Rebound of Iowa community offers hope for Janesville
For decades, the biggest employer in town supported a middle-class lifestyle for thousands of workers and their families.
Then, the unthinkable: The employer shuttered its operation and left workers on the short side of a generous “30 and out” contract that paid full pensions and benefits.
Other local businesses suffered as well.
Economic gloom cast a shadow over town.
But in the 18 months since Whirlpool slammed the lid on “Washer Town USA,” Newton has done what Janesville and other communities dream about.
The central Iowa city of 16,000 has added nearly 1,000 jobs, many of them in the emerging alternative fuel industry. Many jobs involve workers from Maytag, a company and appliance brand that became synonymous with Newton after starting 113 years earlier as a farm implement manufacturer.
After a short courtship, Whirlpool bought Maytag and announced in May 2006 that it would move the Newton operations to other states. The consolidation put 1,800 workers out of work by October 2007.
“When that announcement was made, we got lots of letters to the editor saying that Newton would be a ghost town,” recalled Andy Karr, editor at the Newton Daily News.
Thanks to a regional approach to economic development and a healthy dose of good timing, Newton has survived.
Wind beneath its wings
TPI Composites and Trinity Structural Towers now call Newton home. The two manufacturers of wind energy components came to Newton with their eyes on a portion of Maytag’s 2.6 million-square-foot plant on the north side of town.
The space didn’t work for TPI, which makes massive blades for wind turbines. With $6 million in state incentives, TPI instead built a 320,000-square-foot plant nearby and employs 350 people, many of them former Maytaggers.
The company is adding workers weekly as it marches toward its goal of 500 by 2010.
Trinity’s 70 workers started building turbine towers a week after Whirlpool vacated the facility. It expects to eventually employ 140.
Iowa Telecom, the state’s second-largest telecommunications provider, bought the older Maytag plant, a 1 million-square-foot downtown facility that most recently served as Maytag’s corporate headquarters and training facility.
The company created 150 new jobs in Newton. It leases space to Caleris, a company that specializes in outsourcing business services.
Caleris offers 24-hour technical support, inbound call center services, content and Web site moderation and ISP tech support. Its 150 workers include former Maytag employees. They serve more than 100 clients—Microsoft and Rubbermaid included—under the motto of “Outsource to Iowa, not to India.”
Newton rests comfortably on its location and Midwestern work ethic and values.
“Part of our advantage in going through the loss of Maytag was that there was a brand recognition around Maytag that went far beyond this city,” said Kim Didier, the former executive director of the Newton Development Corp. “It was quality and dependability, Mom and apple pie.”
Way, wages of life
A childhood in Newton meant a strong likelihood of a career working for the Maytag family, whose corporate citizenship is widely apparent.
Fred Maytag paved streets and built buildings. Maytag Park is home to the Fred Maytag Bowl, the Fred Maytag Pool and the Maytag Park Disc Golf Course.
“There were two tracks to Maytag,” Didier said. “Some kids knew that if all they did was finish high school, or maybe even not finish, they could get a job on the floor at 18 and retire at 48 with a full pension and benefits and start a second career.”
With hourly wages between $20 and $25, production workers could lead a substantial middle class life.
Others, she said, went off to college for degrees in engineering or marketing. They returned to Newton and an even higher standard of living.
But what created stability in Newton also put the community in a dangerous position.
“Because of the wages Maytag was paying, it was hard to grow the community,” said Frank Liebl, the development corp.’s interim director. “The population has never really changed.”
Outside companies routinely looked at Newton, a city selling its prized location and workforce.
But those companies continued down the road when they learned of Maytag’s wage scale.
“For lack of better terminology, for many years we were a one horse town here,” Liebl said.
Maytag’s wages also created pressure for existing businesses.
Didier saw that firsthand when she came to town in 1999 as an assistant city manager. She heard the talk that she’d taken the city job and would later move on to a better paying job at Maytag.
Didier did move on, although she said she joined Maytag for other reasons. She eventually left Maytag for the development corporation and now works with the Iowa Association of Business & Industry.
“The wage structure was certainly in everyone’s thought process,” she said. “Since Maytag left, we have been somewhat successful in retaining a lot of that talent and converting it to other companies in the community.”
Because state incentives were involved, TPI and Trinity pay starting salaries of $13.40 plus benefits. The average wage at the new companies is about $18 an hour.
Caleris, the call center company, pays wages competitive with Maytag’s call center.
“There were certainly people who were making way more than that,” Liebl said. “It was tough for them to come down, but there are plenty of people who are grateful to have a job.”
Karr, the newspaper editor, said many former Maytag workers have landed good jobs in Newton and nearby towns. Many others, he said, have launched their own businesses.
“There have been people who haven’t been successful or who just left town,” he said. “But there are a lot of resourceful people around here.
“Times are still tough, but Newton is doing better than it probably should be.”
Didier was shocked to learn that the county’s recent unemployment rate was 9.2 percent, just shy of the high-water mark recorded right after Maytag’s closing.
Only four other Iowa counties had higher rates.
The unemployment number reflects layoffs at companies in the region and not necessarily in Newton or Jasper County, Didier said. Unemployment claims are based on where a person lives, not where he or she works.
“Economic development is now regional, and the workforce is regional,” she said. “A lot of people who want to stay living in this community have been able to find jobs elsewhere in the region within a 30-minute commute.”
Last July, the county’s unemployment rate dipped to 6.8 percent.
Didier and Liebl shudder when asked what the local unemployment rate would be if TPI, Trinity, Iowa Telecom and Caleris hadn’t created nearly 1,000 jobs in Newton.
“We say that Newton hit the lottery when we landed TPI and Trinity,” Liebl said. “Then you look at the other people who stepped in—Iowa Telecom and Caleris.
“The alternative picture is very bleak. We’re not out of this crisis yet, but we’ve been very fortunate.”
Didier is more blunt.
“Not to be callous, but we’d be right where (Janesville) is,” she said. “That’s the toughest situation because everyone’s going through it. We had the luxury of being the first and moving through it when the competition for new companies was less.
“Now, we would be in an incredible amount of world of hurt. You never wish it upon yourself, but we were so fortunate that it happened to us when it did.”
News that Whirlpool would close its Maytag operations in Newton reached Scott Griffith’s home before he did.
“I walked in, and everyone was crying, and one kid was throwing up,” recalled Griffith, an engineer with 22 years at Maytag.
Griffith’s family is happy these days.
Dad is one of 41 former Maytag employees working at Springboard Engineering, a company that engineers, prototypes and tests products for a growing list of customers.
Springboard is the brainchild of Jordan Bruntz, a 20-year Maytag engineer who couldn’t fathom leaving Newton for another job.
Whirlpool bought Maytag and announced in May 2006 that it would move Newton operations to other states. The consolidation put 1,800 workers out of work by October 2007.
Springboard still does work for Whirlpool, but it does so from a former Kmart on the east end of Newton.
“We had 140 to 150 engineers at the height of our grandeur, but Whirlpool had capacity issues and decided to close us,” Bruntz said. “We still were doing a lot of work, and engineering is engineering.”
But start-up engineering firms and Newton haven’t historically gone hand-in-hand.
While Whirlpool ramped down its operations, Bruntz and his partners ramped up their business plan. It was panned in the business and banking communities.
“They said we didn’t know what we were doing,” Bruntz said. “But we did; it’s what we had been doing. The business is similar, but now we have more than one customer.”
Community leaders are grateful that Springboard was able to keep high-paying jobs in Newton. Springboard’s wages are just short of those paid to Maytag engineers, but they’re still the highest in the county.
Bruntz is quick to point out Whirlpool’s significance in the start-up of his company.
“It’s a double-edged sword,” he said. “If it weren’t for the Whirlpool connection and opportunity for work, we would have never done this.
“But it was also Whirlpool that pushed us to the edge of the cliff. You had to jump, but the jump was easier with the courage that was thrust upon us.”
Until the day Whirlpool closed, Bruntz and Griffith had co-workers who couldn’t accept the fact that their company was shutting its doors.
“They said it couldn’t happen to a company that had been in the community that long,” Bruntz said. “There was a cloak of security that had enveloped everyone that the company would never go away.
“Well, it went away.”
That cloak doesn’t exist at Springboard.
“We’ve been successful, and I’m optimistic, especially because we were able to start this business in this business climate,” he said. “But our eyes are open here.”
Outsource to Iowa
Judy Stevens sits in a small conference room and describes her job with Caleris as a lifesaver.
A self-described “older person,” Stevens lost her job when Whirlpool closed its Maytag call center.
She and Angela Nichol, however, were the first two employees hired when Caleris opened an office in Newton.
Caleris offers 24-hour technical support, inbound call center services, content and Web site moderation and ISP tech support. Its motto is that its call center help is available in Iowa, not India.
Stevens and Nichol literally walked across the floor to their new office, which Iowa Telecom bought from Whirlpool. Iowa Telecom, the second-largest telecommunications provider in Iowa, runs its business from the building and leases space to Caleris.
“I wanted to set some boundaries on how I worked,” said Stevens, who worked seven years at Maytag and now is Caleris’ corporate trainer. “Time in the community is important to me, as is time with my grandchildren.
“I needed to find something that would allow me to serve and be a part of my the community.”
Stevens and her colleagues are serving more than their immediate community. One of Caleris’ jobs is to monitor content on the photobucket.com Web site. They’ve tipped off authorities and helped send child pornographers to prison.
One guy got a 1,000-year sentence, Stevens said proudly.
“Our people are certainly offended by what they sometimes have to see, but they really feel good about helping to clean it up,” she said.
Since opening two years ago, Caleris has grown to serve a diverse client base. It now employs 150, some of them former Maytag workers.
“I’d like to be able to hire them all,” said Nichol, who manages the Newton operation. “But Caleris is a business, not a charity, and sometimes the skill sets just don’t line up.
“Maytag’s closing was a real dark time. You see your friends and neighbors suffering, and we felt guilty. We were quite fortunate.”
The waiting list for jobs is long. The pay and benefits are comparable to Maytag’s package.
“We are very diversified in our client base, which is wonderful,” Nichol said. “When we lose a business, we always seem to have others that come on board.
“We hope to keep growing in Newton, but today’s economy is tough. I’m confident, though, that we won’t get smaller.”
Kim Didier describes Whirlpool’s decision to close its plants in Newton, Iowa, as a point-blank shot to the community’s head.
Quick and painful but survivable, she said.
Whirlpool announced in 2006 that it would close the former Maytag operations in Newton the following year. Nearly 2,000 jobs would be lost.
Community leaders formed a retention committee to try to keep portions of the Whirlpool business in Newton.
The retention group structured itself so that it could immediately turn its focus to charting the community’s course without Whirlpool.
It rallied leaders, resources and the community.
A community meeting four months after Whirlpool’s announcement produced a vision statement charting Newton’s future as a “center of excellence with world-class education, technology, research and development and an innate culture of entrepreneurship.”
“What we said at that meeting was that we can’t control what happened to us, but we can control how we respond,” said Didier, who at the time was running the Newton Economic Development Corp. “Our sense of uncertainty is gone. Now we can move forward.”
In the short term, the leadership group developed strategies to help people with training, education and entrepreneurial opportunities.
It successfully focused on getting local control of the massive Maytag buildings, two of which were donated to the local Des Moines Area Community College for vocational and technical training programs.
“The people and the buildings were incredible assets that provided value to our community,” Didier said. “We didn’t want them sitting around like a huge vacuum that would suck the morale out.”
Leaders quickly adopted a regional approach to economic development. They marketed the resources of a seven-county area.
“The fact that labor markets are regional markets is clearly evidenced by the fact that many of the 1,800 former Maytag employees have been able to find employment in the central Iowa region,” Didier said. “On the flip side, many of the new companies that we have recruited to Newton are employing individuals from all over the region.”
Didier said education, workforce and economic development resources were realigned to support the regional workforce.
“Regions that demonstrate the ability to develop a constant stream of talented people that can transform new ideas and new knowledge into advanced, high-quality products and services will always succeed,” she said.
The concept of regional economic development was relatively new in Iowa.
“Maytag didn’t just employ Newton residents,” she said. “The labor force is regional, so the resources that we were going to need to get through didn’t just reside here.”
Economic development, education and government structures historically are parochial, she said. The folks in Newton spent too much time worrying about beating the town 16 miles away on the football field and in the economic development arena.
“We never really had to recruit any businesses to Newton because we had such low unemployment,” said Frank Liebl, director of the Newton Development Corp. “Now, companies want to know what the region offers, not what Newton offers.”
The Newton area received $1 million from the U.S. Department of Labor, spawning the Regional Innovation Grant program.
Didier admits the region had timing on its side.
The state was pushing growth in alternative fuels and wind energy.
When TPI Composites and Trinity Structural Towers were looking at production sites, Newton had the buildings and workforce that would make shipments of the massive products much more cost efficient than production sites in Mexico.
“Everything really came together for us,” Didier said. “Even before Maytag shut down, we started on some projects that fortunately came to fruition at the right time.”
One of those, the Iowa Speedway, emerged from cornfields just across Interstate 80 from downtown Newton. The $70 million raceway opened in September 2006 and has created a significant tourism industry.
With grandstand and suite seating for 30,000, the speedway attracted 39,000 people for an Indy Car race in 2007. Season ticket sales have jumped from 5,000 to 20,000.
“As Maytag was singing its swan song, we were getting ready to open,” said Craig Armstrong, the speedway’s general manager. “People had something to look forward to, they didn’t have long to mourn.”
Armstrong said the investment showed that the Newton area was someplace special. He routinely welcomes executives from companies considering relocation to the Newton area.
And they’re always impressed, he said.
“Everyone’s offering TIFs, credits and other tax abatements, but not everyone has a $70 million motor sports facility,” he said. “I think it’s a magic bullet in the gun that also includes a stable population and an educated workforce.”
Newton’s easy work is done, Didier said, but tough questions remain.
Why are some people being turned away from the new jobs?
What can be done to improve training and education programs so the area has a larger talent base?
What quality of life improvements will make it easier to recruit new talent to central Iowa?
“The work we’re doing now is focused on systematic changes that take a long time,” Didier said. “But clearly, we are in a better place right now than we were four years ago because of the diversification.”