Tuesday, October 30, 2007

The Last Shift: A Perspective on Maytag

By now everyone's heard that the folks at Whirlpool administered the coup de grace to Maytag, which had been manufacturing in Newton, Iowa for 114 years, first in horse drawn farm equipment and later in washers and driers.
Fred L. Maytag over on the left there was a brilliant mechanic who dabbled in a number of fields that today are mostly of interest to collectors, but much of what Maytag did tracked the evolution of the country from a horse drawn, kerosene lit rural economy to the wired, electrified and developed state it is today.
Maytag was once famous for its gasoline powered washers, and as anyone who's ever tried to boil wash in a copper tub and scrub it on a washboard can tell you what Fred created was a gift from God. In the opinion of the average farm wife on the prairie, Fred should have been canonized early on, and several times to boot.
Whirlpool bought the firm after several years of declining share values and mismanagement at the hands of a succession of eminently forgettable chief executive officers who seemed incapable of exercising leadership at the level that was needed to modernize and compete effectively in a cutthroat field.
What happened to Maytag was formulaic, really-there is a buyout or series of buyouts, and eventually a salvage sale-which was pretty much the way the company my father gave 28 years to-Weston Electrical Instrument Co.-became nothing but a memory and a collection of buildings that can be seen on Google Earth if you punch in 614 Frelinghuysen Avenue, Newark, New Jersey.

Last Friday most of the workers still on the payroll at Maytag pulled their last shift, although some folks will be doing cleanup for a few weeks, no doubt setting the scene for one hell of an auction, the likes of which haven't been seen for a while.

The Maytag name will continue in some form or other-it's a valuable property with a quality cachet- but as we have seen in other businesses like aerospace, it's nothing new these days for a strong competitor to buy and idle a weaker one.

If you've been following this blog you may see some similarities between what happened to Maytag and what happened to McDonnell Douglas's commercial division. The process does two things-it narrows the field, it idles excess productive capacity, and more importantly it raises the bar for any potential competitors seeking a turnkey entry into the field-which is largely dominated by a few domestic producers at this date.

The entire affair makes economic sense from Whirlpool's perspective because American manufacturing is in the fight of its life for its very existence. Pitting American labor and production engineering against the best that can be found in Mexico and China is not a game for the faint of heart. Bold leadership and steady nerves are the sine qua non of survival today, and no amount of excess baggage can be tolerated if the competition's to be met.
When I first moved here to Iowa one of the things I noticed about Newton was that it was a town where there was something of a labor elite-lots of working class toys like Harley dressers, bass boats in the driveways and huge pickup trucks sometimes known as 'duallies' to haul the travel trailers around.
Jobs at Maytag were handed down from father to son like the hereditaments of medieval ceorls, and it was all very nice. "Thirty years and out" was the way things went, and a lot of guys my age had already done their thirty years and were enjoying generous retirement benefits from contracts that were negotiated when everything Maytag made turned into money-lots of money. Forklift drivers who'd retired were whipping around town in red Corvettes and wearing expensive Hawaiian shirts. When you think about it, it was crazy, and it couldn't continue.
The gravy train had to end. Ineffective leadership failed to take Maytag's high labor cost structure and inefficient production facilities under control in time to do something about it, and the end was, ultimately and depressingly predictable. Labor, for its part, never came to any independent consensus and plan to save Maytag from itself and in a sense did its part to kill the golden goose.
What's the object lesson? There are a number of takehomes, as my mentor Professor Neil Hamilton used to say.
When a marathon runner was needed, Maytag was a sumo wrestler.
Labor cannot survive by tossing people off the liferaft and letting the Devil take the hindmost. American manufacturing can compete on efficiency and quality as any number of executives at Honda, Toyota, and Hyundai can tell you, because what we've got is infrastructure, production engineering expertise, an intelligent and creative workforce and liberal work rules.
Management for its part cannot depend on doing things the way Dad did them back in the fifties, and it can't survive by fiddling the stock options to line their pockets and head for the timber when the competition heats up.
The perspective has to be clear and unflinching on both sides of the house.
Much as I hate to say it, it's time for labor and management to reach some sort of consensus and modus vivendi about where the American manufacturing project is going-either that or exit the field.


At 3:45 PM, Blogger Aurora said...

Seems like we agree that the old model isn't working anymore?

At 4:12 PM, Blogger Robert Luedeman, attorney at law said...

Well, I reserve the right to change my mind at times, but maybe for different reasons. As long as we stay friends, there are only differences of opinion.

It may interest you to know that the retired forklift driver with the Hawaiian shirts and the red Corvette is a real person.

I agree that it's time for a new consensus abot how we work and what the objective is, but I have my doubts as to whether management is worthy of the task. The tyranny of the quarterly statement and stock options has seen to that.


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