Maytag Corp. plans a $65 million expansion at its Amana refrigeration plant that would add 200 jobs.
The Newton-based appliance maker said Thursday that it chose Iowa to launch a refrigerator product over foreign suppliers and its plants in Mexico and elsewhere in the United States.
Maytag declined to provide details about the new product, citing competitive concerns.
Michael Blouin, director of the Iowa Department Economic Development, said Thursday that landing the project in Iowa is a victory against global outsourcing. “Companies have to look at the numbers . . . and the numbers work,” he said.
The expansion comes at a cost: New workers will receive an average of $12.33 an hour, about $3 less than the average pay the plant’s 360 workers earn.
Concern about wages prompted the state to cap the amount of tax incentives Maytag could recoup at $1.5 million, instead of the $5 million allowed. One of the 200 new jobs met the state’s definition of a high-quality job.
Blouin said union members at the Amana plant – represented by the International Association of Machinists and Aerospace Workers – agreed to lower wages for new workers. Representatives of Local 1526 could not be reached for comment.
Peter Orazem, an economist at Iowa State University, said two-tiered wage structures are becoming more common. Iowa employers such as Deere & Co. have used them for years.
Orazem said the wage structure helps lower the risk associated with introducing a new product.
“If a product is successful, it gives unions a bargaining chip down the road” to merge old and new wage scales, he said.
Pat Teed, who leads workers at Maytag’s Newton plant, said two-tiered wage structures “should cause the whole nation concern.”
But, he said, Maytag is trying hard to keep jobs in the United States.
“There aren’t many U.S. appliance makers left,” said Teed, president of United Auto Workers Local 997. “The appliance industry is in a tough spot.”
Price pressures from foreign competitors have pushed many manufacturers to produce appliances overseas.
Maytag is not immune. It closed its Galesburg, Ill., refrigerator plant last year and moved part of the operations to a new plant in Reynosa, Mexico. It also has an assembly plant in Juarez, Mexico.
The company also is trying to cut costs and is in the midst of a restructuring plan to slash 1,100 salaried employees from operations in Newton, North Canton, Ohio, and elsewhere. Maytag expects to eventually save $150 million annually.
When deciding where to build a product, Maytag weighs cost, delivery, production and safety, spokeswoman Karen Lynn said.
“The product will help improve Maytag’s competitiveness in the refrigerator market,” said Lynn, who declined to specify when product development would begin in Amana.
Lynn said Amana workers’ willingness to ramp up to seven-day operation of the plant, giving the company “delivery flexibility,” played a significant role in the company’s decision. Reporter Donnelle Eller can be reached at (515) 284-8457 or deller@dmreg.com
Michael Blouin, director of the Iowa Department of Economic Development, said he expects about 500 companies will be interested in locating or expanding in Iowa by year-end.
That’s lightyears ahead of the 50-some companies that expressed interest 18 months ago, when lawmakers created the $503 million Grow Iowa Values Fund, he said. Already, more than 400 companies are in talks with the state.
After a court ruling that dismantled the program last sum- mer, lawmakers are contemplating replacing the economic development program. There are several proposals, including Gov. Tom Vilsack’s plan to spend up to $800 million on business and community development projects.
Iowa should be able to keep its momentum going with legislative action, Blouin said Thursday. The state has about $15 million left for business incentives, he said. “We won’t run out of money unless a couple of big projects come up,” he said.
From The Des Moines Register