A week ago we told you about how a combination of fake lean and traditional accounting is wreaking havoc at Whirlpool. Over a thousand people are being laid off from plants in Evansville, Indiana and Fort Smith, Arkansas while over a thousand new jobs are being added at plants in Amana, Iowa and Clyde and Mason, Indiana. Plus the rapid expansion of their Ramos Arizpe plant in Mexico.
In other words, in their distorted world supported by traditional accounting methods, it is cheaper to eliminate tens of thousands of years of experience, pay a hundred million bucks in severance costs, pay millions more to bring a thousand new hires up to a week or two of experience (many of which are in an area known for very high turnover), deal with the hassles of longer multinational supply chains… than to retool an existing plant and leverage existing knowledge. That’s what happens when many real world liabilities and assets aren’t captured on traditional balance sheets and P&L’s.
Unfortunately being beholdened to traditional accountants instead of looking at the real world has ramifications far beyond their own company.
All of us are paying as laid-off Whirlpool workers will be tapping into unemployment pay and two years of training provided by the federal Trade Adjustment Act. The Act is a federal program aimed primarily at those whose jobs have been lost to foreign competition or moving of production outside of the United States. A good thing for the displaced workers, but in effect taxpayers are making it easier to rationalize poor decisionmaking.
But it doesn’t stop there. Let’s take a look at what’s happening to some of Whirlpool’s suppliers, and just the microcosm of suppliers to the Evansville plant. Collis, Inc., which builds appliance shelving, will close its Evansville plant and lay off 160 workers. Atlantis Plastics, after only recently expanding to handle more Whirlpool work, is also going to reduce its workforce. Companies that provide molding technology services, such as The Tech Group, may also be affected.
So from a real-world perspective, accounting for the value of experience and knowledge and not trying to shoehorn absorption of all facility expenses into an hourly rate, the decision didn’t make much sense. Now tack on all the other costs and human impact to taxpayers and suppliers and you really have a mess. But I guess it looked good on paper.
Wouldn’t it have been easier to simply sit down with suppliers, employees, and perhaps even the local government (who already gave them tax breaks to increase the size of the Evansville plant), and figure out how to manufacture more efficiently. Perhaps actually implement lean instead of just talking about it?