Maytag stock drops in fifth day of strike

Maytag stock drops in fifth day of strike
 
Date June 15, 2004
Section(s) Local News
   
 
By DAVID PITT

Associated Press Writer

Maytag Corp. stock dropped in heavy trading Monday as a strike at the company’s flagship plant entered its fifth day with no signs of ending.

Industry analyst Laura Champine of Memphis-based Morgan Keegan and Co. said investors are tired of negative news from the nation’s third largest appliance manufacturer.

“I just think it’s investor fatigue with continued bad news at Maytag,” Champine said.

The company announced it would cut 1,100 administrative jobs a week ago — about 700 factory workers in Newton have been laid off since 2002 — and late last week Maytag CEO Ralph Hake said the company was revising downward its quarterly earnings estimate.

Hours before the strike was announced last Thursday, the California Public Employees’ Retirement System placed Maytag on a focus list reserved for companies with corporate governance concerns.

Maytag officials said CalPERS had no “legitimate justification” for including Maytag on the list.

Investors on the New York Stock Exchange reacted quickly Monday, the first day of trading since the strike was announced.

At one point, the stock was down as much as $1.05, selling for $22.75.

It rebounded shortly after noon when it was off 73 cents at $23.07, but sagged as the day ended to close down 82 cents at $22.95. The closing price represented a 3.45 percent drop in the stock’s value on a day when more than 1.6 million shares were traded.

Company spokeswoman Lynne Dragomier declined to discuss the stock prices.

Aside from the immediate effect on stock prices, the strike has potential to cause problems for the company, Champine said.

“I think given that this is their largest facility and it’s in laundry, their flagship products, that it could create problems for them,” Champine said.

The Newton plant makes the company’s high-end laundry brands, such as the Atlantis and Neptune washing machines and dryers.

The appliances are sold at company stores, small appliance stores and large retailers including as Sears, Lowe’s and Best Buy.

Although appliance stores reported no distribution problems, store owners expressed some concern if the strike is lengthy.

“There’s obviously a concern for that,” said Kerry Walker, manager of Randa’s Appliance & Electronics in Newton, which carries Maytag appliances. “It’s hard to sell appliances that you can’t get.”

The company has stockpiled inventory and could shift production to plants in Herrin, Ill., Searcy, Ark., and Florence, S.C., if necessary.

Organized labor experts said strikes are not often used in manufacturing, where many companies can hire replacement workers, move production to nonunion plants or transfer jobs to low-cost offshore plants.

“The strike has become a much more dangerous weapon for labor to use for some time,” said Bob Bruno, a labor and industrial relations professor at the University of Illinois. “The risk of job loss is pretty high.”

Maytag has a new refrigerator manufacturing plant in Reynosa, Mexico, and room to build several more plants on adjacent land.

Hake has said the company has no plans to move more jobs to Mexico but has also adamantly said workers at Newton — the highest cost plant in the company — must lower the cost of production.

“We want the Newton laundry plant to be a vibrant part of Maytag‘s future but we need cooperation on containing health care costs,” said Dragomier, the company spokeswoman.

Bruno said health care seems to be a point of contention in many labor disputes.

“That issue is sparking greater militancy,” he said. “It just impacts families too dramatically.”

Employers are less willing to assume the burden and are passing the costs on to workers, Bruno said.

Retirement benefits and job security are other issues that the company and the UAW bargaining team could not reconcile, said Pat Teed, the UAW Local 997 president.

Analysts and labor experts said there is no way to determine how long the Maytag strike could last. The duration will be determined by how long the striking workers can hold out — the UAW offers strike pay and health insurance during the work stoppage — and how long Maytag wants to stand its ground.

Strikes of shorter duration — defined by weeks or a few months — tend to have a better outcome for union workers, Bruno said.

“It suggests a lot of planning by the union that had the employer in a bit of a bind and that it could take advantage of market issues.”

The last UAW strike against Maytag in Newton was in 1971. It lasted more than 5 months.

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