Sunday, September 20, 2009

Whirlpool Corporation - Another Failure to Compete

Advertisement Transcript:

This country may be in danger
It could be losing something we can’t afford to lose.

Once in this country when a man produced a product it was the best he could possibly make

He stood behind it
With pride

He lived a simple idea
Do it right or don’t do it at all

Nobody told him that
No government agency dictated it

And it built a standard of living
For the world to aim at

Now that idea is threatened
By shod, the second rate

To some it means quick riches

To some it means quick death
Of the standards we have built

Some are fighting this threat

Whirlpool Corporation believes in one simple idea
To continue to design, build and service home appliances
The right way, with pride, so you can live with them comfortably for years
Or they will not build them at all

If we can’t keep this simple idea alive
Then indeed we are the endangered species.


Countless times as a child, I heard the message from both my parents, “do it right or don’t do it at all.” I was raised on that philosophy just as I suspect were many Americans. I agree with the message in the above advertisement even if I lack that particular level of testosterone. Yes, Americans worked hard, produced the best products possible and built a standard of living for the balance of the world to strive to achieve. Whirlpool Corporation, like myself perceived a threat to this country from “the second rate.”

Today, the difference between Whirlpool Corporation and myself is that I maintain my ideals not unlike the many thousands of American manufacturers we list on our site.

Once upon a time, Whirlpool Corporation had a fine reputation due to their innovation & dedication to quality. Today their concern is cost cutting - not innovation, quality or keeping alive a “simple idea.”

Whirlpool announced that they will close their plant in Evansville, Indiana and move production of their top mount refrigerators to Mexico next year demonstrating again that Whirlpool now embraces what it once recognized as a threat.

From their August 28, 2009 press conference:

"While Evansville has most certainly had the best quality, it has not been competitive in terms of cost and asset utilization for some time. That combined with a decrease in demand for top mount refrigerators, aggressive new global competitors and the continued effects of a recessionary economy, are requiring Whirlpool, like many companies, to take unprecedented steps to help ensure that it remains competitive."

Please note that Whirlpool acknowledges that their Evansville plant has the best quality and they are willing to sacrifice that quality for other concerns. Whirlpool also states that this recessionary economy contributed to their decision to move production. That recessionary economy is the very same one that the thousands of manufacturers we list on our site navigate and persevere yet proves too difficult for Whirlpool. I’m smiling now thinking my own company must be better managed than Whirlpool Corporation.

Two other things struck me in that paragraph from their press conference. The use of the word “requiring” implies that this decision was the result of having no other choice, or that some external entity is forcing them to close this plant. If those who manage Whirlpool Corporation lack an understanding of corporate responsibility, they likely also lack an understanding of personal responsibility.

There is also the phrase “like many companies,” as though no one need take this decision personally or think ill of Whirlpool since they are just one of many companies moving production and are actually part of a trend - m’kay?

I can tell you about a trend - in lean manufacturing, something many companies are pursuing and utilizing enabling them to better compete in the marketplace. By comparison, Whirlpool established committees to explore such techniques. Those committees meet regularly and discuss what other companies are actually busy implementing.

Okay, so Whirlpool Corporation is not exactly trend setting or cutting edge. They needed to cut costs so the first thing, or the second thing they considered, after establishing committees was to move production to a low wage country. Or perhaps it wasn’t the first thing they considered.

Perhaps they reviewed their entire operation and business model. Perhaps they reviewed their levels of management and compensation packages. Perhaps they studied each and every one of their expenses and made all prudent cuts eliminating all waste. Perhaps they engaged with their workforce and implemented the ideas and suggestions from the very people who daily have their hands on product. Perhaps they are truly operating as effectively and efficiently as possible - honest to goodness running lean & mean and is still reduced to moving production to Mexico.

Which scenario strikes you as more likely?

The Whirlpool press conference also noted "unprecedented steps" which confuses me since Whirlpool had already closed some plants in the US and moved production to Mexico. There doesn’t seem to be anything unprecedented about this type of production move, it’s just another step that indicates Whirlpool’s inability to innovate and compete. I would though categorize as “unprecedented steps” the occasion when Whirlpool moved some production from Mexico back to the US because of a high failure rate in those particular foreign made appliances.

The average person may believe that highly paid/compensated individuals, well educated and with experience, such as those who run large corporations, certainly must know what they are doing.

Pause for a moment and consider our bankers…

Couldn’t you make better decisions? Give it a try. Come sit in the big chair in the large office on the top floor. You need to cut costs for your company. You can continue to manufacture in the US with your skilled experienced workforce and cut other costs. Trust me on this - if you are blessed with a capable, highly trained & experienced workforce, you have one heck of an asset! Then, if you manage a company well, you can make some real money.

Or, you can move production to northern Mexico, incurring some freight costs and hassles at the border. You leave behind the most productive workers in the world, American workers trading for low wage workers. That cuts wage costs but you’ll have higher, ongoing training costs due to the high attrition rate in the Mexican workforce. You’ll trade the infrastructure in the US for the infrastructure in Mexico. You’ll operate in a country with drug cartels with armed thugs that number as large as the Mexican military. Consider also that those drug cartels sometimes extort “protection” money from US companies.

You might also consider the growing desire for US made goods by American consumers and their growing dissatisfaction with imported products. Now consider that my own company is operating in this recessionary economy and I made cuts in our costs, none of which had any impact whatsoever on product or workers. My approach was to cut fat, not meat.

What would be your approach?

That’s what I thought. See, you would do well seated in the big chair in the office on the top floor.

When companies can so easily and readily abandon manufacturing here for manufacturing elsewhere, there really isn’t a framework in place to compel companies to focus on themselves and their products so they can improve, advance & innovate, is there? They can simply trot off to another country with their same poor practices, inefficiencies, behaviors & imprudent management decisions. They can readily preserve the “fat” in their companies while sacrificing the “meat.” The consumer is not well served in such an environment.

As a consumer, would you purchase the refrigerator that was built by Americans with decades of experience or would you buy the refrigerator built by a person with perhaps months of experience if they lasted that long on the job?

Whirlpool is moving production to Mexico supposedly so they can better compete with new global competitors, correct? So consumers can expect a decrease in the price of those top mount refrigerators that will be made in Mexico, correct? Now if the price remains stable, we’ll know that Whirlpool simply enlarged their profit margin, won’t we? And they only had to sacrifice quality and over 1,000 American jobs to accomplish that feat.

We’ve all been to this rodeo, haven’t we?

Whirlpool Corporation has many divisions and still manufactures some brands in the US such as KitchenAid products. I have no confidence in their dedication to US manufacturing so their product lines sit on our watch list. Personally, I would still purchase those US made brands, placing greater faith in American workers than I do in the management personnel of Whirlpool Corporation.

It’s pitiful and sad to me to see a once great company falter and fail with their best days behind them.

Sadly, Whirlpool Corporation is unable to keep a simple idea alive.

“Do it right or don’t do it at all,” as my parents would say…

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Mary - Webperson for