Hard times in the Heartland
Layoffs hit the Whirlpool appliance plant in Iowa, but the economic pain doesn't end at the factory gates.
AMANA COLONIES, Iowa (CNNMoney.com) -- The turmoil on Wall Street has come to the Pit Stop, a bar in the blue-collar town of Marengo, Iowa.
That's where Al Powell spent a recent Sunday afternoon thinking about his future after he and his wife were laid off from their assembly line jobs at the nearby Whirlpool factory.
"There's a lot of pain going through that place right now," said Powell, sipping a $2 Bud while the juke box played "Chicken Train" by the Ozark Mountain Daredevils. "A ton of people got hurt this year."
Powell and his wife, who have two children, join 440 of the factory's 2,000 workers in losing their jobs. Whirlpool blames the cuts on the international economic downturn, which has dried up demand for its high-end refrigerators.
Powell and his wife were making about $15 an hour, which covered the mortgage payments on their $60,000 three-bedroom house. But they just started working at Whirlpool last year and the layoffs were carried out in terms of seniority, from the bottom-up.
Powell, who has worked at other factories nearby, said the plant sometimes hired back laid-off workers, but he wasn't sure what was in store for him.
"I don't know whether I'm going back in three months or six months. They don't tell ya," he said.
In the past month, there's been a lot of talk - on the floor of Congress in Washington and in kitchens and at office water coolers throughout the country - about how the global financial crisis is hurting Main Street. Powell and others in this community have heard all of it. But more to the point: They are living it.
The sprawling Whirlpool factory emerges from a land of corn fields, soy beans, silos and 19th century farmhouses. The number of workers at the plant, post-layoff, is roughly equal to the 1,500 residents who live in the Amana Colonies, a collection of seven villages established in the 1850s by a religious commune of German farmers. (The Amana appliance company, which was named for the area, was bought by Whirlpool in 2006.)
Many of the plant workers come from small towns within 10 miles, like Marengo and Walford, or from the larger city of Cedar Rapids, about 20 miles away. Workers have grown accustomed to the cyclical layoffs and periodic unemployment, but this time it feels different: Not only is the number of job cuts larger than usual, but it occurs amid a time of deep financial uncertainty.
Whirlpool, a Michigan-based corporation with about 73,000 workers worldwide, announced the job cuts on Oct. 9, and said they would occur between Oct. 13 and 20.
"I think what makes these layoffs significant in many people's minds is the backdrop in which they have occurred," said Whirlpool spokesman Jeff Noel. "It is, in fact, a reflection of uncertainty in the marketplace. Consumers won't be buying the kind of appliances they need and deserve in order for us to maximize production."
The most recent data from the Federal Reserve shows that production at the nation's factories fell by 2.8% in September - the worst month-to-month drop in 34 years.
The cheapest refrigerator produced at the Whirlpool plant in Amana retails for $1,500. Such pricey appliances can be a hard sell these days. Retail sales dropped 1.2% in September, the worst month-to-month decline in three years, according to the Commerce Department. Appliance sales in North America fell 17% in September compared with last year, according to Longbow Research analyst David MacGregor.
"It's in our best interest to operate that plant at full capacity to make products and get them out the door," said Noel, noting that medical benefits for laid-off workers will be extended to the end of the year. "[But] like a lot of companies, we have to play the cards that have been dealt to us in the global economy."
A worker leaving the factory at the end of his second shift put it succinctly: "The markets are soft and people aren't buying."
The economy in the Amana area depends on three sectors: manufacturing, which is dominated by Whirlpool; tourism, centered on the historic homes and farms constructed in the 1800s by the agricultural commune; and farming, specifically for feed corn and soy beans.
Farming and tourism draw their income from sources other than manufacturing, but they are still dependent on the future of the Whirlpool plant.
John Peterson, chief executive of the Amana Society, is hoping there's an ace in the deck for Whirlpool. The Society is a home-grown corporation of 17 local companies - including utilities, farmers and small local businesses - that was formed in 1932, when the German commune transformed itself into a shareholder-based company.
"Whirlpool is an important member of our community for a number of reasons," said Peterson, whose organization supplies power to the plant. "Since they're 82% of our electricity load, we're very concerned for their health."
Kristie Wetjen, executive director of the Amana Colonies Convention and Visitors Bureau, which organizes tourism in the area, said, "If the plant was to close down, it would have a huge impact on the community, financially and emotionally."
Tourism and farming were hit hard by summer floods that inundated 2,000 acres of the Amana Society's farmland, ruining crops and making the area temporarily inaccessible to tourists. The farmers' hardships are offset somewhat by high prices for corn and soy, said Wetjen, while the tourism industry rebounded in the fall, with its most lucrative Oktoberfest in more than 40 years, she said.
John Vought became the head of his 500-acre family farm more than 50 years ago, when his father was killed in a farming accident. He later married a descendant of the German farming community and raised four children, two of whom worked temporary stints at the Whirlpool plant.
On a recent afternoon, Vought harvested soy beans from behind the wheel of his combine. Like many farmers, Vought is land-rich but cash-poor. His house, located just a couple miles from the Whirlpool plant, is dwarfed by the farm machinery parked outside.
"I've been broke all my life," said the 70-year old farmer, who said he can't afford to retire.
Vought doesn't see his profession as an option for laid-off factory workers, because of the enormous overhead costs in agriculture.