Magazine

Online Extra: Sucking the Life Out of Hoover


Melissa Knight, 28, has been a single mother for the last three-and-a-half years. Now, she's unemployed, too. She was laid off from Maytag's (MYG) Hoover floor-care factory in North Canton, Ohio, in June. She had been cut loose for several weeks in 2003 and again in 2004, but both times she got recalled as inventories were worked off.

Knight might be back at the plant in late August, as Hoover adds a second shift to one of its production lines. But she doesn't know if the job will last the year. "I'm afraid to get my hopes up," she says.

Over the last six years, Knight was a "Jill of all trades" at the factory. She drove a forklift, worked on the assembly line, and built electric motors and seals -- "whatever they needed." This was her second factory job.

"WISH IT WAS ME." Previously, she had worked at a nonunion metals-casting shop nearby. That job paid only $7.50 an hour. At Hoover she was making more than $15 an hour. Plus, she got benefits that she thought were wonderful - among the best offered in north central Ohio -- even after she and other hourly co-workers had their wages frozen and began paying health-care premiums and expenses under a concessionary labor pact in late 2003.

Knight and her daughter, Madison, live in a house she rents from an aunt who still works for Hoover. Her home is literally two houses away from the factory, so Knight is reminded constantly about what she has lost. "I watch the people walk in everyday and wish it was me," she says. "It's sad."

MADE IN CHINA. Why did Knight lose her job? Maytag has been getting killed by competitors who make their vacuum cleaners in China and have been able to underprice Hoover models by incredible margins.

You can get a Chinese-made upright vacuum cleaner for well under $100 at Wal-Mart (WMT), Target (TGT), or Sears (SHLD). Hoovers generally started at upward of $200. Not surprisingly, Hoover has lost market share, though it still was No. 1 in upright cleaners in 2004.

Maytag's response was to get concessions from the plant's union, the International Brotherhood of Electrical Workers, and to trim its workforce in North Canton, where Hoover began in 1908. Then it started shifting production itself, outsourcing the work to its own maquiladora in Mexico, as well as outside shops in Asia, including China.

MORE LAYOFFS? With 320 workers dismissed so far in 2005, the headcount is now under 900, according to the union - a far cry from the 2,200 employed five years ago.

And more folks could be out of work soon. Today, the factory primarily makes steam vacuums, which still warrant higher prices. But cheap imports are beginning to steal market share from Hoover in this line as well.

Management told the union in July the company will transfer more work to its border factories in Juarez, Mexico, and El Paso, Tex., in early 2006. The union figures that will mean 150 more layoffs.

WHAT'S AHEAD? Local 1985 President James A. Repace worries that the plant could be shut down entirely in 2008 when the current contract runs out. One reason: Maytag says despite employee concessions and white-collar layoffs, it's the second-highest-cost plant in the company, because of its relatively well-paid and senior workforce.

Ironically, Hoover began notifying laid-off workers in mid-August that it'll rehire some of them as it ups production of its steam-vacs. But no one knows if this is only to build up inventories so retailers don't get shorted because of the transition to Hoover's maquiladora or an about-face in corporate strategy. Maytag declines to comment on its plans.

Another unknown is what Maytag's new owner will do with the entire Hoover subsidiary. Whirlpool (WHR) on Aug. 10 sweetened its takeover bid for Maytag to $2.7 billion, or $21 a share, to ace out Ripplewood Holdings, which earlier offered $2.1 billion.

GETTING BY. But Whirlpool may not save Hoover, either. The Benton Harbor (Mich.) company jettisoned its own floor-care business years ago. Some former Hoover employees have found new work, mostly in the service sector. But even those jobs aren't plentiful. Ohio's unemployment rate, at 6.1% in June, was the sixth worst in the U.S.

For now, Knight is getting by on unemployment compensation, which comes to just half of her old pay. Because she can now be home with her daughter, she no longer has to pay for day care, so the cut in income doesn't seem that deep. She also gets a pretty good deal on rent since her aunt owns the house. And Knight had just finished paying off her 2000 Ford Focus before she got laid off.

Still, she has cut back on expenses. "I minimize, and I watch what I spend," she says. "I make sure my daughter's got clothes on her back and food on the table. That's about it. I can't live on unemployment forever."

"I LOVE FACTORY WORK." She also looks for new work, but had no prospects until Maytag started recalling workers. Her old employer in the casting business has said she could return -- at $7.50 an hour. That would be no better than subsisting on unemployment, she points out.

She would like to get another well-paying job in manufacturing. "I love factory work," she says. "I'm not a desk person. I like people, but I don't like to have to deal with them all them time."

In her view, plenty of parties share responsibility for her plight. She blames Maytag management for not running a better company and President George Bush and others in Washington for allowing or even encouraging a flood of cheap products from China and elsewhere.

She would like the government to put duties on these goods, making them priced more like products made in the U.S. And she blames her fellow citizens. "The American economy wants cheaper things, and we want everything today," she says. Knight doesn't spare herself when it comes to doling out blame. She admits: "I'm guilty of this, too." By Michael Arndt in Chicago


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