Thursday, May 11, 2006

MAYTAG, RIP

To nobody's surprise, Whirlpool announced yesterday that the Maytag production plant and headquarters in Newton will be closing. A sad story.

Whirlpool left in spite of the Governor's best efforts to bribe them to stay:

An incentives package, including state money for job training, tax incentives and the promise of a new state-of-the-art factory, couldn't sway company officials from announcing it would shut down operations in Newton beginning this year.

Gov. Tom Vilsack called the state's offer the largest incentives package offered in Iowa. Details of that plan, which could have cost Iowa as much as $95 million, included:

- Building the company a high-tech factory at a cost of $50 million to $75 million. The state would have leased it to the company.

- More than $20 million to retrain Maytag employees to work for Whirlpool.

- Tax and energy incentives that were being ironed out.

The governor's office and state Department of Economic Development declined to provide specific details, saying state officials remained in negotiations with Whirlpool in hopes of keeping other Iowa Maytag facilities open.

"He all but gave them the keys to the state," said Rep. Paul Bell, a Democrat from Newton.



Why? Because they still couldn't make money:

It was (Maytag's) inability to keep up with the times, to renovate, to update, to keep up with the updated equipment," Bell said, noting that a Whirlpool plant in Ohio could churn out five machines in the time it took Newton to make one.


I saw comments on one blog saying that the closing showed the wisdom of Senator Harkin and Rep. Boswell's attempt to block the deal via antitrust law. This, of course, is nonsense. The most that the politicians would have accomplished is to destroy millions of dollars of Maytag shareholder value by blocking the sale to the high bidder. Politicians couldn't have made the plant five times more efficient. The inefficiency - not the Whirlpool purchase - doomed the plant.

Bribes and ethanol pipe dreams won't build Iowa's economy. A low-rate, simple tax system won't do it by itself, but it is a necessary first step. Unfortunately, nobody running for governor seems interested in that.

2 comments:

Ed Abbey said...

Actually, I think it was the union who doomed Maytag. Several years ago when Maytag was bleeding money, the union pushed through a better benefits package even when executives showed them how much the union was costing them compared to other companies. The union persisted and won. Now they have reaped what they have sown.

Joe said...

I'm sure the union didn't help. Of course, somebody signed that agreement with the union. If the management had held out, maybe strikes would have destroyed the company sooner.

It's not easy running a big company in a world market. A decision that makes sense in 1976 may have been fatal 30 years later.