Pratt's letter to the union on closures

East Hartford (WTNH) - Here is the letter to the Machinists Union from Pratt & Whitney regarding plant closures:

September 21, 2009

Mr. James M. Parent [HAND DELIVERED]
Assistant Directing
Business Representative
District Lodge No. 26
I.A.M.A.W., AFL-CIO
365 New Britain Road
Kensington, Connecticut 06037

Dear Mr. Parent:

The purpose of this letter is to respond to your final proposal presented to the Company on September 11, 2009, and to inform you of our decision regarding Cheshire and CARO.

Pratt & Whitney thoroughly analyzed the proposal and appreciates the significant work and effort to develop it. Based on our analysis and after serious consideration, however, the Company has concluded the Union’s proposal does not achieve the annual, recurring savings needed to preserve the work in Connecticut. Therefore, and despite the Company’s best efforts and those of the IAM and the State, it is with deep regret that we have concluded the process has been unsuccessful in identifying a reasonable alternative to keep Cheshire and CARO open. As a result, the Company will proceed with the relocation of this work from Connecticut to other Pratt & Whitney facilities after the expiration of the six months notice provided to you on July 21st.

As we discussed throughout the meet and confer process, our challenge has been to find a way to preserve the work in a way that responds to current market conditions and business volume reductions while improving the overall cost structure of these businesses for long-term competitiveness. The objective we laid out on July 24th was to address the $53.8M annual, recurring savings that would be realized by the closure of Cheshire and CARO. We attempted to narrow that gap between this target and current conditions through our discussions with the IAM and the State of Connecticut so that we would be able to keep the facilities open and save jobs.

After years of making every reasonable effort to try to improve the facilities’ financial and operational performance, we wanted to make sure we gave this last available effort every chance for success: we provided detailed financial analysis and market data over an intensive meeting schedule; we agreed to extend the 45-day meet and confer period at your request to ensure the full airing of any ideas; we provided savings options when quantifiable savings alternatives were not forthcoming; we assigned more than $10M in extra value to keep work in Connecticut when developing our proposals and when evaluating yours; and we concurrently met with the State to determine if its proposals could also help narrow the gap.

The annual, recurring savings associated with Pratt & Whitney’s third proposal provided on September 11, 2009, was $48.8M plus $5M of annual savings we assigned to the State of Connecticut’s offer. I explained that our proposal, or one that delivered similar quantifiable recurring savings, would allow us to preserve the Cheshire and CARO work in Connecticut.

The Union rejected that proposal and subsequently presented its final proposal which you indicated contains $34.3M of quantifiable savings. The Company’s analysis indicates your proposal would generate only $25.8M of savings from those same elements - savings that can be assured for only one year subject to renegotiation in December 2010. The substantial difference between the value you assign and Pratt & Whitney’s analysis is the result of lower employee population projections by the Company in light of upcoming volume reductions.

The Union also sought to assign $47M in additional value to potential savings opportunities, the full value of which is not quantifiable today. As we discussed throughout this process, the Company has been considering whether to make an important decision that will result in recurring, annual savings now and into the foreseeable future. Alternatives to that action need to be equally tangible and therefore savings opportunities that present only the possibility of future savings cannot be factored into our current economic analysis.

Separately, the State of Connecticut has provided a generous offer that we have reviewed in light of our focus on the long-term competitiveness of these businesses and our commitment to finding alternatives that would keep the work here. Looking at that offer in its most favorable light at today’s employment levels at Cheshire and CARO, specific elements of the State’s offer would generate approximately $5M in savings for five years for the two facilities. Given anticipated volume reductions, most notably 40% in Cheshire in the coming months, the value of those elements will fall to approximately $3.5M. Nonetheless, we have assigned the entire $5M to this assessment. While the total estimated value of the State’s offer is significant and appreciated,