Posted on 01/16/2004 7:28:51 AM PST by FourPeas
In the end, the price tag was too high: $27,000 per worker a year.
That is how much Electrolux workers in West Michigan would have had to give up to save their 2,700 jobs, records obtained by The Press show.
The company this morning announced it will close the 127-year-old plant and split its 1.5 million refrigerator production between Anderson, S.C., where wages are half as much, and Mexico, where wages are a tenth of Greenville's.
Electrolux AB executives today told workers the plant will close in 2005.
The mountain of money Electrolux says it can save proved far too steep for a task force from Greenville and the state to match. According to the documents, Mexico workers will be paid $1.57 an hour, compared to an average of $15 an hour in Greenville.
Gov. Jennifer Granholm called the announcement "heart-wrenching news" for the city and state. She said the United Auto Workers had offered $32.6 million a year in wage concessions -- the first time that figure was made public.
Still, that proved less than half of what the company said it needed from workers after state and local incentives were figured in.
"In the end, however, the company's financial demands were too great, and they turned down our strongest offers," Granholm said this morning. "While this is a painful blow to both the families of Greenville and the people of Michigan, it is not a knockout punch."
State officials will meet "to help Electrolux employees find new employment as quickly as possible," she said.
The dreaded news came to employees at 7:30 a.m., between the third and first shifts. The parking lot was jammed with cars as workers stayed in the parking lot and state police stood by.
"Unfortunately, we face significant competitive challenges in today's global economy, most notably that all of our major competitors have located or announced they soon will locate production facilities in Mexico and thus put us at a large cost disadvantage," said Keith McLoughlin, president and CEO of Electrolux Home Products North America.
"Given these competitive and economic realities, the combined impact of our own efforts plus proposals from the unions and community committee could not bridge the financial gap."
It means that by next year, 2,700 hourly and white collar employees will be out of work.
Economic incentives offered by Greenville and state officials added up to $121.2 million, spread out over 15 to 20 years. But Electrolux needed to save $81 million each year at this plant to change its mind; state and local tax breaks and incentives shave roughly $6.5 million annually from that total, according to company spokesman Tony Evans.
Details of the state and city's incentive plan -- which does not include worker concessions -- were obtained from the state Thursday by The Grand Rapids Press through a Freedom of Information Act request.
These are the major elements:
Up to $83 million over 20 years, or $4.15 million a year, for job retention tax credits through the Michigan Economic Growth Authority;
$31 million over 15 years, or $2.06 million per year, for a tax-free Renaissance Zone offered by the state and local governments, and forgiveness of the Single Business Tax;
Up to $2 million for public works to a new factory site, through a Michigan Community Development Block Grant;
$3.9 million over 15 years, or $260,000 a year, abating the state's 6-mill education tax;
$790,000 for 12 years, or $65,833 a year, in a 50 percent abatement of local property tax;
Up to $500,000, or $250 per employee, for workforce re-training assistance.
Electrolux workers this morning were starting to look to the future.
Gary Dwight, 43, of Ionia, said employees were resigned to the plant closing.
"I used to drive a truck, so I'm bumping up my CDL (commercial drivers license) because I figured they were going to fly," the three-year employee said.
He carpools with John Sturm, 27, also of Ionia, who already has three job offers, he said, including one that pays more than Electrolux.
"I'm going to be selling motorcycles in Ionia or Lansing," Sturm said. "I've got something to go to, but I feel bad for the older guys. What are they going to do? Some of them have spent their whole lives here."
The Swedish appliance maker announced it will build a new plant in Mexico, but did not say where. It has a 12-year-old vacuum sweeper parts plant in Juarez, and economic development officials say the company has toured the area in search of a new site.
Today's announcement took some by surprise when the company said it would split off production of the top-freezer models to its plant in Anderson, S.C., in the northwest corner of the state, two hours northeast of Atlanta.
Economic development experts like Birgit Klohs of the Grand Rapids-based The Right Place program said they are devastated by the Electrolux decision.
"I really don't know (where the package fell short)," she said. "We made a Herculean effort to put a package on the table.
"This is the best package I've ever had the privilege to put together and I've been doing this 27 years. I can tell you this: We don't have to look over shoulder and say we could have done something more, done something better."
Greenville City Manager George Bosanic said the task force will reorganize, with one arm taking on employee assistance and the other working on economic development.
"We have a lot to offer here in Greenville," he said. "Our pledge is to replace those jobs by the time those folks lose them." The decision ends long negotiations between the company and the United Auto Workers. Workers, who already had taken a wage freeze, worried that they could be asked to approve cuts in wages, health insurance and pensions. Layoffs were also expected if the company built a smaller but more modern plant in Greenville.
Electrolux will pay a price for moving. Just closing the Greenville factory carries a $154 million price tag for severance and shut-down.
Trucking refrigerators from Mexico back into the U.S. will cost an extra $26 million a year. And a new plant in the maquiladora zone along the Texas-Mexico border will cost $14 million.
Maquiladoras are factory sites for foreign companies in Mexico that tap abundant low-cost labor, low taxes, and little regulation. Hourly workers must be Mexican nationals who live on their side of the border. Supervisors and executives usually live on the Texas side and are paid U.S. wages.
A new plant in Greenville would have cost $50 million on a $500,000 site. With the company heading to Mexico, it is likely to lease a plant site and move its refrigerator assembly lines into a shell of a factory.
Details of severance plans have not been made public, although workers whose jobs move to Mexico or Canada are eligible for extensive tuition and retraining money.
Electrolux will join a crowd of competitors already in Mexico. Whirlpool, GE, Maytag, the Chinese company LG, the Korean manufacturer Daewoo, and the Japanese company Samsung all have plants there.
Those factories have lower labor costs, and competitors are forcing down the price of refrigerators as a result. Since 2001, wholesale prices have dropped 6 percent, while the cost of employee labor and benefits has risen 18 percent in those two years in the U.S., according to Electrolux.
The Swedish company already owns a Eureka vacuum cleaner plant in Ciudad Juarez, Mexico.
When Mexican President Vincente Fox made a state visit to Sweden last fall, he spoke with Electrolux chief executive officer Hans Straberg, telling him of the high unemployment in the hard-hit border towns and factories. The region has lost 100,000 jobs to China in the past three years.The Greenville plant produces 15 percent of Electrolux sales in consumer appliances in the U.S. Other products in that category include dishwashers, string trimmers and lawn mowers.Frigidaires are the primary product line at the plant that manufactures both the side-by-side and top-freezer models. Other brands made there include Kenmore, White-Westinghouse, Gibson, and Kelvinator.
The closing is another blow to West Michigan from the North American Free Trade Agreement, or NAFTA. The region has lost 30,000 manufacturing jobs since 2000.
Staff writer Matt VandeBunte contributed to this report.
I remember when the Maquiladoras were going to solve all kinds of border problems and make workers in both the United States and Mexico prosperous. Wonder who, specifically, has actually gotten the greatest benefit of this program.
Do you really see this happening? Years ago when Mr. FourPeas worked for a contractor in Mexico there was a huge flap over Ford wanting to pay the Mexicans "too much" in the estimation of the government. The government actually set the maximun Ford could pay.
(Or, it doesn't).
Let me see. All these companies are locating jobs to Mexico while Mexico is trying to locate Mexicans here? Perhaps the solution is to replay union organizing efforts from the 1920s in Mexico. When Mexicans stop working for 25% of the minimum American wage, jobs will stop being relocated to Mexico.
The elephant in the living room is the (well-hidden, for now) cost of government. If that were competitive, we would have nothing to fear from free trade.
Just don't expect government to allow any honest scrutiny.
The american consumer.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.