Monday, October 15, 2012

Who buys after the last job is outsourced?

Our current home renovation project put us back in the market for major appliances. That brought to mind a 2010 piece, providing my view of Maytag, a once successful manufacturer that lost independence and ended up as one more brand name of Whirlpool Corporation. The following was first published March 3, 2010:

When did someone last spin a story about washing machines and appliance manufacturers?  Sounds riveting, eh? Yet, within it, we find failures that repeat because common lessons go unlearned.

In decades of keeping house, my family has purchased more than a few major appliances. The best were the earliest ones. Sturdily made, they cost little to maintain and kept going and going, despite demands of a home that often included three generations and raised three very active children.

Our modern era acquisitions included a Whirlpool refrigerator, Maytag dishwasher and Maytag laundry units. We expected long service. These were not low-end units, complex top-of-the-line models nor were they from secondary manufacturers.

Within three years, plastic drawers in the refrigerator had turned brittle and shattered. The Maytag dishwasher lasted five years, done in by faulty controls and a fried pump. Ka-ching. The dryer needed two costly service calls. Ka-ching, ka-ching. At least the washing machine functioned without trouble.

Until, that is, last week (2010). Sudden high pitched screams and squeals arose in the laundry room, followed by a thump, silence and that peculiar smell of burning electrical components. The washer needed attention. My son the plumber refused to participate in a self-repair, so we called an appliance mechanic. He attended, examined the patient and pronounced it dead upon his arrival. Irretrievably dead. Permanently dead. And, its replacement was not in the budget.

I remember that dear old granny had one electric washing machine in her lifetime and she lived to be 100. Wringer washers didn't look as sleek as today's models and were a tiny bit more dangerous. Wet clothing was fed through rollers to press out excess water. With an instant of inattention, the operator's hand, forearm and shoulder could be fed into the rollers too. Grandma used it regularly, even after her broken arm, and the machine was still going when she was not.

The washing machine lying in state in our utility room is a Maytag, six years out of a box and now headed for the dump. Anyone remember Jesse White, the loneliest man in town? Because of the claimed reliability of Maytag products, their repairman never got any calls. Starting in 1967, White continued this role for 22 years and the campaign carried on with other actors. The advertising, while amusing, was successful because it focused on a matter of fact. Maytag was indeed regarded by consumers as a reliable brand and commanded a  higher price than many competing models. That reputation was founded on actual user experience, not advertising puffery.

We got six years of light use - only two of us now - and the washer is headed for recycling. Unacceptable. I have computer equipment older than that. Wondering if our experience was unusual, I began to read about the Maytag Corporation. What I discovered is a story that applies, I fear, broadly to North American consumer product manufacturers.

Maytag, founded in 1893, manufactured laundry machines in the U.S.A. throughout its main history.  Being smaller than full line appliance makers, Maytag concentrated on constructing premium equipment of enduring quality. Its corporate address in Iowa, was "One Dependability Square."

By the sixties, Maytag sold rebranded products manufactured by others and the company added dishwashers and disposers to its built products. Later, the company made growth its priority. It acquired Hardwick Stove, Magic Chef, Hoover and Amana, moves that gave the now large enterprise a wide line of products. In the last part of the 20th century, it began to focus on design innovation instead of durable construction and started labelling cheaply built Amana units under the once premium Maytag label.

Its new line of high efficiency Neptune machines was persistently problematic. Reflecting proven European style but modified for American preferences, the front loading machines performed badly. Resulting class action lawsuits and recalls harmed the company's standing.

Prescription for final failure

By the turn of the century, plagued with unsatisfactory results, Maytag replaced undisciplined growth with aggressive cost cutting.  The company reduced component quality and began overseas outsourcing. Product research and customer support were curtailed, warranties shortened. News of declining quality spread rapidly because, in the Internet age, unhappy consumers do not remain quiet. Mounting losses, legal problems, meagre customer satisfaction and historically low market share spelled the end.

Maytag had survived for generations as quality and price leader in a narrow but profitable market.They built machines that pleased customers and brand loyalty transferred from generation to generation. Then growth and change became the company mantra. Quality slumped and dependability disappeared. The response to continuing deficiency was cost cutting and further declines in quality. They kept pruning until corporate bone pickers arrived to sweep up the remains. The name Maytag survives now on rebranded Whirlpool machines.

Following Frederick Maytag's model, the company was an industry leader in financial performance and customer satisfaction. That continued for decades but management lost sight of why the company was successful. After 112 years, the remnants were worth little and the Maytag example is not unusual.

Modern executives are captured by the tyranny of quarterly reports. Short-termism leads to sacrificing long term strategies for immediate profit results. A company loses loyalty to itself, forgets its purpose and its expertise. Arrogance, carelessness, greed and other factors contribute.

A business I intend to watch is Red Wing Shoe Co., a Minnesota based company that began selling high quality work boots and shoes in 1905. Until recent years, they proudly offered only made in the USA footwear. It was premium priced but premium quality product. Now, much of what they sell is made in China and while it still carries high prices, product quality is reduced. Red Wing customers have formed lobby groups asking the company to return to domestic production. Has Red Wing forgotten its purpose and its expertise? Time will tell.

Another company putting itself at risk is Air Canada. This week, the company announced it is laying off 1,000 technical staff, mostly aircraft mechanics and maintenance workers. The company already has image problems. Will reluctant customers fly on an aircraft that is overhauled in China, Costa Rica, India or some other part of the world that does not match North America for safety record and stringent regulatory oversight? I know one traveller who is already planning a ticket change.

Years ago, after crushing lay-offs when Boeing shed more than 60,000 workers, during the ensuing "Boeing Bust," a Sea-Tac billboard displayed, "Will the last person leaving Seattle please turn out the lights."

Could we ask today's outsourcers something similar? "When you've outsourced the final job, who in this country will buy your goods?"

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10 comments:

  1. Fabulous observation Norman, and so very true. I honestly don't think they've thought of what will happen when everyone is earning what the politicians think we're worth...minimum wage or less. Who will buy? Who will keep the wheels of consumerism turning?

    I suspect a great number of our politicians already own homes in other countries...and that when the feces hits the oscillation blades in great amounts...you'll see them gone. Laughing all the way to the bank, with nary a thought for the generations they've rendered to a life of slavery - before they're even born!

    ReplyDelete
  2. "When you've outsourced the final job, who in this country will buy your goods?"

    That, is the question. I can't figure out how the ruling class figures we can exist as consumers of their "brands", when we can't afford food? I won't be buying any coke products anytime soon, I think I'll go buy veggie seeds instead!

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  3. Just a quick note regarding your excellent Posting regarding outsourcing.
    We have used the Sears Catalogue for ordering goods for about 30 years.
    As we live on a Gulf Island, it has always been very convenient.
    In 2009, Sears outsourced their CANADIAN Call Centers to the Philippines.
    We no longer spend our hard earned Canadian dollars at Sears............

    Cheers
    Gary L.

    ReplyDelete
  4. Another excellent article Norm.
    We too have a Maytag Neptune washing machine sitting in the basement awaiting a trip to the dump. Parts are far too expensive and with added tax and shipping, make int p[rohibitive to repair.

    We will not be buying another expensive Maytag washer again.

    Seems big business just doesn't care any more eh !

    Thanks

    ReplyDelete
  5. In the automotive world, it will be interesting to watch Toyota — and Japanese auto makers in general — as they respond to the significant improvements shown by Kia and Hyundai. (Remember the original Hyundai Pony? Blech!)

    My 1995 Camry wagon is approaching 400,000 km and is running well on mostly original parts. Even the exhaust system is original, as are the shocks. I know I'm tempting fate but all the belts and hoses are also original. Yes, even the timing belt! Excellent components, right from the get-go.

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  6. I bought five top of the line appliances from Sears. Before two years, the stove and the washer broke down. My son being an Electronics Engineer, took the panel covering off the instrument panel. It said right on the mother board...The schematics were wrong. He said it was toast, he couldn't solder a repair. When he called Sears and told them about the schematics, they as much told him to go to hell. A new mother board, was over three hundred dollars. My son said, a new mother board would likely be from the same outfit, the board with wrong schematics was from. The next week the washer went. Five months later the fridge broke down. Within three years, the only appliances that were still working was the dishwasher and the clothes dryer. Within five years, only the dishwasher was still running. I really learned a lesson, from my son. Buy appliances with the least electronic components that you can find and, the least expensive appliances you can get.

    I had shopped at Sears most of my life. They used to be very good to deal with. My mother before me, had shopped out of the Sears order books since 1920 and did so, until the day she passed away.

    ReplyDelete
  7. I have a second rate Whirlpool story to share...

    I live in an apartment building where the appliances were included in the sale price. Within two months of moving in, the dryer was not working. After dozens of calls to Whirlpool's useless (and probably outsourced) 1-800 number and one inept service technician who had a hissy fit and refused to move the dryer, I finally took matters into my own hands and called Whirlpool Canada's head office in Calgary and spoke to one of the higher ups in the company. After explaining my situation and saying I was willing to go to the media to tell my story, I had a certified Whirlpool technician in my apartment who fixed the faulty circuit board. Problem solved, at least in my case.

    Fast forward to five years, and I'm getting countless reports of failing Whirlpool appliances. Each one I've given my contact from the head office, but now they're told the appliance is outside the one year warranty period and there's nothing they care to do about it to make things right. I told them to call back and say they'll go to the media or sue...Whirlpool says go ahead. Pretty sad when a company doesn't care about its brand or reputation anymore.

    Moral of the story...buyer beware. The brand names that have built a reputation over the past century have mostly sold out to the highest bidders, and the rest are mostly empty offshore shells of their former self.

    ReplyDelete
  8. that be what happens when the lawyers and the beancounters take over the companies!!!!!!
    the only way to win is to own the company stocks to afford the money to buy their crap over and over again!

    ReplyDelete
  9. It takes the same amount (more or less) of the Earth's resources to build a quality piece of goods as it does to produce a piece of sh&#. Access to raw materials should be restricted only to those bound to make a quality product....not to mention make good use of our dwindling energy resources. The energy required to recycle poorly made junk needs to be recovered from the original manufacturer, or at least the retailer promoting it. I saw a full page ad in our local paper "Hot Water Tank Guaranteed 8 Years!!". What an insult trying to make us believe a measly 8 years is a technological breakthrough. If it doesn't last 18 years don't waste gas unloading it from the boat.

    ReplyDelete
    Replies
    1. That's it, right there. An IRON-CLAD LAW that prohibits WASTE in all forms of manufacturing. When QUALITY is sacrificed for the sake of instant profits, life quality goes down!

      Those money-worshipping morons will rue the day they favours PROFITS over QUALITY! It won't be soon enough, though. (sighs).

      Delete

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