V., a Mexican company controlled by the CIE Automotive group.
Finally, in early 2012, we completed the acquisition of the Galaz Group, a Mexican manufacturer of steel side bars for commercial vehicles, as well as of Hayes Lemmerz, a US global manufacturer of steel and aluminum automotive wheels for light vehicles, and steel wheels for commercial vehicles.
AmstedMaxion serves all railways and their users in Brazil and abroad, including freight car leasing companies.In the largest steel casting plant of South America, parts of up to 6 tons are manufactured for application on machinery and industries of civil construction, mining, siderurgy, automobile and railway.
In the mid 2000’s, ASF-K de Mexico S. de R.L. de C.V. officials were joined by Mexico President Vicente Fox and Hidalgo Gov. Miguel Osorio Chong at a ceremony to mark the grand opening of the company’s steel casting plant in Sahagun, Mexico. ASF-K de Mexico — a newly incorporated Mexican company owned by ASF-Keystone Inc. — plans to begin full production at the plant by the end of the first quarter.
The plant will produce steel for castings by melting recycled scrap metal. Workers will create freight-car castings by pouring molten steel into large silica sand molds. During the next 18 months, ASF-K de Mexico plans to hire 350 management and production employees; the company has hired 160 to date.
The plant will be managed by ASF-K de Mexico Vice President and General Director Tony Bauer, a long-time ASF-Keystone employee.
The Mexican federal, state of Hidalgo and Sahagun governments, and representatives of former employees/creditors of NACOMEX helped ASF-Keystone purchase and reopen the plant, according to ASF-K de Mexico.
ASF-Keystone is a division of Amsted Industries’ Amsted Rail Group, which also includes Brenco Inc. and Griffin Wheel Co”.
Although this offers a semi-detailed breakdown of the inner workings of ARII, GBX and Amsted, it is important to understand the significance of this venture. Globalization has been touted as a trend that can’t be stopped. Therefore, this is a common structure in which many American companies circumvent the constant struggle between using U.S labor versus foreign labor to lower fixed costs and increase profitability. In this case scenario, two public companies have been able to utilize foreign labor via a third party privately held company, thus avoiding pending penalties and public distain. Although these companies maintain U.S based manufacturing facilities, the ability to slowly integrate their foreign fixed cost structure over time under the shadow of a U.S company that utilizes foreign labor is simplistic and fortuitous of the future strategy.
It is also important to understand that these companies involved in this Joint Venture are keenly central to this strategy. Carl Ichan has made two attempts in the past to purchase GBX via his Investment company IEP. However, they never reached an agreement and there was a large concern of Anti-Trust laws preventing such a large-scale merger in a relatively small Industry in the first place. However, in this case scenario, a single joint venture of a small company in Alliance Ohio has set the stage for two increasingly large companies to work as one, but under different umbrellas. To further bring their intent to light, the following news release was issued by GBX recently:
“Greenbrier Companies has signed an agreement to buy a 19.5% ownership stake in Brazil’s Amsted-Maxion Cruzeiro.The new strategic deal is subject to customary closing conditions and Amsted-Maxion Cruzeiro expects to pay its outstanding debt and help future company growth.The transaction is valued at around $10m and is expected to complete in Q4 of Greenbrier’s fiscal year ending 2016.Amsted-Maxion Cruzeiro makes castings and components for railcars and other heavy equipment. It was jointly owned by Amsted Rail Company (Amsted) and Iochpe-Maxion.”It also provides services to several transportation equipment markets across Latin America and supplies railcar castings and components to Greenbrier-Maxion. In addition, it provides components for heavy equipment used in agriculture, mining, and other industrial applications. In the last calendar year, the company registered net sales of around $100m. Greenbrier-Maxion recoded over $200m in net sales for the same duration. As part of the latest investment, Greenbrier has won an option to buy another 10% interest in Amsted-Maxion Cruzeiro. This is subject to certain conditions and will expire in December next year. However, it has been modified as part of the current deal to provide Greenbrier greater flexibility. The modified option allows Greenbrier to buy an additional direct ownership interest in Greenbrier-Maxion at any point in a range between 30.6% and 40.5%, with the option exercise price adjusted in proportion to the ownership interest received. Greenbrier Companies chairman and CEO William Furman said: “Our first year of operations with Amsted and Iochpe at Greenbrier-Maxion has been an unqualified success. “A sign of our progress came last month when Revista Ferroviaria, the leading rail publication in Brazil, recognized Greenbrier-Maxion as Best Freight Car Manufacturer and Best Manufacturer of Undercarriage Components over several larger, well-established multinational competitors. “Global markets are increasing in strategic importance for Greenbrier. Over the years, Greenbrier has successfully participated in several joint ventures, internationally and domestically”.
In other words, GBX is now taking private ownership of Amsted, while still having an indirect venture with IEP-which will not close, but remain under a temporary closure indefinitely. Therefore, we are asking that this long-term plan of quietly shipping U.S jobs overseas be stopped and addressed with the same potential reprisal that Carrier Corp was faced with.
In the end, President Elect Trump was entirely correct when he said Carl Ichan would be a brilliant architect of foreign labor deals. After all, Mr. Ichan is currently paid to be a long-term investor who is highly skilled in long term planning. We can’t fault Mr. Ichan for simply utilizing laws, rules and guidelines set forth by our current Government, much like President Elect Donald Trump utilized to his advantage while in the private sector. However, what we as American based Labor can do is ask that Alliance Castings be kept open as an example of what companies are no longer going to do with the inauguration of Donald J. Trump. In the end, this is not simply about 500 workers in the small town of Alliance, Ohio. It is about all the small to medium sized manufactures in this country that are begging, willing and ready to work.
Please help us to get this message to President Elect Mr. Donald Trump and have him intervene with Mr. Ichan to find another path other than closing this facility down. We need the help of Mr. Trump, his transition team or any other elected official immediately. As we have all heard before, it only takes one action to catapult a change. This change is a stronger America through stable jobs for all and our catapult is hopefully President Elect Donald J. Trump.
The workers of Alliance Castings