Oct. 26 (Bloomberg) -- Coal miners lining up behind the Republican presidential nominee, Mitt Romney; auto workers praising President Barack Obama for saving the U.S. car industry. You don’t have to look far to see signs of Americans’ deep anxiety over deindustrialization, and of a profound nostalgia for a more toilsome past.
Yet a closer look at bygone days shows that the decline of U.S. industry isn’t only the result of unfair Chinese trade practices or the low wages of Asian workers.
Consider the case of a classic U.S. manufacturer, the washing-machine maker Maytag Co., and the current condition of its former company town: Newton, Iowa.
Mostly a memory today, Maytag evolved from small-town origins to become a major international corporation. Frederick L. Maytag, a farm boy born near Elgin, Illinois, moved with his parents in the late 1800s to Newton, a village of 2,500 people, 35 miles east of Des Moines. In 1892, Frederick joined with the inventor and entrepreneur George Parsons to market a “band cutter and self-feeder,” a threshing-machine accessory. This proved only a modest success, and by 1907, the duo turned to another field: the manufacture of washing machines.
Newton was already home to several makers of similar devices, including the One Minute Washer and the Automatic Electric Washer. Maytag and Parsons dubbed their machine -- essentially a wooden tub with a crank mechanism that dragged clothes against a corrugated surface -- the Pastime. Within a few years, the company, now known as Maytag Corp. after F.L. Maytag bought out Parsons, was producing a model that ran on a gasoline engine and another that was electric-powered. State fairs across the Midwest were a prime venue for exhibiting and market-testing the machines.
By the mid-1910s, Maytag had abandoned the field of farm implements. Its Maytag Multi-Motor, a washer that ran on gasoline, became a hot seller, and the company’s production more than doubled. The Multi-Motor’s popularity was partly due to the capacity of the engine -- while in operation -- to also serve as a power source for other appliances, such as butter churns and ice-cream freezers. Ads in the Saturday Evening Post showed a housewife reading a book while the Multi-Motor labored away, its flywheel propelling three household appliances simultaneously.
Although about 120 manufacturers were making washing machines at this time, four companies in Newton made more than one-third of them. By 1920, Maytag had the largest factory in Iowa, thousands of dealers and a backlog of orders. Early in that decade, it introduced an innovation that would become standard in modern machines: a bottom-of-the-tank agitator that used water alone, rather than any sort of corrugation, to do the cleaning.
Maytag’s workforce in Newton rose to more than 2,000, and it erected a new 600,000-square-foot factory. Newton was well on the way to becoming a one-company community. Chief Executive Officer Elmer Maytag joined with a Newton contractor to build hundreds of homes that they sold to employees. Mortgages, paid via payroll deduction, were offered by a savings bank where Elmer was an officer. A company gasoline station accepted scrip-like coupons that were also charged against workers’ pay. The Maytags funded a local YMCA and company workers were required to join and pay dues.
With several path-breaking machines to its credit, innovation had become a Maytag hallmark. Its growing reputation for quality would be even more significant to the company’s success.
During World War II, Maytag shifted all production away from washers, instead making parts for aircraft and armored vehicles. It returned to washer making after the conflict, and it faced a raft of new competitors, including General Electric Co., Westinghouse, General Motors Co.’s Frigidaire, and -- soon to emerge as Maytag’s primary competitor -- Whirlpool Corp.
Another challenge was the growing market power of big chains such as Sears, Roebuck & Co. and Montgomery Ward & Co. in a marketplace once dominated by small appliance stores. But Maytag held its own, opening a new plant in 1949. And in 1967, it began a series of popular television ads featuring the lonely Maytag repairman -- underemployed because of the company’s supposedly unbreakable products.
By the 1980s, Maytag had become No. 3 among U.S. appliance makers, behind Whirlpool and GE. But accomplishment goeth before a fall: A much heralded, mid-1990s innovation -- the pricey, energy- and water-saving Neptune washer -- developed a seemingly endless number of defects, from faulty seals and latches to failing circuit boards. A class action featuring more than 120,000 claims forced the company to pay out millions in claims and attorney fees. Moreover, competition from makers that employed foreign labor prompted Maytag to outsource production abroad, skimp on materials, trim new-product investment, and introduce a low-cost line of products that tended to degrade the brand.
The abandonment of quality echoed developments in auto making, where U.S. consumers turned to Japan and other countries to find more durable, superior products. “If you can find a better car, buy it,” said Lee Iacocca, the chief of Chrysler Corp. in the 1980s and previously the primary advocate of the unsafe-at-any-speed Ford Pinto. Millions of consumers took his advice -- and bought Toyotas.
By 2005, Maytag’s share price and market share had collapsed, and customer surveys put the company’s products in the appliance-field cellar. After a takeover battle, Whirlpool acquired Maytag in 2006. The new owner quickly announced it would be closing Maytag’s headquarters and two large factories in Newton, along with plants in Arkansas and Illinois.
The purchase left almost a fifth of Newton’s 16,000 residents without jobs. In 2009 and again this May, President Barack Obama visited the town, promoting two local wind-turbine manufacturers as the kind of outfits that can help spear an industrial comeback.
But a specter will continue to haunt Newton: that of the onetime quality leader whose name is emblazoned on such local landmarks as Maytag Park, the Fred Maytag Bowl band shell, and Hotel Maytag.
(Hardy Green is the author of “The Company Town: The Industrial Edens and Satanic Mills That Shaped the American Economy.” The opinions expressed are his own.)
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