SUNDAY EDITION | Electrolux has history of moving work to lower- - WDRB 41 Louisville News

SUNDAY EDITION | Electrolux has history of moving work to lower-wage factories

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By Mike Petrig, WDRB By Mike Petrig, WDRB
LOUISVILLE, Ky. (WDRB) -- At Electrolux's brand-new, $190 million oven and range plant in Memphis, Tenn., rank-and-file jobs start at less than $12 an hour and average $14.65 – pay rates the city's newspaper noted are not exactly “the solid middle-class wages that lifted factory workers a generation ago.”

Wages look to be even lower at Electrolux's plant in Springfield, Tenn., where a temp agency is advertising $9-per-hour “temp to hire” assembly line jobs that have the “potential to go full time” in three to four months at $10.25 an hour.

Those wages aren't on par with General Electric's Appliance Park in Louisville, where line workers start at $15.51 per hour and skilled veterans can earn $30. And rather than starting as temps, they're fulltime GE employees with benefits negotiated by the park's union from Day 1 on the job.

Electrolux, based in Stockholm, Sweden, is set to become the new employer of some 6,000 GE workers in Louisville – including about 3,800 hourly employees at Appliance Park.

The $3.3 billion purchase of GE's Louisville-based appliance division will put 11 North American plants under Electrolux's control sometime next year, but the company says it's too early to discuss whether production and employment will be consolidated among those factories.

“It is too soon to determine job impact and we won't be able to determine that until we have regulatory approval and are operating as one company,” said Eloise Hale, spokeswoman at Electrolux's North American headquarters in Charlotte, N.C.

There's also no indication that Electrolux expects to pay Louisville workers similar rates as workers at its non-union plants in the South. The company has a union plant in Minnesota where workers apparently earn more comparable wages to Appliance Park, though neither Electrolux nor the Minnesota union would provide figures.

“Our compensation and total benefits are competitive in the markets in which we operate. There are many roles in each of our plants and the pay rates are based on the complexity of the role,” Hale said in a prepared statement.

Yet, a review of Electrolux's recent history in North America shows several examples of the company shifting manufacturing from higher-wage, union plants in the Midwest and Canada to Southern states where unions are weak, and to Mexico, where workers earn a small fraction compared with their American counterparts.

Electrolux executives have promised investors they'll wring $300 million in annual cost savings from the combined GE-Electrolux operation. They have not said exactly how they plan to achieve those savings.

To be sure, Electrolux leaders have also lavished praise on the GE Appliance plants since the deal was announced Sept. 8, saying they are buying the business to invest in it and to grow it.

One big selling point for Swedish company was the $1 billion GE has pumped into manufacturing, research and development at its plants since about 2009. Louisville Appliance Park received about $800 million of that spending.

“They have been through a major reinvestment program over the last three years, which is paying off now,” Tomas Eliasson, Electrolux's chief financial officer, told investment analysts on Sept. 8. “They are well invested -- good facilities, good product(s), good platforms -- and that is one of the reasons why we are interested in them.”

Even if the company decides to make cuts, they could just as easily come from Electrolux's current plants -- in Minnesota, Mexico, North Carolina, South Carolina and Tennessee – than from GE Appliance's plants. Besides Appliance Park, the GE sites are in Indiana, Georgia, Tennessee and Alabama.

For now, it's a waiting game. GE Appliances won't even become part of Electrolux until mid-2015 – assuming the deal doesn't run into regulatory barriers. And Electrolux executives have said it will take three or four years to reach the cost savings they envision.

Amid the uncertainty, the surest way to retain jobs at Appliance Park is to show how workers make up for their wages by churning out high-quality products, Louisville economic development officials said.

“What we have in Louisville is a high-quality and highly productive workforce; we have lower turnover. We have higher skills, and we have many generations of manufacturing expertise that some of these other markets don't have,” said Mary Ellen Wiederwohl, head of Louisville Mayor Greg Fischer's economic development effort, Louisville Forward.

“It's going to be up to us to prove to (Electrolux) that this is the place to make it,” said Eric Sims, president of IUE-CWA Local 761, the union representing about 3,800 hourly park workers. “It'll be up to us, to have them want to stay.”

Closing factories in favor of cheaper labor

In the last decade, however, Electrolux's moves suggest the cost of labor has been a driving factor for the company in the highly competitive, low-margin household appliance business.

In the early 2000s, under former CEO Hans Straberg, Electrolux undertook an aggressive “restructuring” program to move manufacturing work to lower-cost areas. In North America, the company closed three Midwest factories and one in Canada in favor of Mexico and its plants in Tennessee, North Carolina and South Carolina, according to news reports.

- In 2004, Electrolux said it would close a Greenville, Mich. refrigerator plant employing about 2,700. Most of the jobs were headed to the company's new factory in Juarez, Mexico and some to its plant in Anderson, S.C., according to the Associated Press.

Keith McLoughlin, who at the time ran Electrolux's North American division and is now Electrolux CEO, said the company simply couldn't continue to operate “at a large cost disadvantage” with competitors who were making appliances in Mexico. Efforts by the unions representing plant workers and Michigan officials to save the jobs “could not bridge the financial gap.”

- In 2009, Electrolux said it would close a washer and dryer plant employing more than 600 in Webster City, Iowa – as well as a smaller plant about 60 miles away in Jefferson, Iowa. The move also resulted in the death of the 60-year-old local branch of the United Auto Workers union that had represented plant workers who made about $16.50 an hour, the AP reported.

Again, the jobs went to Mexico.

One consolation for Webster City was that Electrolux retained about 80 jobs at a research and development facility. But, as the Des Moines Register reported, those jobs in engineering, product design and testing did not last long. Electrolux moved them last year to Charlotte, where Electrolux had consolidated its North American headquarters from Augusta, Ga. and a handful of other locations in 2010.

- In 2010, Electrolux decided to shut down a unionized kitchen appliance plant in Quebec, Canada. This time, the winner would not be Mexico but Memphis, Tenn.

As the Memphis Commercial Appeal reported, state and local officials in Tennessee put up an eye-popping $188 million in public money to land the $190 million plant and 1,200 jobs from Electrolux – more than $150,000 in subsidies per job.

Construction began in 2011 and the plant opened in January. Electrolux told local officials the jobs would pay an average of $14.65 per hour plus benefits, the newspaper reported earlier this year.

Hale, the Electrolux spokeswoman, declined to disclose wages at any of the company's plants other than to say that $14.65 will be the average pay for hourly workers in Memphis “by the end of our five-year ramp-up period.”

She added that the $14.65 figure “includes average wages plus overtime and shift premium.”

If overtime is factored in, that would suggest the base average wage at the plant is actually lower than $14.65. Hale said she could not “break out the number any further.”

In 2011 interview with the Wall Street Journal, former Electrolux finance executive Robbert Kaufman said cost was not the only factor playing into Electrolux's decisions to close some U.S. plants.

“If we look at the Memphis facility, for example, we also have an existing facility in Springfield, Tenn. Again, you look at cost, you look at distribution, and Memphis is at a very nice central point in the country for getting your products out,” he said.

The same could be said for Louisville, of course.

Electrolux's remaining union plant is in St. Cloud, Minn., where the company makes refrigerators.

Eugene Simon, president of the International Association of Machinists Local Lodge 623 in St. Cloud, declined to speak with WDRB about wages at the plant or the union's relationship with Electrolux.

In 2008, union jobs at the plant started at $12.54 per hour and topped out at $24.28 for maintenance electricians, according to a copy of the plant's 2006-2009 collective bargaining agreement, which was filed as evidence as part of lawsuit in Minnesota federal court. The union declined to provide a copy of its current contract.

On the GE side, only two of the five appliance plants are unionized: Appliance Park and the Bloomington, Ind., refrigerator factory, where workers are represented by the International Brotherhood of Electrical Workers.

According to a Q&A document distributed to Appliance Park workers after the sale was announced, Electrolux will “recognize and bargain in good faith” with any unions representing GE Appliance workers.

That's the company's obligation under federal law, which generally prohibits businesses from disregarding existing collective bargaining units, said Scott Miller, a Louisville attorney who represents IUE-CWA Local 761.

The collective bargaining agreement for Appliance Park is part of a national contract covering dozens of GE plants. The four-year agreement expires June 21, 2015.

IUE-CWA President Jim Clark, one of the union leaders who negotiate the national agreement, declined to answer questions about what the sale means for the Louisville workforce. It's “early in the process,” he wrote in an email.

The employee Q&A also says Electrolux will provide Appliance Park's union workers with “pay and benefits that are comparable in the aggregate for a year” – presumably, maintaining the status quo while the company negotiates with the union.

“All Electrolux employees are free to exercise their legal rights to form, join, or refrain from joining organizations,” Hale said in a prepared statement. “We have a strong and positive history with our employees and know the benefit of direct collaboration and communication with one another.”

Electrolux now looking to grow

With the GE acquisition, Electrolux is now looking to bulk up, gain market share in the United States and take on its biggest rival Whirlpool, said Dinesh Kithany, a United Kingdom-based home appliance analyst with research firm IHS.

Kithany said it's possible that Electrolux might find an under-performing plant to close after absorbing GE, but short of another devastating economic recession, he doesn't see any “blanket” reduction in manufacturing work.

The U.S. market should continue growing as the economy recovers, more new homes are built and consumers replace old appliances, he said.

Electrolux executives have stressed that GE Appliance complements – rather than duplicates – their business.

McLoughlin, the Electrolux CEO, told analysts this month that GE brands fit in neatly between Electrolux's mass-market brand Frigidaire and its high-end Electrolux brand. (Electrolux products also appear under the names such as AEG, Eureka and Westinghouse. It will get to use the GE name under a licensing agreement that will last 40 years.)

And whereas Electrolux is good at selling directly to consumers looking to replace appliances, GE excels in sales to homebuilders, he said. That means the appliances made between GE and Electrolux factories are not necessarily interchangeable – some are built-in models, others freestanding, Kithany noted.

Appliance Park's future looked a lot grimmer when GE was looking to sell the appliance division in 2008 – before it spent hundreds of millions of dollars on the factory, said James Reddish, vice president of economic and workforce development for Greater Louisville Inc., the metro chamber of commerce.

That investment more than doubled the park's hourly workforce to the current 3,800 and brought production of hybrid-electric water heaters, bottom-freezer refrigerators, dishwashers and washers and dryers to Louisville.

As part of the turnaround, GE also beefed up research and development operations at Appliance Park, putting engineers closer to the shop floor, Reddish said.

“They are performing and they have built something at Appliance Park which is unique, within the Electrolux system,” he said. “Electrolux does not have an equivalent to Appliance Park.”

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