Hake: Maytag will ‘migrate products’

Hake: Maytag will ‘migrate products’
 
Date January 28, 2005
Section(s) Local News
Brief  
 
By PETER HUSSMANN

NDN Editor

Continued reductions in staffing levels at Maytag production facilities in Newton may lie ahead as Maytag continues to target “factory utilization” as a cost saving measure in the coming year, Maytag CEO Ralph Hake said following release of the corporation’s fourth quarter results today.

Speaking in a conference call with business reporters, Hake said the corporation will “migrate” product platforms to its most cost-effective production operations throughout the coming year.

“We will migrate products to our more cost-effective factories,” he said. “Work forces in those facilities will grow while work forces will continue to shrink (in the least cost effective operations). This puts us in a better cost position with the intense competition. You will see more of that in 2005.”

Although not expressly naming the local laundry facility operation, Hake has said in the past that “Newton is our highest cost facility.”

Labor negotiations last year resulted in a new four-year agreement. However, Maytag said the cost savings generated under the new contract still did not make the plant eligible for new product platforms.

Maytag Corp. reported a fourth quarter loss of $14.1 million or 18 cents a share including the costs of a company restructuring and litigation over a front-load washing machine.

The Newton-based appliance manufacturer’s results compared to a profit of $23.9 million or 30 cents a share a year ago.

The quarter included charges of 12 cents per share for the company-wide reorganization and 13 cents per share to set aside money related to the early generation front-load washer litigation. A charge of 1 cent per share was reported for the closing of a refrigerator plant in Galesburg, Ill.

Results would have been about 8 cents a share excluding the charges. Analysts surveyed by Thomson First Call expected fourth quarter earnings of 17 cents a share.

Sales for the quarter were down 8.4 percent to $1.16 billion, compared to $1.27 billion for the same period last year.

Hake said lower sales in Hoover floor care equipment and vending machines and higher steel costs also contributed to the loss.

“Higher raw material and energy costs significantly impact our operating results for the quarter and the year,” Hake said, in a statement. “We have addressed our challenges head on, and have taken decisive steps to improve Maytag‘s performance going forward.”

For the full year 2004, the company reported a loss of $9 million or 11 cents per share, compared to income of $120.1 million, or $1.53 per share in 2003.

Excluding charges year-end earnings would have been about 88 cents a share. Analysts’ expectation was for a profit of 97 cents.

Sales were $4.72 billion, down 1.5 percent from $4.79 billion in 2003. Operating income was $40.3 million for 2004 versus $228.3 million for the prior year.

Hake also lowered the company earnings guidance for 2005, saying the company expects reported earnings per share of $1.10 to $1.50 in 2005 including about 5 cents for restructuring charges. Previous guidance was between $1.50 and $1.60 including the restructuring charge.

Hake said he expected 2005 to be a better year.

“It’s not business as usual for Maytag,” he said. “We’re a leaner organization that’s becoming more responsive on all levels. We expect to benefit in the coming year from our ‘One Company’ cost reductions and our stream of innovative products, including the new Maytag 27-inch washer and dryer, Jenn-Air suite of reflective glass appliances, the FloorMate hard floor cleaner and a premium upright introduction, among others. As we work through the first quarter, we also expect to benefit from favorable pricing initiatives, which were announced late last year.”

At 10:30 a.m. today, Maytag‘s stock was down $1.63 to $15.42, a 9.56 percent drop. Trading was heavy with more than 4 million shares traded.

Associated Press writer David Pitt contributed to this story.

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