3:21pm

Mon April 8, 2013
Business

One Manufacturing Giant Creates Winners And Losers

Originally published on Mon April 8, 2013 7:59 pm

The United States lost close to 6 million manufacturing jobs between 2000 and 2009. Now, slowly, some of those jobs are coming back. Over the past three years, the U.S. economy has gained a half-million manufacturing jobs.

But even with the manufacturing recovery, there are both winners and losers — and sometimes they're created by the same company.

Take the case of the Swedish manufacturer Electrolux. A century ago, it got its start in vacuum cleaners, and now it makes a wide range of appliances. It's the world's second-largest appliance manufacturer behind Whirlpool, owns the Frigidaire brand and makes Kenmore products as well.

In 2004, Electrolux began a major restructuring, shuffling jobs from high-cost to low-cost areas, from Sweden to Hungary, from England to Poland and from Denmark to Thailand. This summer, Electrolux will begin moving jobs from a town outside Montreal to Memphis, Tenn., where it will begin production of ovens and stoves in a brand-new, high-tech plant.

With the move, Electrolux will go from paying a base union wage of close to $19 an hour in Canada to roughly one-third less in Memphis. The company is expected to eventually hire about 1,200 people at the Memphis location.

'Back To The Future'

Jack Truong, president and CEO of Electrolux Major Appliances North America, won't speculate on how long the company might stay in Memphis. The company has not committed to a minimum amount of time, but Truong says Electrolux is committed to working with Memphis to build success so that it can stay there for the long term.

Memphis Mayor A C Wharton is delighted about the jobs. "We're actually going back to the future here. This used to be a heavy manufacturing city," he says.

Wharton and other officials are trying to reclaim some of the city's past, and they're using huge sums of money to do it. In 2011, as part of an investigative series, the Memphis newspaper the Commercial Appeal calculated that the city of Memphis, Shelby County and the state of Tennessee together had come up with subsidies of $188 million to land Electrolux.

Mark Herbison, senior vice president for economic development at the Greater Memphis Chamber, says the group learned in negotiations that there was an offer of more than $100 million on the table from Mexico to attract Electrolux. To compete, he says, Memphis would have to be in the same ballpark.

The state government came forward with a large offer, Herbison says, motivated in part by the fact that Tennessee already has an Electrolux plant outside Nashville. If the project went to Mexico, Tennessee officials feared that plant, making ovens and stoves, might go, too.

A Bitter Loss In Iowa

And it wasn't just a theory. Communities elsewhere in the U.S. had already lost Electrolux jobs to Mexico. One of them was Webster City, Iowa, population 8,000. In 2011, Electrolux closed a washer-dryer plant there and sent the jobs to Juarez.

The plant once employed 2,000 Iowans, including Jerry Kloberdanz and seven of his siblings.

"The wages were better than anyplace else within 30 to 40 miles. The benefits were very good. I was making $22.17 [an hour] when they closed the plant," he says.

Kloberdanz worked at the plant for 32 years. He thought it was a death sentence when he lost his job, he says, and was worried that he wouldn't be able to support his family.

Now, with federal retraining funds, Kloberdanz is studying geographic information systems at a community college. He's optimistic he will find work in the field.

Kloberdanz has a house full of Electrolux products — but wouldn't consider buying another one today. "I'm not going to be putting money in their pocket," he says. "They took it all out of mine."

Kloberdanz believes the company will go wherever wages are lowest and incentives are highest. A couple of years ago, that place was Mexico. Today, it may be Memphis. But for those looking for work at the new plant, Kloberdanz has a piece of advice:

"Don't plan on retiring there. Because I don't think they'll stay there either."

Truong, the company's North American president, says Electrolux is committed to working with Memphis to build success, so that it can stay there for the long term.

"I think the message for all of us is that it's very, very important that we always continue to innovate and come out with new products — products the consumers continue to want, at the right quality and cost," Truong says. "As we continue to grow and gain consumers, that's when business will thrive and employees will thrive."

In Memphis, Hopes For Job Security

Back in Memphis, there's no trace of the cynicism you hear in Iowa — only enthusiasm for a company that's brought the promise of jobs.

In a classroom at Southwest Tennessee Community College, Memphis is helping Electrolux find and train workers. Job seekers spend four weeks in "industrial readiness training," working on hard skills like math and mechanics, and soft skills like communication.

Electrolux doesn't pay a penny for this class. Tuition is largely covered by taxpayers. The company does commit to sitting in on the class and interviewing every student, most of whom are unemployed or underemployed.

Charlene Dearing, 56, quit her job at a dentist's office after her husband was diagnosed with Alzheimer's. He went to a nursing home, she lost their home to foreclosure, and today she gets by cleaning houses. She believes a job at Electrolux would bring a complete turnaround to her life.

"It's long term. It has excellent benefits. You can grow, and I plan to retire [here] if this is for me," she says, echoing the sentiments of many in the room.

John Churchill, head of workforce development at Southwest Tennessee Community College, notes that most of the students in this class would not normally get an interview with a company like Electrolux. Few in Memphis have the manufacturing experience the company typically looks for, he says. Memphis is a logistics hub, dominated by FedEx, and many of the jobs, like those in warehouse and distribution, are lower-paying and require fewer skills.

And so, Wharton, the mayor, sees great value in the jobs Electrolux is bringing to his city. He refuses to worry too much about what would happen if Electrolux were to leave.

"You will be better off even if that does happen," he says. "You will have elevated the skill sets of your employees, their standard of living. How long should that last? Oh, I hope for eternity. But even if it does not, it's well worth it."

Whatever the future in Memphis, it's clear that in today's global economy, it's companies that have the power to shop around, while communities are left to compete with each other — all hoping they'll be winners, not losers.

Copyright 2013 NPR. To see more, visit http://www.npr.org/.

Transcript

MELISSA BLOCK, HOST:

From NPR News, this is ALL THINGS CONSIDERED. I'm Melissa Block.

AUDIE CORNISH, HOST:

And I'm Audie Cornish.

The United States lost close to six million manufacturing jobs in the decade from 2000 to 2009. Now those jobs are coming back slowly and President Obama wants to keep up the momentum.

PRESIDENT BARACK OBAMA: I believe in manufacturing.

(APPLAUSE)

OBAMA: I think it makes our country stronger.

(APPLAUSE)

CORNISH: Still, even in a recovery there are winners and losers, and the same company can create both. NPR's Andres Hsu has this story about a global manufacturer that's viewed as either a hero or a villain, depending on where you live.

ANDREA HSU, BYLINE: The company is the Swedish appliance maker Electrolux. It made its name in vacuum cleaners and today makes all sorts of appliances. It owns Frigidaire and also makes Kenmore products. Electrolux is the second largest appliance manufacturer in the world, behind Whirlpool.

JACK TRUONG: This is the latest innovation that we are bringing to the marketplace.

HSU: Jack Truong is CEO of Electrolux Major Appliances, North America. He shows off the Frigidaire Gallery Symmetry Oven. It's two ovens...

TRUONG: Large enough to cook two 28-pound turkeys at the same time.

HSU: Or Truong says, steaks in one, cookies in the other.

Soon, this and other premium ovens and stoves will be made in a brand new factory in Memphis. Two years ago, this spot was a field of soybeans. Today, it's Electrolux's most high tech and energy efficient plant in North America.

(SOUNDBITE OF MACHINERY)

HSU: Project director Adam Roberts takes me past the stamping presses to custom-built lines of robots that will bend and weld steel into oven cavities.

ADAM ROBERTS: This is what comes off this high tech line. This is the inside of an oven.

HSU: The plan is to eventually employ about 1,200 workers, mostly in the assembly area.

ROBERTS: In the very near future this will be full of people.

HSU: Electrolux will shutdown production at a plant outside Montreal. Twelve hundred people there will lose their jobs. The company will go from paying more than $18 an hour to roughly a third less in this non-union plant. The move is part of a cost-cutting that Electrolux began in 2004. Jobs were shuffled from Sweden to Hungary, from England to Poland, from Denmark to Thailand.

Memphis has come out a winner in this restructuring. And Memphis Mayor A.C. Wharton is delighted.

MAYOR A.C. WHARTON: We're actually going back to the future here. This used to be a heavy manufacturing city.

HSU: Now, Mayor Wharton and other officials are trying to reclaim some of that past, and they're using huge sums of money to do it. In 2011, the newspaper, the Commercial Appeal, calculated that to land Electrolux, Memphis, Shelby County and the state of Tennessee together came up with subsidies of close to $190 million.

Mark Herbison is with the Greater Memphis Chamber. He says it's the largest incentive package he's ever been involved with.

MARK HERBISON: We understood from the beginning that there was a very large hundred-plus-million dollar offer on the table from Mexico, and that we were going to have to be in the ballpark in order to be able to compete for this one.

HSU: He says, the state stepped up, motivated in part by the fact that Tennessee already had an Electrolux plant outside Nashville, also making ovens and stoves. The fear was, if the project went to Mexico, that plant might go, too. And it wasn't just a theory. Communities elsewhere in the U.S. had already lost Electrolux jobs to Mexico.

I went to visit one of them, Webster City, Iowa, population 8,000.

(SOUNDBITE OF RAIN)

HSU: After a late winter storm, Main Street is quiet. Some shops have yet to open for the day, others are closed for good. The movie theater marquee is blank - it shut down last month.

(SOUNDBITE OF RINGING PHONE)

HSU: Inside TrueValue hardware, Pam Fitzgibbon takes a moment away from the cash register. She glances out the back door at the shuttered plant where she assembled washers and dryers for Electrolux.

PAM FITZGIBBON: Twenty-six years, yup. Hard to drive by it.

HSU: And soon she won't have to. Webster City has just issued a demolition permit.

FITZGIBBON: It's an old factory. It was in bad shape, they just gutted it. It's, I'm sure, a home for raccoons and possums and all kinds of things right now.

HSU: The plant once employed more than 2,000 Iowans. Production shut down two years ago and Webster City became yet another place in America subjected to upheaval, as the main employer in town sought efficiency and profit elsewhere.

Jerry Kloberdanz spent 32 years at the plant. His first job was throwing boxes on washers and dryers. His last job was in maintenance. Seven of his nine siblings had also worked there.

JERRY KLOBERDANZ: I actually thought that it was a death sentence for me when I lost my job, 'cause I didn't figure I'd ever get another job again. And the wages were better than any place else probably within 30-40 miles. The benefits were very good. I was making 22.17 when they closed the plant.

HSU: Not enough to get rich, he says, but enough to do things like buy a new car, put braces on the kids' teeth, and send them to college. Now with federal retraining funds, he's enrolled in community college studying geographic information systems. He plans on staying put in Webster City in a home filled with reminders of the past.

KLOBERDANZ: The stove is Kenmore but made by Electrolux. And the refrigerator is an Electrolux - Frigidaire. I have an Electrolux freezer. I've got an Electrolux washer and dryer.

HSU: But ask Jerry Kloberdanz if he'd buy an Electrolux product today, and he almost laughs.

KLOBERDANZ: No. No, I would not buy an Electrolux product. No, I wouldn't.

(LAUGHTER)

KLOBERDANZ: No, I'm not going to be putting money in their pocket. They took it all out of mine.

HSU: He believes the company will go wherever wages are lowest and incentives are highest. A couple years ago, that place was Mexico. Today, it may be Memphis. But for those looking for work at the new plant, Kloberdanz has this advice...

KLOBERDANZ: Don't plan on retiring there, 'cause I don't think they'll stay there, either.

HSU: In fact, Electrolux has given Memphis no guarantee of how long it'll stay.

TRUONG: I can't really speculate on the time, you know, (unintelligible) it's about forever or anything like that.

HSU: But North America CEO Jack Truong says Electrolux is committed to working with Memphis to build success so that it can be there for the long term.

TRUONG: I think the message for all of us is that it's very, very important that we always continue to innovate and come out with new products, products that consumers continue to want, at the right quality and cost. As we continue to grow and gain new consumers, that's when business will thrive and employees will thrive.

HSU: Back in Memphis, there is no trace of the cynicism I heard in Iowa, only enthusiasm for a company that's brought the promise of jobs.

TAYLOR TAGG: Tracy?

TRACY: Here.

TAGG: There's Tracy. Ricky?

RICKY: Here.

HSU: In a classroom at Southwest Tennessee Community College, Memphis is following true on its promise to help Electrolux find and train workers. Job seekers spend four weeks working on hard skills, such as math and mechanics, and soft skills like communication.

TAGG: If I said, great job working the line today, you've really pushed out those double ovens like nobody's business. What does it give you?

UNIDENTIFIED WOMAN: Well, I'm very receptive.

TAGG: Right, it was sincere. It was...

HSU: Electrolux doesn't pay a penny for this class. Tuition is largely covered by taxpayers. The company does commit to sitting in and interviewing every student. And that gives students hope where they've had little.

James Bernard lost his job at a railroad

JAMES BERNARD: It's been very frustrating. You go to a lot of hiring sessions and it's 3,000-something people there. So it's very difficult to, you know, to get the few jobs that have been available in Memphis.

CHARLENE DEARING: It's been hard. I've been out of the workforce almost a year. My husband became ill.

HSU: With Alzheimer's. Charlene Dearing quit her job to care for him. She lost her home to foreclosure and now gets by cleaning houses. She's come to class wearing a suit. I want it that bad, she says.

DEARING: It's long term. It has excellent benefits. You can grow. And I plan to retire if this is for me.

HSU: Mayor A.C. Wharton shares her optimism. He refuses to worry too much about what would happen if Electrolux were to leave.

WHARTON: You will be better off even if that does happen, because you will have elevated the skill sets of your employees, their standard of living. They will be better off than we are now. How long should that last? Oh, I hope for eternity. But even if it does not, it's well worth it.

HSU: Whatever the future in Memphis and in Webster City, one thing is certain: In the global economy, companies have the power to shop around, while communities are left to compete with each other, all hoping they'll be winners, not losers.

Andrea Hsu, NPR News. Transcript provided by NPR, Copyright NPR.