Rockwood Gets What Whirlpool Forgets

A little over a year ago we told you how Whirlpool was laying off thousands of people at various U.S. factories just to rehire them back at factories in Mexico.  By traditional accounting methods that makes sense... the direct hourly labor cost goes down.  Reality is obviously different.

So let me get this straight... tens of thousands of years of manufacturing knowledge are being disposed of in Evansville and Fort Smith, huge hiring and training costs in Clyde, Mason, and Amana to bring workers up to a few weeks of manufacturing knowledge, it's "too expensive to retool" the Evansville plant but easy to swallow a hundred million bucks of severance charges (not to mention what the taxpayers shoulder).  A few bucks an hour savings in Mexico is worth a much longer multinational supply chain that requires more oversight, longer transportation of thousands of heavy objects a day, far more training expenditure to handle a foreign language in an area notorious for extremely high turnover, and the resulting quality problems from such a lack of long-term manufacturing knowledge.  That is some wacky accounting.

Wacky indeed.  But leave it to much smaller companies, companies not beholdened to high-priced MBA's fluent in traditional accounting spreadsheets, to understand reality.  Companies like Rockwood Manufacturing in Pennsylvania.

[Rockwood owner William] Gurzenda said there is “an incredible amount of human capital” invested in the company’s work force.  “They have the knowledge, skill and dedication to serve our customers and it would not be easily duplicated upon moving to a new location,” he said.

And he's talking about a handful of employees, not thousands.  Hats off to Mr. Gurzenda for realizing what most of the Fortune-50 doesn't: there is value in them there brains.

Comments

[Matthieu]

So true... It would be interesting to get a follow-up in a few months to get a sense of the outcome of such different policies.