Maytag plant on the line: Future of Newton production to be reviewed

Maytag Plant on the Line: Future of Newton production to be reviewed
 
Date April 22, 2005
Section(s) Local News
Brief  
 
By DAVID PITT

Associated Press Writer

DAILY NEWS STAFF

The fate of about 1,500 jobs at Maytag Corp.’s flagship laundry plant in Newton could be in jeopardy unless the company works swiftly to cut costs, company CEO Ralph Hake said this morning.

“We will work with the UAW in Newton and local and state representatives to determine the future of the Newton facility,” Hake said in a conference call with analysts to discuss the company’s first-quarter earnings, which saw net income fall nearly 80 percent from last year due to dwindling sales and rising costs.

Maytag, based in Newton since it was founded in 1893, said it must take “more aggressive steps” to restructure its manufacturing operations and cut costs. Maytag already has made cost-cutting measures in the past year, closing a refrigeration plant in Galesburg, Ill., and slashing its salaried workforce as part of its “One Company” restructuring plan.

“We have dramatically shrunk our volumes and workforce in our highest wage and benefit manufacturing facilities in Newton and North Canton. A lot has been done. It has been painful. It has not been enough,” Hake said.

Unless Newton becomes more competitive with other laundry facilities, Hake said, Maytag will “target its next generation of high efficiency laundry products to be manufactured in a low-cost location before the contract expires in June 2008.”

The plant makes Neptune and Atlantis model washers and the Dependable Care line sold to commercial customers.

Hake said discussions also are under way with the International Brotherhood of Electrical Workers about cutting costs at the North Canton, Ohio, Hoover vacuum manufacturing plant. The transfer of some production is already planned and further phase-out could occur.

“We expect to keep our contractual commitments for the contract period, which ends in 2008,” Hake said.

Hake had previously said the company would consolidate all vertical washer and dryer production into two dedicated facilities. During today’s call, he said those two facilities will be Herrin, Ill., for vertical-axis washers — subject to successful labor negotiations — and Searcy, Ark., for the companion dryers.

“Our operation plans at Newton and North Canton are not finalized. We expect to work through that in the next months and quarters,” Hake said, adding that the ultimate decision hinges on discussions with union officials.

Maytag‘s conference call this morning followed the release of an earnings report indicating quarterly income fell to $7.7 million, or 10 cents per share, for the three months ending April 2 from $38.7 million, or 49 cents, in first quarter of 2004. Earnings include restructuring charges amounting to about 4 cents per share, the company said.

Maytag‘s earnings — excluding the charges — came in well below the average estimate of 20 cents per share from analysts polled by Thomson Financial.

Sales shrank 4 percent to total $1.17 billion from $1.22 billion a year earlier, just missing the $1.18 billion targeted by Wall Street analysts.

Declining sales of refrigerators and lower average prices for vacuum cleaners drove down appliance sales 3 percent to $1.11 billion, while commercial business dropped 26 percent to $54.7 million amid a continued slump in the vending industry, Maytag said.

Savings from restructuring activities implemented in 2004 only partially offset rising costs, the company said.

Maytag said higher costs — primarily for steel and energy-related items, and higher distribution costs — reduced its profits.

Nonetheless, Hake said Maytag saw improvements in market share in all major appliance categories, signaling the actions the company had taken to improve its sales performance were taking hold.

“We expect further growth from new products scheduled for launch in the first half of 2005,” he said.

Those include the Maytag Neptune 27-inch washer and dryer, the Jenn Air suite of glass-front appliances and the Hoover FloorMate hard floor cleaner.

Maytag Services and Maytag International both generated double-digit revenue growth last quarter, the company added.

Looking ahead, Maytag now sees yearly earnings of 45 cents to 55 cents per share, including about 10 cents worth of restructuring expenses.

That estimate is down sharply from earlier guidance of $1.10 to $1.30 per share.Analysts currently see income of $1.10 per share on $4.77 billion in sales, compared with a profit of 88 cents and $4.72 billion in sales for 2004.

The Maytag report came a day after rival Whirlpool Corp. said first-quarter profit fell 14.9 percent because of higher costs for fuel and raw materials. The maker of Whirlpool and KitchenAid home appliances said net income fell to $86 million, or $1.26 per share, in the January-March period from $101 million, or $1.43 per share, a year ago. Sales increased 6.7 percent to $3.21 billion from $3.01 billion.

Maytag stock took a hit this morning, dropping more than 25 percent to $11.08 in early trading before rebounding slightly to $11.35. More than 7.2 million shares were traded.

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