Lean Manufacturing

Qingdao Haier’s Bids for Maytag: LeanSigma Goes to China?

By Jon Miller Published on June 23rd, 2005

Qingdao Haier, the giant Chinese appliance manufacturer along with Blackstone Group and Bain Capital has placed a bid to acquire Maytag. Their bid is $2 per share higher than the competing bid from Ripplewood Holdings. It is far from a done deal, but should Haier acquire Maytag it could have interesting implications for not Lean manufacturing in China.
This bid is more than another in a series of high profile acquisitions of major manufacturers by Chinese companies. Although this acquisition would be in the league of China’s TCL purchasing Alcatel (mobile handsets) and also Thomson (owner of RCA brand TVs), Lenovo purchasing IBM’s PC business, and the new bid by CNOOC (petroleum) for Unocal, there is a unique Lean manufacturing angle to this Maytag story.
If Haier succeeds in making this purchase they would be in the top 4 American appliance manufacturers along with Whirlpool, GM and Electrolux. They would own Maytag痴 respected American brands. They would also inherit a team of Lean trainers, six sigma black belts, and workers and managers experienced in kaizen.
Maytag has been going down the Lean path actively for the past 5 years or so. They have a close relationship with a well-known American Lean consulting firm. If you look up the term “LeanSigma” on the U.S. Patent & Trademark registration website you will find that it is a service mark registered by Maytag.
For example at the Herrin, Illinois production facility they used kaizen to improve the capacity by 50% and cut defects 70% between 2001 and last year without major spending according to a June 22nd, 2005 article in the Chicago Tribune. These are typical Lean manufacturing results that Maytag has been enjoying for years. Yet will it be enough to keep Maytag assembly jobs in the United States?
While shipping large appliances for overseas isn’t cheap, with the burdened cost of labor being around $300 per day at U.S. assembly factories and roughly $10 per day in Chinese assembly factories Haier would be more than tempted to move production offshore. Haier is certainly interested in Maytag because of its brand, its North American and European sales and distribution channels, but the chance to slash labor costs can not be far down the list of reasons to buy.
It’s hard to say whether Haier is aware of Maytag’s Lean Six Sigma competencies. Lean Six Sigma is just becoming a recognized concept in China with an increased number of Foreign Invested Enterprises bringing it to the awareness of local managers and business owners. The people in Haier at the decision making level likely are concerned with strategic issues like brand, sales channels, and off shoring rather than value stream maps or line-level kaizen issues.
Yet it is interesting to see that one of three positions posted at the online HR database on the Global Haier Group website is for a Cost Management Expert whose role is to “Specify, implement plan for cost analysis and cost control of home appliances, design and conduct plan for reducing cost, specify, implement plan for cost analysis and cost control of home appliances, design and conduct plan for reducing cost.” This position requires a Bachelor degree or above in mechanical engineering and more than 10 years work experience in cost control in global company. It sounds like a Lean position to me.
Should Haier’s bid succeed, and should they chose to move manufacturing offshore, it would be a shame to see Maytag’s Lean transformation cut short. Many manufacturing jobs would be lost in the United States. If Haier gains Maytag’s LeanSigma capability, this may accelerate the development of awareness and competence for Lean manufacturing in China, and that would be a good thing. Is this a crisis or an opportunity? Probably both, but only time will tell.

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