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Reviving Manufacturing
Newton Needs to Move Ahead Creatively Post-Maytag

[Note: This material is copyright by the Des Moines Register, and is reproduced here as a matter of "fair use" for non-commercial, educational purposes only. Any other use may require the prior approval of the Des Moines Register.]

Why? Whirlpool Corp., which purchased Maytag in March, has more efficient, nonunion plants in Ohio that can make five appliances for what it costs to make one in Newton, the company and others said.

As a result, Whirlpool announced Wednesday that it will cease all operations in Newton by late 2007, ending Maytag's run in the central Iowa town of 15,600 where it was founded in 1893.

The operations were doomed, appliance industry observers said, by the demands of a fiercely competitive global appliance industry and a new owner with no need for a second corporate headquarters. Whirlpool's president of North American operations, David Swift, said building a plant in Iowa that was comparable to or better than the company's plants in Ohio - which he called the most efficient in the world - couldn't be done.

"The marketplace is a difficult place, a place that doesn't have a capacity for compassion," said Iowa Gov. Tom Vilsack.

Casualties include Tim Hartgers, 42, who has worked at the plant for 18 years. He is a sheet-metal worker, making between $18 and $19 an hour.

Hartgers said he knew there was a chance the plant would close after Whirlpool bought it March 31.

"There's not a thing you can do about it," he said. "But where else am I going to find a job that pays that well?"

The closings, scheduled to take effect by late 2007, include:

• The Maytag headquarters and research and development center in Newton. Lost jobs: 800. Operations will be folded into Whirlpool's headquarters in Benton Harbor, Mich. About 1,000 workers report to the headquarters but are based around the country in sales, service and other jobs. Out of the total, several hundred will be offered Whirlpool jobs elsewhere, with Whirlpool helping to pay relocation expenses.

• The Newton washer/dryer factory. Lost jobs: 1,000. The factory employed 2,600 as recently as four years ago before Maytag began cutting the work force. The manufacturing will be moved to Whirlpool's 3,000-employee washer factory in Clyde and its 2,800-employee dryer plant in Marion, Ohio. Union workers can apply for jobs, but will have to pay for their own moving expenses if they're hired.

However, the company said it may sell Amana's commercial microwave business, along with its Hoover floor care business, which has operations in Ohio.

Ed Miller, a representative of Local 1526 of the International Association of Machinists at the Amana plant, said about 50 workers make microwaves.

Cuts of administrative jobs in Newton will begin in six months, with production jobs being phased out starting now and continuing through the fourth quarter of 2007, Whirlpool said.

Whirlpool will close two other laundry plants acquired in the Maytag deal. Production will end later this year at a 1,000-employee factory in Herrin, Ill., and a 700-employee factory in Searcy, Ark.

The overall consolidation, part of Whirpool's integration of Maytag into the combined business, will eliminate 4,500 jobs nationwide, including the 1,800 in Newton, Whirlpool said.

The consolidation will create 1,500 new jobs at other Whirlpool locations, for a net reduction of 3,000 jobs.

Whirlpool said it will improve the cost efficiency of its laundry operations and restore the Maytag brands' competitiveness.

Announcing the closings of Newton's Maytag operations all at once was "the kindest thing they could do" for employees, said Swift.

He said Maytag workers have been under uncertainty, so it was important to move with speed.

Laura Champine, an analyst with Morgan Keegan in Memphis, Tenn., said the plant's manufacturing processes put Newton at a disadvantage. The plant makes many of the components that go into finished products, when the industry trend is to cut costs by outsourcing parts and to devote a single huge factory for final production and assembly of a single type of appliance, Champine said.

Whirlpool's Clyde and Marion plants get components from a variety of sources and then bend, staple and paint metal to create the finished appliance, Champine said.

Maytag got into the outsourcing game late, after competitors built parts and production factories in lower-cost countries such as Mexico.

Health care costs could have been an issue, said Eric Bosshard, an analyst with FTN Midwest Research in Cleveland.

He also noted that members of United Auto Workers Union 997 went on strike against Maytag for three weeks in 2004 in a dispute over a new contract.

Vilsack, at a news conference in Newton, said state government tried to save the Newton jobs with the most expensive incentive package in the state's history, offering to spend up to $75 million to build a new state-of-the art factory to be leased to Whirlpool.

The Newton factory, under Maytag ownership, did not have adequate investment and innovation over the years, Vilsack said. "That's a gap no amount of incentives could make up."

Swift, the Whirlpool executive, said, "This is a story about an industry that's incredibly competitive. One that requires that we take rapid action to go after efficiencies. That's essentially what we've done today."

Jill Russell, senior associate editor at Appliance magazine in Oak Brook, Ill., says Whirlpool likely decided it made more sense to use Whirlpool manufacturing processes to produce Maytag brand laundry products, rather than introduce Whirlpool processes into the Maytag factories.

Swift emphasized that the decision to close the Maytag operations was not about poor performance by employees "in any way, shape or form."

Manufacturing employment in America has dropped for decades in large part because of productivity increases: Technology advances have allowed fewer workers to make more goods.

Manufacturing jobs stood at 14.2 million in April, according to the Department of Labor. That's a drop of 5.3 million overall since the historical peak of 1979, according to the Congressional Budget Office, but represents an uptick in recent months. Losses were particularly steep from 1998 forward.

The phenomenon of a "jobless recovery" after the 2001 recession was largely due to lost manufacturing jobs that never returned, unlike their rebound in past recoveries. Plants closed or consolidated. Jobs were shipped overseas or disappeared altogether.

A series of Register editorials last fall laid out a blueprint for reviving manufacturing in America. The main recommendations:

• Repeal the job-killing corporate tax, which creates an unfair playing field vs. foreign competition.
• Separate health insurance from jobs, another factor that hurts American exporters in the world marketplace.
• Enact a GI Bill for workers, so they can continuously upgrade their skills.
• Launch a national research crusade, to drive innovation.
• In Iowa, safeguard the state's top moneymaker by investing in the future workforce - through public schools and the state's universities.

At least Whirlpool Corp. didn't prolong the agony. Just weeks after acquiring Maytag, Whirlpool announced it has decided to abandon the Iowa-born company's hometown.

No severance package can adequately ease the anguish of disrupted lives for workers who might have few re-employment options at comparable wages, but there is one positive thing about the announcement: It frees Newton to move ahead into the post-Maytag future.

For the past several years, the community and thousands of families that drew their livelihood from Maytag have lived in limbo. Even before the company became a takeover target, there were doubts about whether the manufacturing operation would remain in Newton. Then there were long months of additional uncertainty during the buyout process, which put headquarters jobs in jeopardy, too.

During the long agony of waiting, Newton leaders have tried to plan the community's future with or without Maytag — with Maytag, they hoped, but were not counting on it.

Now, they have a clear track.

A former executive once described Maytag as Newton's greatest asset but also its greatest liability in terms of economic development. The payroll was the town's lifeblood, but the presence of a large manufacturer paying high wages tended to discourage other employers from considering the location.

If it's any consolation, Newton is now free to aggressively seek out other employers and can offer them a workforce that has high-quality manufacturing in its blood.

The community also has the advantage of being within a short commute of the fast-growing Des Moines metro area, where many former Maytag employees may be able to find work without moving.

Newton has worked to position itself as a community with a healthy diversity of white- and blue-collar families and a small-town quality of life. With the opening this fall of an auto speedway, the town sees part of its future as a recreational destination.

There will be life after Maytag for Newton. Perhaps the best way to assure it is for the community to make the Newton Promise a reality.

The Promise, proposed by the Newton Development Corp., would provide full or partial college tuition to graduates of Newton High School. It would be an incentive for families to reside in Newton, helping maintain property values, stimulating local businesses and assuring the presence of a family-centered workforce to offer prospective employers.

It would be financed by a combination of private giving and local tax money.

Newton should make the Promise happen. Times like these call for creative action.

The same might be said for the whole state. Rather than wringing hands over jobs being lost, Iowa needs to step up its advanced-manufacturing initiative, encouraging manufacturers to invest in new equipment and processes to stay competitive. And Iowa needs to invest boldly in the education, training and quality-of-life enhancements that will generate new jobs to replace any that are lost.

Those steps might not have saved the Newton plant. Businesses grow and die. It happens at an ever-faster pace in the global economy. Public response needs to be fast-paced, too, to save current jobs and generate new ones.