Maytag to cut jobs
Saturday, June 5, 2004
DES MOINES, Iowa -- Maytag Corp. announced Friday it is cutting its salaried work force by 20 percent, or 1,100 jobs, as part of a restructuring, and lowered its earnings expectations, citing lower sales and higher materials costs.
Maytag shares closed down more than 7 percent.
The Newton-based appliance maker will consolidate its Hoover, Maytag Appliances and headquarters divisions into what it said is a "one-company" approach, designed to improve speed and competitiveness.
"Maytag will be a much leaner organization, capable of better serving customers and more rapid decision-making," Maytag chairman and CEO Ralph F. Hake said in a statement.
Under the restructuring plan, the Hoover brand will join the existing business units -- Maytag, Jenn-Air and Amana -- within a single marketing organization, the statement said.
Maytag spokeswoman Lynne Dragomier said the reduction in the company's salaried work force of 5,800 will come at Hoover's factory in North Canton, Ohio, and its company headquarters in Newton. Maytag currently employs 19,500.
Maytag said the restructuring, to be completed by the end of the year, is expected to save $150 million annually.
In the short term, however, Maytag expects to incur restructuring charges of $75 million to $100 million, primarily for severance costs and asset write-downs.
The company lowered its earnings expectations for the second quarter and the full year 2004.
"This is the result of lower than anticipated sales volume at Hoover and Maytag Appliances, coupled with lower factory volume related to balancing inventory levels, as well as higher steel and resin costs," Hake said in the statement.
The announcement prompted Fitch Ratings, a New York-based bond rating service, to revise its outlook for Maytag from stable to negative, said analyst Tom Razukas.
He said failure of the company to significantly improve operating margins after previous restructuring causes doubt about its future.
An unresolved labor contract between the company and the United Auto Workers in Newton also concerned analysts. The contract was set to expire at midnight May 31 but was extended to 10 p.m. Wednesday as negotiations continued. The UAW members have authorized the union to call a strike if an agreement is not reached.
Hoover has been a challenge for Maytag.
In the first quarter, Hoover revenues dropped 22 percent and the brand lost market share in both higher priced vacuum cleaners -- those selling for $300 or $400 -- and at the lower-end pricing levels below $100.
As early as January, Hake had told analysts in a conference call that "the key to Maytag earnings recovery, simply put, is to fix Hoover."
Hake emphasized that Maytag is committed to its premium brands and innovation strategy.
"We have selected the one-company approach as the most effective structure to go to market with our brands and innovative products, and it was determined that this approach should dramatically improve competitiveness and position us for future growth," Hake said.
About two years ago, Maytag announced plans to close its 1,600-employee plant in Galesburg, Ill. Production in Galesburg is scheduled to end in September.
Maytag stock finished down $2.01 at $24.28 on the New York Stock Exchange.
On the Net:
Maytag Corp.: http://www.maytagcorp.com