Posted on 27-12-2002

Nightmare On Mainstreet, Whose Next?
By Steven Greenhouse

GALESBURG, Ill., USA (NYT, 26 Dec02) — Throughout the 90's, this prairie
town of 34,000 felt blessed because it managed to escape the scourge of
factory closings that hit Peoria and Decatur and and other heartland
communities.

But when Maytag announced this fall that it was closing the area's largest
factory, a refrigerator plant with 1,600 employees, the news hit Galesburg
like a bomb. Despite this city's gritty optimism, home prices are slipping,
shop owners are complaining about flat Christmas sales, and Maytag workers
do not know what to tell their children. "This reflects a lot of what's
going on in America, whether it's East Coast, West Coast or Middle West,"
said Galesburg's mayor, Robert Sheehan. "The economy is changing. People
say that's a part of life. When it hits elsewhere, people can just shrug
their shoulders and say life goes on. But when it hits your own area, well,
then it has a very different meaning. It's going to be tough."

What has sharpened the pain is that Maytag plans to replace the Galesburg
factory, where wages average $15.14 an hour, with a new refrigerator plant
in Reynosa, Mexico, with wages around $2 an hour. The company was stung by
the fierce anger of workers, Galesburg officials and Illinois lawmakers,
who thought concessions they had made since 1994 would be enough to keep
the plant here. Maytag explained that its rivals were moving operations to
countries with lower wages and that it had to do likewise if it was to
continue selling refrigerators at a competitive price.

Suddenly, Galesburg feels it has caught the infection that has hit so much
of industrial America: the exodus of factory jobs. With the nation losing
two million factory jobs in the past two years, manufacturing employment,
now 16.5 million, has sunk to its lowest level in 40 years. "This used to
be a strong factory town," said Robert Eichorn, who opened his jewelry shop
on Main Street 47 years ago. "But the factory base is evaporating not only
here, but all over the country. They're going to China, Mexico, you name it."

William Beer, president of Maytag's appliance division, said Maytag
executives were mindful of the human cost. "We deeply regret that we
couldn't identify a cost-effective solution that would allow us to continue
long-term production of refrigerators in Galesburg," Mr. Beer said. The
Maytag workers are fuming about the North American Free Trade Agreement,
about Maytag's embrace of low-cost labor south of the border and about
politicians who trumpet the benefits of free trade. "This is
heartbreaking," said Aaron Kemp, a Maytag worker who attaches door hinges.
"This is one of the most unpatriotic, most un-American things I can imagine
a company doing. They want Americans to buy their products, but they don't
want to put Americans to work making those products."

In many ways, Galesburg epitomizes America. Lincoln debated Douglas here.
Carl Sandburg was born in a tiny prairie home alongside the rail yards. As
a boy, Ronald Reagan lived at 1260 North Kellogg Street.

Even though Maytag's layoffs will not begin until next summer and the plant
will not be completely shut until 2004, the city's boosters are feeling a
pall this Christmas. Galesburg officials fear that once Maytag closes, the
city will lose 2,000 other jobs that depend on Maytag — in distribution,
auxiliary industries and retailing. "Obviously, it's going to be a more
somber Christmas than normal," Mr. Kemp said. "For the kids, we'll try to
do something normal, but all this puts people under a lot of stress."

Many Maytag employees have little idea what they will do next. Take John
and Stacy Ester. He has worked at the huge factory for 26 years, she for 8.
Her mother worked there for 31 years, a grandmother for 25 and a
grandfather for 30. "When we went to her family's house for Thanksgiving,
there literally wasn't a life in that room that wasn't touched by Maytag's
decision," Mr. Ester said. Ms. Ester said she might return to school to
become a medical technician. "I want to look for a career in a medical
department somewhere," she said. "That way they can't send my job
overseas." Despite their deep roots here, the Esters are thinking of
leaving because there are slim job prospects for John. "I can't believe we
might have to move," Ms. Ester said.

Maytag is providing job counseling, and federal money is available to
retrain workers who lose their jobs when factories move to other countries.
Mr. Beer, the appliance division president, said the decision to close the
52-year-old factory was part of Maytag's long-time competitive strategy.
"Maytag's plans are designed to produce refrigerators more economically and
therefore more profitably," he said. "What we did is conduct a study of
competitive business strategy, and we don't believe it's possible for the
production of side-by-side and top-mount refrigerators in Galesburg to
become competitively viable." Mr. Beer said competitors were already
building refrigerators in Mexico. "Labor is certainly lower there, no
question about that," he said, adding that most Maytag factories remained
in the United States.

The day that Maytag announced the closing here, Wall Street analysts
applauded and Maytag's stock jumped 6 percent. "In today's environment you
have to be focused on cost," said Efraim Levy, an appliance industry
analyst with Standard & Poor's, "and unfortunately there's a human price."

Maytag has long been respected as a solid, trustworthy company, but that
has not stopped workers in Galesburg from attacking it as bitterly as if it
were Enron. "It's not that Maytag can't still make money in the United
States, it's that they can't make enough money," said Dave Bevard, vice
president of the machinists' union local representing the Maytag workers.
"It's all about corporate greed."

Maytag executives have refused to answer questions about whether the
factory is unprofitable, convincing many in Galesburg that the plant is
indeed making money.

Galesburg's anger has been intensified by concessions the state, city and
union made to Maytag to persuade it to stay. Beginning in 1994, when Maytag
first threatened to leave, the state gave it $7.5 million in grants and
loans for training and improvements. Galesburg raised its sales tax by
one-quarter percent, raising nearly $3 million to assist Maytag. And in
contract negotiations last April, the union accepted concessions that
Maytag said it needed to remain competitive, like agreeing to more
mandatory overtime and a stricter policy on sick days. One local newspaper
captured the public's sentiment with the headline, "A City Betrayed." "I
feel everyone stepped up to the plate," said Doug Dennison, a Maytag worker
for 18 years. "The state, the county, the city, the union have all stepped
up to the plate. But Maytag has failed to step up to that plate."