Analysts express concern over Maytag’s ability to compete

Analysts express concern over Maytag’s ability to compete
Date July 15, 2004
Section(s) Local News

Associated Press Writer

Maytag Corp. stock reached a new 52-week low Wednesday as analysts expressed concern that the nation’s third largest appliance manufacturer may have trouble competing.

Rising interest rates could cut demand for major appliances and increasing pressure from low-cost competitors could hurt Maytag sales, Prudential Equity Group’s Nicholas Heymann wrote in a recent analysis.

“Given the fact that virtually all of its competitors today continue to shift more production to Mexico, staying competitive for Maytag may prove increasingly difficult going forward, in our view,” said the analysis.

Maytag shares closed 53 cents lower at $21.71 on the New York Stock Exchange Wednesday.

The stock had traded as high as $32.21 and as low as $22.10 in the past year.

Most of Maytag‘s appliances are still made in the United States while the nation’s top appliance manufacturer, Whirlpool, makes more than 20 percent of its appliances in low-cost regions, the analysis said. The second largest, General Electric, imports more than half of its appliances sold in the U.S.

Maytag expects to have 17 percent of its products outsourced by next year, chief executive Ralph Hake said in a June conference call with analysts.

The company has entered an agreement with Korean manufacturer Samsung to make some front-load laundry products and outsources some top-freezer refrigerators to Daewoo, another Korean manufacturer.

Maytag also opened a refrigerator manufacturing plant in Reynosa, Mexico, this year.

“While all these developments appear to be moves into the right direction, we do not believe they are even nearly enough for the company to stay in the game,” the Prudential analysis said.

Manufacturing was halted at Newton Laundry Products on June 10 when the workers represented by the UAW went on strike. The company and union failed to reach a contract agreement after nearly a week of contract extensions.

The company’s 1,525 production workers returned to their jobs July 6 after a 27-day strike.

The Newton workers agreed to a new contract that requires them to pay more for health care and reduces the company’s costs for retirement benefits for future workers.

Similar concessions may be sought as workers at the company’s Amana refrigerator factory open contract negotiations in September.

Heymann’s analysis also said Maytag maintains heavy debt and it expressed doubt that a restructuring plan announced last month would significantly reduce costs.

The plan eliminated about 20 percent of the company’s salaried work force.

In a June 4 conference call with analysts, Maytag chief executive Ralph Hake said the company has maintained healthy laundry and cooking appliance sales. Dishwasher sales were flat and demand for refrigerators was weaker than expected.

He said the company was not expected to meet analysts expectations for the quarter.

Maytag officials are scheduled to release second quarter earnings on July 23.

Hake said although earnings margins and sales growth were issues of concern, the company’s cash flow was more than adequate to pay down debt, fund pension programs and maintain investor dividends.

“Cash is not an issue for the Maytag Corporation,” he said.

Demand for some of the company’s premium washers and dryers increased sufficiently for Maytag to recall about 100 laid off production workers in Newton, where Atlantis, Neptune and Dependable Care models are made, said company spokeswoman Lynne Dragomier.

The workers will return to their jobs Monday, she said.

About 700 workers have been laid off from the Newton plant since 2002.


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