Maytag cuts 1,100 jobs

Maytag cuts 1,100 jobs
Date June 04, 2004
Section(s) Local News

By PETER HUSSMANN
NDN Editor

Maytag Corp. announced a major restructuring plan today that eliminates 20 percent of its salaried work force, with 600 of the 1,100 jobs being lost coming from its Newton-based business units.

The plan calls for the consolidation of Hoover Floor Care, Maytag Appliances and Corporate Headquarters into “one company.” Once fully implemented by the end of the year, Maytag estimates cost savings of $150 million annually.

“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,” said Maytag CEO Ralph Hake.

In a conference call this morning, Hake said continued cost pressures, especially at Hoover, led to the decision to integrate Hoover and Maytag Appliances. Though the company has made strides at keeping costs in line where it can compete effectively in the competitive marketplace, including the elimination of thousands of manufacturing positions, more was needed to be done.

“Despite our accomplishments, we have not converted those savings to the earnings growth we’ve expected,” he said.

Hake said its major appliances and floor care businesses serve many of the same customers.

“The restructuring will create enhanced value for our retail customers through one sales force and one marketing organization,” he said. “It will eliminate redundancies across the organization in areas including logistics and administrative functions, and will also result in infrastructure cost savings. Maytag will be a much leaner organization, capable of better serving customers and more rapid decision-making.”

As a result of the restructuring, the Hoover brand will join the existing strategic business units within the marketing organization. Those units will now include Maytag, Jenn-Air, Amana and Hoover, as well as a unit that will include Maytag Housewares and Hoover Diversified Products.

Hake said Bill Beer, current president of Maytag Appliances, and Tom Briatico, president of Hoover, will join a new Office of the President. Their staffs will be eliminated and they will have no direct line of responsibility. The two will hold “strategic guidance” responsibilities and be given “substantial assignments.”

The integration of Hoover will reduce the North Canton facilities to a Research and Development and manufacturing site, as well as downsizing Maytag Appliances and Corporate Headquarters. Hake said there will be approximately 500 salaried positions lost at North Canton.

While the restructuring will consolidate such elements as IT, human resources and finance with the organization, it will not have a significant impact on the corporation’s sales force.

“The sales force will only be marginally impacted,” he said.

The restructuring is expected to save $150 million annually and to be completed by year end, although Hake said some terminations were completed today. In connection with the restructuring, Maytag expects to incur charges between $75 and $100 million, primarily for severance costs and asset write downs. The cash portion of the charge is expected to be in the range of $45 to $60 million.

Analysts covering Hake’s conference call asked the status of Maytag’s labor negotiations in Newton and whether there were any plans to close additional plants. Hake said negotiations continue under a short-term extension and that the company is trying to put the Newton facility in a better cost position.

“We’re under a short extension and as I’ve said before, Newton is our highest cost facility, primarily due to benefit costs,” he said.

Analysts also asked whether Maytag had contingencies in place should the local labor negotiations fail.

“We are in the fortunate or unfortunate position of having four laundry facilities,” he said. “We do have the capacity to expand at the others and take on volume if needed.”

Hake said the restructuring plan, which has been in the works for a period of time, was initially scheduled to be announced following the conclusion of labor negotiations in Newton. However, since the timeframe for completion is yet unknown, Hake said it was his decision to implement the plan at this time.

“I decided to go ahead and start to save money now,” he said.

Maytag also lowered its earnings expectations for the full year.

“We now expect that earnings will not meet previous expectations for the second quarter and the full year 2004,” Hake said. “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. In addition, we expect to incur restructuring charges and asset impairments associated with the comprehensive business restructuring announced today.”

Hake also announced that the unsuccessful appeal of a lawsuit where a plaintiff received a $10 million verdict against the company will also affect earnings this year.

Hake said though the decision was difficult, it was “something that needed to be done” for the benefit of Maytag.

“This restructuring will cause hardships and challenges for many of our employees and their families,” Hake said. “Maytag Corporation has skilled and talented employees, which makes this decision so difficult. However, in order to succeed and grow, Maytag must rapidly reduce costs and improve market execution.”

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