By Kevin Meyer
We’ve been following the story of Whirlpool’s Evansville refrigerator factory for several years. Back in August of 2006 we told you about one round of layoffs.
The first was Whirlpool's announcement that they will lay off between 300 and 500 workers at the Evansville, Indiana plant. This is due to "continuing efforts to adjust production to market demands." But the line that really explains what is probably going on: "the company will continue to have committees explore lean manufacturing or efficiency practices."
That was in contrast to Sealy who on nearly the same day said something a bit different: "Sealy will employ lean manufacturing techniques in the design and operation of the plant." There’s a difference between “committees to explore” and “will employ.” That difference began to play out a few months later in December.
A few days before Christmas I received a long email with the subject of "Help me to understand." It was from a worker a Whirlpool's Evansville factory, who was among 500 people laid off earlier in the month. To avoid causing him any further grief, I'll just call him "Bob."
500 people, including the very real human named Bob.
Whirlpool's rationale for the layoff is that demand for top-mount freezers has been shifting to side-by-side models, which aren't made at Evansville. However, at the same time Whirlpool is adding over a thousand new jobs existing factories in Clyde and Mason, Indiana, as well as Amana, Iowa. But those jobs need to be netted against almost a thousand jobs soon to be lost at the Fort Smith, Arkansas plant due to the rapid expansion of the Ramos Arizpe plant in Mexico.
So let me get this straight… tens of thousands of years of manufacturing knowledge are being disposed of in Evansville and Fort Smith, huge hiring and training costs in Clyde, Mason, and Amana to bring workers up to a few weeks of manufacturing knowledge, it's "too expensive to retool" the Evansville plant but easy to swallow a hundred million bucks of severance charges (not to mention what the taxpayers shoulder). A few bucks an hour savings in Mexico is worth a much longer multinational supply chain that requires more oversight, longer transportation of thousands of heavy objects a day, far more training expenditure to handle a foreign language in an area notorious for extremely high turnover, and the resulting quality problems from such a lack of long-term manufacturing knowledge.
That is some wacky accounting. Actually it’s traditional accounting.
He went on to describe the environment at Whirlpool, which played right into the “committees to explore” versus “will employ” difference.
Bob's first email to me described several situations that unfortunately make perfect sense when you think about the statement in their August press release:
- "Management is consumed with operating like Toyota. I heard it everyday for more than a two years."
- "Management was not willing to make the necessary changes in conjunction with their employees."
- "Meetings, meetings, meetings all day long. All that really gets accomplished is a re-hash of the previous meeting."
- "Waste is abundant. They talk about it being a problem but every year it seemed to multiply."
Yes, that sounds like a lot of talking, committees, and meetings with no action.
So what would you expect after a couple years of ignoring the value of knowledge, obsessing about committees, and basically doing everything except focus on creating value instead of reducing cost? Yep, you guessed it. Thanks again to “Bob” we have the final obituary.
Indiana will lose another industrial icon next year when Whirlpool closes its Evansville refrigerator plant, wiping out 1,100 jobs. Known a half-century ago as the world refrigerator capital, Evansville will see its last remaining refrigerator plant close next summer when Whirlpool moves production to Mexico.
Rest in peace Whirlpool of Evansville. With a management team focused on the cost of hands instead of the value of brains we’ll probably be saying the same for Whirlpool as a whole in a few years.
Karen Wilhelm says
Once again, managers miss the big picture. As about the last appliance mfr in the U.S., Whirlpool could have taken that as an effective marketing advantage. (Though there is a lot of non-U.S. content in their products.) They also ignore total landed cost. If they sell a refrigerator in Evansville, or anywhere some distance from Mexico, what’s the cost to ship it there? How much fuel does that take? And have they changed the biggest costs to the company–management and functional employees who haven’t moved to Mexico?
Jason Morin says
As usual I feel I should play devil’s advocate. I agree wholeheartedly that Whirlpool made some poor decisions and are now suffering the consequences, but I take issue with Bob’s very big and uninformed generalizations about Mexico. Should a company move their plant or outsource production to Mexico because of cheaper labor? Of course not. But some companies that have invested in Mexican production (not outsourcing) have been successful. They have a hard-working, reliable, trained workforce that creates high quality products.
As for extending the supply chain, I have to argue this one. Again, I am not in favor of creating an extended global supply chain that adds complexity and cost. But we’re talking northern Mexico, which is basically south Texas, not Asia. Yes, Mexico’s transportation infrastructure is not world-class and there is some added complexity when shipping over the border (customs, etc.) But it’s not Asia which is several thousand miles away.
And language? It’s Spanish, not Mandarin or Vietnamese. Many Americans speak Spanish (incluyendo este gringo) and many educated Mexican managers speak English.
Just my 2 cents…
U.S. companies should not look at Mexico for ther cheaper labor. It is true that it adds great savings as labor cost is lower, but yes there are other factors to consider such as freight costs. Companies like Whirlpool, Electrolux, they choose the northern part of Mexico for freight purposes. Electrolux has successful operations in Juarez Mexico, just across the border from El Paso Texas. It’s an ideal place for North American distribution, they are enjoying the benefit of lower labor costs, high skilled workers, strong manufacturing experience in the area and a very well developed infrastructure on both sides of the border. This gives a great advantage for this large appliance manufacturers. Mexico is not only lower labor cost but also a country with strong manufacturing experience, bi-cultural, high skilled and a geographic economy that should serve the North American companies become more efficient and boost their profits.
For more information on how to set up a factory in mexico: http://www.mfiintl.com
jamie flinchbaugh says
I thinking having a committee to explore the general viability of lean is what a lot of companies do, basically doing ‘just enough’ to convince themselves, their boss, or industry that they are doing lean without having to make a real commitment. This is what we talk about as phase zero in The Hitchhiker’s Guide to lean. It’s not really being on the journey but doing just enough to convince yourself that you are. I feel a rather higgh percentage of companies are stuck in phase zero without really knowing it.
There are some well made statements here. But, there are some things that I do not buy into and can actually prove that the general work force is, quote, un-quote, highly trained and reliable.
Lets start at the beginning. In August 2005 Whirlpool brought in an outside lean contractor to assist with job restructuring. This company was out of Toronto, Canada. This restructuring lasted into early 2007. The area where I worked they tried to take four jobs and make one (me) person do all the work. They tried putting parts as close as possible, re-designing how the parts were added, etc., etc. What they failed to consider was the time factor. On paper the time worked just fine. Implementing it is another issue. I brought the engineers, managers, and my foreman together to explain why it would not work. They all disagreed except for my foreman who understood exactly what I was telling them. Well, the proof was in the pudding as they say. Two days of test trials and every conceivable way of rearranging things could not address the issue of “time” in getting the job done. Eighteen seconds to: pull a kit pack out of a large box put it on the line, grab two plastic pans, insert instruction booklet, move kit pack box back to upright position when it emptied and use pneumatic lift to reset the lid, spin the box around, lift off the lid, tilt to upright position and then go back to adding the kit packs back on the line along with the plastic pans not to mention setting glass shelves next to kit pack. I had three forklift operators keeping me supplied with material. I worked as fast as I could and would always run behind. The line speed was around 850 which meant we were pumping out around 1200 units every 8 hours. The end result was that instead of eliminating 3 people they cut 2. They had to add one other person. Now I was doing the work of two people not 4. Efficient by any standard. So, where am I going with this.
Prior to bringing in the lean consultants Whirlpool had already moved one product line to a new plant in Mexico that was up and running. Within 6 months Sears came back to Whirlpool and basically begged them to bring back that product line as it was theirs. The reason: A 70 percent failure rate and a lack to keep workers made re-training non stop. I was informed by an engineer who had gone to Mexico that the attrition rate was almost 50 percent. So, that product line was brought back. This was the spark that ignited the use of lean consultants. But, what really stunk was the fact that Whirlpool brought down the office people to assist in job restructuring. Say what!!! I was all for the lean aspect. Whirlpool added insult to injury by bringing down the white collar folks to tell blue collar’s how to do our jobs!!! So, here you have the lean people doing there thing, the office people in the way trying to assist the lean folks. What a circus!
Being one of the 506 laid off in December 2006 I did not qualify for job retraining as I already had a degree. It took almost 13 months to find another job. I officially separated from Whirlpool in June, 2008.
As an afterthought, I am glad it is leaving. Management sure can’t blame the workers anymore for their failures!!