Win cycle for a Maytag town

Herrin, Ill., plant raises output, squeezes costs, but threats linger

By Michael Oneal
ChicagoTribune staff reporter
June 20, 2004

Herrin, Ill. -- Thumbtacked to a cork bulletin board on the second floor of the Maytag washing machine plant here, rows of charts and graphs hang like Tarot cards waiting to reveal the future. Chuck Parke, the plant's 40-year-old manager, studies the welter of fever lines and bar graphs every month, and every month they tell him where he stands with the higher-ups. One chart shows how many man-hours it takes to spit out a washer or dryer. Others track the plant's defect rate and how many injuries it doles out each month to its workers.

For Parke and his 1,100 employees, the past three years have boiled down to one imperative: keeping those numbers moving in the right direction.

"It's like a college football coach," Parke said of the pressures facing manufacturers. "If you don't get enough wins, you aren't going to be there."

When it comes to saving jobs in this country, battlefield managers like Parke may be America's last line of defense. With besieged manufacturers jettisoning workers and factories like sandbags from a hot air balloon, inspiring employees to run plants more efficiently can spell the difference between prosperity and disaster for places like Downstate Herrin.

While strikes and plant closures have battered Maytag elsewhere, Parke and the International Association of Machinists and Aerospace Workers have spun the kind of manufacturing success story you don't often hear these days. Combining old-fashioned know-how with team-oriented Japanese manufacturing techniques, they have kept Maytag Herrin--the largest private employer in southern Illinois--aloft.

But with labor running scared from the hard truths of globalization, the constant threat of outsourcing and plant closings could easily throw a wrench into the delicate workings of this relationship, especially since Parke will leave to manage a bigger plant in Tennessee on Tuesday.

"We've already been squeezed and squeezed and squeezed," said Steve Jones, head of the machinists union in southern Illinois. "And they're probably going to squeeze us again."

Operations specialists like Janice Klein, of the MIT Sloan School of Management, say opportunities abound for U.S. manufacturers to slim down and save jobs using Japanese techniques. But even in a good plant, long-term stresses associated with outsourcing and job security can be corrosive.

Jackie Jarvis, who switched to a lower paying job when her old position was sent to Mexico, knows what Klein means.

"Am I bitter?" she said. "No. I'm just depressed."

For reminders of how tough it's gotten, Jarvis and the others need not look far.

In 2002, when the numbers soured at Maytag's refrigerator plant in Galesburg, Ill., 300 miles north, the company laid plans to close the 1,600-worker factory and move production to Reynosa, Mexico, and Amana, Iowa.

Then on June 10, workers walked out of the company's hometown plant in Newton, Iowa, after labor and management couldn't come to terms over how to split the soaring cost of health care. On Friday the two sides agreed to resume negotiations. In an interview, Maytag Chairman Ralph Hake said he has no plans to shut any other U.S. plants as long as they continue to make their numbers, and he thinks they can.

"But let's be frank," he added, "I'd do it again if I had to."

For Parke, preventing such a fate turned into a crusade after he arrived from North Carolina in 2001. There, he had managed a set of furniture plants battling low-cost imports from Asia.

The Maytag plant he inherited had stood at the corner of 12th Street and Lyerla Drive since 1946, when a local businessman man named O.W. Lyerla went to Chicago to convince the Norge division of Borg Warner Inc. to build in Herrin.

It has been through four owners since then (old-timers still call it the Norge plant), but labor peace and high-quality work have generally been a constant.

Just up the road is the site where rampaging coal miners massacred 19 replacement workers in 1922, which was one of the most notorious outbreaks of labor unrest in the nation's history. But workers and management have mostly gotten along at the washer plant.

"I take my job very seriously," said Jarvis, 54. "We're very proud of our work."

Competition from Asia, Mexico

When Parke arrived, global competition was just gaining steam. An array of low-cost Asian competitors like Samsung and Daewoo in Korea and Haier Group in China had arrived to challenge the incumbents: Whirlpool, General Electric, Maytag and Electrolux.

Whirlpool Corp. and General Electric Co. were quick to outsource parts of their production. But Maytag dragged its heels until Hake, a former Whirlpool executive, took over in June 2001.

In three years, the 55-year-old executive has laid plans to cut thousands of blue- and white-collar jobs. He has shipped work to a company plant in Mexico and contracted with Samsung and Daewoo to build appliances and parts that might otherwise have gone to U.S. plants.

Hake's view is that because appliances cost so much to ship overseas, "many, many jobs will survive" in this country. His strategy is not to compete on price but by launching better, more innovative products.

Nevertheless, Hake said, Maytag has no choice but to cut costs dramatically.

"If we don't make these kinds of changes," he insisted, "we put our economic future in doubt."

In Herrin, Parke's immediate challenge was to overcome the conventional view that the Maytag plant was making about as many machines as it could. Boosting production seemed to require fresh investment that Maytag wasn't willing to make.

For workers that meant trouble. Herrin needed to cut costs and jobs to remain competitive. But without new investment, those idled workers would have nowhere to go.

Collaborative effort

The only answer was a gamble: If management and employees could work together to improve quality and make the plant more efficient, they could produce more machines per worker. That would free up space on the line for more production at a lower cost. If all worked as planned, more production would lead to new jobs.

The tool to get there was a team-oriented approach called Kaizen. Developed by Toyota to take on the U.S. automakers, the system demands that management and labor work closely to identify and fix things like bottlenecks on the line or processes that hinder quality.

The exercise often ends up eliminating jobs for the greater good, which can quickly create conflict. But that can be overcome if existing jobs get easier and increased production creates more of them.

"Everyone involved has to believe they're better off or you don't get buy-in," said William Lovejoy, an operations expert at the University of Michigan Business School.

The Herrin plant was already steeped in Kaizen when Parke arrived. But it wasn't getting the payoff.

"We were counting the number of Kaizen events rather than the number of dollars saved," Parke said. So the new manager focused on bigger fish.

One project involved an injection-molding line Herrin uses to make plastic parts. Parke said a Kaizen team was able to speed up the cycle time on line enough that it had extra capacity. That allowed the company to bring back production of parts that were being manufactured for Maytag by another firm. The move saved about $200,000 a year because it was cheaper to produce the parts in-house. And because it kept the line running full-time, it kept workers busy.

The idea behind Kaizen is to chip away at costs using workers' brainpower and experience.

Kaizen teams have found safer ways to put washing machines in crates and have revitalized the "hydroexpander," an old machine that uses extreme water pressure to bend sheets of metal into dryer drums.

A series of five projects just completed squeezed $1 million out of the washer line by doing things like finding a cheaper cover for a motor and standardizing screws for certain parts.

"The American worker is an ingenious asset to the organization," Parke said. "You gotta give them a chance to use those talents and make a run at it."

Kaizen as practiced in Herrin is no panacea. Hourly workers still complain, sometimes loudly, that they aren't listened to enough. And they often wonder what's really in it for them.

But one reason Parke is effective, workers say, is that he has tried to level with them about the plant's future.

He has improved communications by instituting quarterly meetings to share key information about performance and goals. When he walks the floor, which is often, he's accessible.

Danny Burks, a 55-year-old assembly worker, remembers calling Parke over one time to show him an old wash tank that was in his way. He'd filed a requisition to have it moved weeks earlier but nothing had happened. Parke not only listened but did something about it.

"By God, within the hour the sucker was moved," Burks said.

Capacity up, defects down

Herrin's success under Parke has been striking. The plant's capacity has jumped by 50 percent without major spending. Defects are down more than 70 percent, and productivity--output per hour worked--has jumped 10 percent a year.

Despite the new efficiencies, Herrin employs about the same number of workers. That's because the consumer-spending boom over the last few years has kept production humming.

More important, Hake rewarded Herrin by giving it the company's newest product: a $1,200 machine called the Neptune Drying Center that combines a regular dryer with a special cabinet that works like a dry cleaner. To tool up for the Neptune, Maytag has pumped $32 million into the plant and, despite a heavy dose of automation, the new lines have created more than 200 new jobs.

But there's a catch.

Herrin's new efficiency hasn't come entirely from Kaizen events. Over the past few years, Maytag has also decided to send some subassembly work to Mexico. Transmissions are made there, as are wiring assemblies. The moves have eliminated close to 275 positions, most of them once held by senior employees making top wages at the plant.

Jim Martin, a 15-year company veteran, was one of them. For years, Martin worked in the machine shop that supported the transmission line. Now he's been reassigned to the dryer-drum machine.

Martin's pay dropped from $16.25 an hour to $13.72 -- or more than $5,000 a year. Worse, at 59, he's working the line. Hundreds of times a day he lifts an 18-pound steel sheet and feeds it into the machine. Then he moves it on and picks up another one.

"I'm thankful that I've got a job," Martin said. "But I'm too old to be working the hydro."

Another problem is that because sales of the new drying center have been slow (many think it is significantly overpriced), the plant had to idle a second shift that was added to boost production.

Uncertainty lies ahead

Jones, of the machinists union, said all of this has begun to erode the trust labor puts in management.

Ever since the Galesburg announcement, he said, workers live in fear that the same thing will happen in Herrin if they don't give in to everything management asks.

Next year, Herrin's labor contract will come up and Jones is bracing for a fight, most likely over health-care costs.

"If you're an organized shop with Maytag right now, they're putting you against the wall," he said.

Jones, who is only 26, has known he wanted to help workers defend their rights since he was 16. That's when his father, a local leader of the United Mine Workers, took him along as he walked the lines of the epic strike against Peabody Coal. Today, mining jobs are so scarce that Jones' dad spends his time negotiating government subsidies that help non-union coal companies mine the fields of southern Illinois.

"That's the reality of where we're at today," Jones said. "It's a scary time, especially for manufacturing."

Parke understands the angst on the factory floor and he regrets having to leave for Tennessee at such a crucial time. But given the environment these days, he considers the plant's continued good health a major victory for all involved.

"Other than my family," he said, "I don't think I've been so proud of anything in my life."

Keeping the momentum going, however, will require heavy lifting and commitment from both sides, not just labor.

"The key to the whole thing is you can't perform at the level that you're currently performing at, or even at some incrementally better level," Parke said. "You gotta take major risks and quantum leaps to make this thing work."

Operations expert Lovejoy said more companies could learn a thing or two from that sort of enthusiasm.

"If we're going to save manufacturing in this country, we have to be more creative," he said. "There's a solution on the table, but it's hard work."