Archive for May, 2005

Ideas to help Maytag cut costs

May 31, 2005
Ideas to help Maytag cut costs
 
Date May 31, 2005
Section(s) Opinion
Brief  
 
To the Editor,

This letter is a reply from an actively employed Maytager to the letter that was published on Thursday, May 26, from Lori Church.

I agree with her when she stated that if Mr. Hake wants to really cut costs in Newton at the Maytag plants, he needs to meet face to face with his employees. No one knows better than we how we can cut costs in our factories. Yes, we do have some ancient machinery in the plants, and yes, they do cost a lot to keep running. Sure we would like to work in a brand new plant with the best machinery available. After he would meet with us, then he would have to listen to us, not just blow us off!

Where I part ways with Lori is her statements about the people on “medical restriction.” I would estimate that 99.9 percent of these people (of which I have been one) do not purposely injure themselves so they can just “sit around and do nothing.” Yes, not being a productive member of the Maytag “Team” hurts us all, but if we didn’t have so many repetitive motion-type jobs and ergonomically incorrect jobs, there wouldn’t be so many of those types of injuries.

If Mr. Hake really wants to cut costs, tell him to stop making our die cast parts in Mexico. Having worked at the Northeast Marching Center (NEMC or Plant 8 to those who work at Maytag) since 1989, I have never seen so much die cast scrap! We truck it here from Mexico, sort out the junk (maybe 50 percent of it) then truck it back to Mexico to be reground, melted and made into more junk to bring back up here.

There are many more items that we are trucking all over the country that I could go into but due to space limitations I won’t. I, and many of the present day Maytagers I know, feel, that Lori Church owes all the hard-working people in the plants an outright apology. I would say to her, when you know what you are talking about, then you can feel free speak out. Unless that is the case, keep your opinions to yourself. We already have enough troubles as it is.

Twenty years and counting.

Patrick L. Blythe

Reasnor

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Listen to the workers on how to improve Maytag

May 25, 2005
Listen to the workers on how to improve Maytag
 
Date May 25, 2005
Section(s) Opinion
Brief  
 
To the Editor:

If Mr. Hake is really serious about wanting to keep Maytag in Newton, there is one main thing he needs to do.

He needs to meet with and listen to the workers on the factory floor. Who better than them to tell you how and where to cut cost in the factory?

They can show him why it is the highest-cost manufacturing plant. Has he seen the ancient equipment that the employees are forced to work with and try to keep running? They don’t have the pleasure of working in a brand new building with up-to-date equipment like they do in Mexico, but yet only get paid a couple of bucks an hour. They do the best they can with what they are forced to work with.

If he is wanting to cut cost, maybe he could go in there (Maytag) and get rid of all the “dead weight.” I think he would be very suprised at how many employees that are there (and I cannot say work) that are on some kind of restriction. If nothing can be found that their restriction allows them to do, they sit around for eight hours and get paid for it. Do you see a problem here? If they cannot do the job they were hired to do, get them out of there.

You would be doing three things at once. 1. Getting rid of “dead weight;” 2. Saving money by not paying them for not doing anything; 3. By cutting them out, you would be saving somebody’s job that is there doing their job and working hard, not sitting.

Mr. Hake, give the factory workers a chance to voice their opinion. Listen to them. I think you would be greatly suprised on how smart they are and some of the ideas they can come up with to save their jobs and keep Maytag in Newton and save the company money. And you in turn, talk to them in person and be open and honest with them. All they want is to know what is going on.

What a win-win situation all the way around.

Lori Church

Newton

Maytag merger plan has $40 million breakup fee

May 24, 2005
Maytag merger plan has $40 million breakup fee
 
Date May 24, 2005
Section(s) Local News
Brief  
 
WASHINGTON (Dow Jones/AP) — Maytag Corp. said Monday it could owe $40 million to an investor group led by Ripplewood Holdings LLC if its proposed deal to be taken private by the group falls apart.

Last week, Ripplewood said it agreed to acquire Maytag, the Newton, Iowa-based maker of appliances, for $14 a share and to assume $975 million in debt.

Maytag said in a regulatory filing that unless there’s a breach of the merger agreement, either party can walk away from the deal if it isn’t completed by Dec. 15.

The investor group includes J. Rothschild Group, RHJ International and GS Capital Partners.

Ripplewood is expected to accelerate foreign production of Maytag‘s well-known brands such as Maytag, Hoover, Jenn-Air and Amana.

Shares of Maytag rose 99 cents, or 6.9 percent, to close Monday at $15.39 on the New York Stock Exchange.

The above-offer stock price implies that some investors believe another bidder will emerge or that Ripplewood will have to sweeten its price to win shareholder approval of the deal.

Maytag disclosed the bid only after its board had accepted it.

A few large stakeholders said they intend to vote against Ripplewood’s offer, should it prove to be the only one on the table.

“We think something with a ‘2’ in front of it certainly is justified by our math,” said John Goetz, co-chief investment officer at Pzena Investment Management LLC, a New York investment adviser that at last report owned more than 1.1 million Maytag shares.

Goetz said the firm would hold out for a higher price.

Ironwood Capital Management LLC president Warren Isabelle, whose Boston company owns more than 356,000 Maytag shares, said the would-be buyout group is “definitely low-balling the bid,” adding, “at $14 I would vote against it.”

Isabelle said that while the company has “a lot of warts,” the Maytag name is a valuable brand.

The Securities and Exchange Commission filing also includes a provision for the establishment of a $3 million “retention pool for th purposes of retaining the services of employees who are key employees.”

The retention bonuses would be overseen by Maytag CEO Ralph Hake. He will determine, with approval of the board and Ripplewood, employees eligible to receive retention awards which would be payable at the time the merger is complete. No primary company executive is allowed to receive retention bonuses.

Daily News Editor Peter Hussmann contributed to this report.

Collins: No immediate changes at Maytag

May 23, 2005
Collins: No immediate changes at Maytag
 
Date May 23, 2005
Section(s) Local News
Brief  
 
By DAVID PITT

Associated Press Writer

The man behind the proposed purchase of Maytag Corp. says there are no plans to make immediate changes to the company behind some of the nation’s most popular household brand names.

Timothy Collins, CEO of New York-based Ripplewood Holdings LLC, flew to Newton on Friday to meet the people behind the company that makes Maytag washers and dryers, Amana refrigerators and microwaves and Hoover vacuum cleaners.

Collins, 48, is leading the private investor purchase of Maytag, which also includes RHJ International, GS Capital Partners and the J. Rothschild Group of Companies. As part of a $1.13 billion cash deal. The investors also will assume $975 million of company debt.

Despite criticism of Maytag CEO Ralph Hake and his management team, Collins said there are no plans to make immediate changes.

“At this point we have every plan to keep them in place. They’ve been dealt a very tough hand and I think they’re developing plans to deal with it and we’re certainly going to be as helpful as we can to them, but I’m not planning to run Maytag, I’ll tell you that,” he said.

Criticism came from industry analysts including Sam Darkatsh, of Raymond James and Associates Inc. who wrote Friday in a newsletter that he was saddened by the announcement.

“Frankly, it is an indictment of the last several generations of Maytag leadership, of which the current regime is only the last chapter,” Darkatsh wrote.

Maytag shareholder Nick Rossi, a 43-year-old California businessman, said he was disappointed with the sale because he would rather keep his share of ownership in the company that he believes has a lot of potential to improve.

Rossi, who has owned Maytag stock for more than 20 years, said the solution for the company’s woes is not a new owner.

“I think it’s just putting in better management,” he said. “I think they just focused on the wrong things. I think they should have focused on upscale and been more of a niche player for the upscale customer. They lost their focus on quality and the image was one of quality.”

In the past year Maytag‘s profits have slumped steeply, it cut 1,100 salaried workers, closed a western Illinois refrigerator plant and faces the prospect of shuttering two more of its costliest domestic factories. Earlier this year, Best Buy Stores Inc. dropped Maytag as a major appliance supplier, giving its retail floor space over to brands that have shown more consumer appeal, from rivals such as LG Electronics Inc. and Samsung Electronics Co. of South Korea, Siemens AG and Whirlpool Corp.

The Maytag sale is subject to the approval of regulators and shareholders. Rossi said he plans to vote against it.

The fate of some of Maytag‘s United States factories including the flagship laundry plant in Newton and a Hoover plant in North Canton, Ohio, is still uncertain.

“I think the reality is we can’t change the laws of nature,” Collins said. “These plants are going to have to be competitive and there are lots of ways to get there. If they can find a way to make these plants competitive and profitable, that’s obviously their first choice.”

Collins said he met Friday with officials of the UAW, which represents the 1,275 production workers in Newton.

“I think they’re very constructive and realistic and know that in order to prosper the company has to prosper and they have to be competitive,” he said.

The way to do that is up to the management and labor officials to determine, he said.

The International Association of Machinists and Aerospace Workers Unions, which represents 1,400 workers at a refrigerator plant in Amana, viewed the purchase positively.

“It is our hope the new leadership recognizes the talent and dedication of the U.S. workers who have made Maytag appliances an American classic,” said James E. Brown, IAM Midwest Territory General Vice President.

The investors plan to take the publicly traded Maytag private and invest resources to make it a world player, Collins said.

“They’ve got to be a much bigger company which means they’ve got to be with their own brand and other brands serving the global market,” he said. “They can’t be a purely domestic company and compete.”

Analysts speculated that other companies could show interest in Maytag.

“Such a buyer would probably be a foreign appliance manufacturer with an established global distribution network and a good backlog of new product innovations,” wrote David MacGregor, an analyst with Cleveland-based Longbow Research.

Maytag Buyout: Private investor group to acquire company in $2.1 billion deal

May 19, 2005
Maytag Buyout: Private investor group to acquire company in $2.1 billion deal
 
Date May 19, 2005
Section(s) Local News
Brief  
 
By PETER HUSSMANN

Editor

More questions than answers arose after Maytag Corp. announced Thursday that it had inked a deal to be acquired by a private investment group.

As word of the sale swept through Newton on Thursday evening, many were wondering what the future held for current employees, pensioners and the future operation of the Maytag plant.

Earlier Thursday, the Maytag Board of Directors approved the merger agreement that calls for Ripplewood Holdings LLC to acquire all outstanding shares of Maytag stock for $14 per share, approximately $1.13 billion. In addition, the New York City-based investment firm agreed to assume $975 million in Maytag debt, bringing the transaction value of the deal to approximately $2.1 billion. The deal will have to be approved by shareholders and receive regulatory approval before being finalized.

The news left many Maytag retirees wanting more information before deciding whether the transaction is a good thing for the company and the community. All hoped the buyout would not bring about the demise of Maytag locally.

“There’s still a lot of pride at this company,” said Bill Ward, a member of the Jasper County Board of Supervisors and a retired Maytag employee. “A lot of these holding companies buy and then try to piecemeal the company out. I wouldn’t want to see that.”

Norm Reiner said he was worried about the benefits he now receives as a Maytag retiree and what the sale of the company might mean.

“I’m a retiree, and I’m scared about the pension and the insurance,” he said.

A Maytag worker who wished to remain anonymous said while standing outside Local 997 today that he hoped the buyout would allow production workers to continue to do their jobs.

“I’m hoping whoever’s buying Maytag will do the right thing and bring some dependability back to the company,” he said. “They should divest themselves of a lot of these other products and let us do our jobs to the best of our ability — make good quality washing machines. There’s a lot of pride here at this plant.”

Chuck Crews also hoped the plant would remain in Newton.

“It looks like they could work out something,” the 36-year veteran of Maytag said. “It would make me feel bad if Maytag left.”

UAW officials were uncertain what the news meant.

Ted Johnson, the new president of UAW local 997, planned to meet with the bargaining committee today to determine the next course of action. But like others, he was waiting for more information.

“For better than a year we’ve been waiting for something to happen,” Johnson said. “Now it’s happened and it’s unclear what it means, so until we know more, it’s business as usual.”

City officials were also trying to distill the news of the pending sale.

“We’re kind of working our way through it,” said Newton Mayor Chaz Allen. “We’re going to have to have a meeting some time with all parties to understand what this means for Newton. I know we’ve got 112 years of history and pride in all Maytag products, and we want to maintain that going forward.

“This may not be a bad thing. This may be a very good thing. We just have to sit down and understand what it means.”

Council member Mike Hansen said the move took him by surprise. He was one of several local officials who met with Maytag officials a few weeks ago. The topic of the sale was not addressed.

“I was surprised. Obviously we had no knowledge,” he said. “I’m hopeful that this means no huge changes for people working there in this community. I think we have to stay positive about announcements like this until everybody knows the facts.”

Rep. Leonard Boswell said in a statement, “I am hopeful Newton’s long history of supplying Maytag with hard-working Iowans will be fully understood by the new ownership should this transaction take place.”

Maytag spokesman John Daggett said many of those details will have to wait to be decided until the sale of the company is complete. He said shareholders will be sent information on the buyout offer in the near future and that a special meeting will be held to vote on the matter.

In the interim, Daggett said, “Maytag will continue to do what it has been doing — designing, manufacturing and making products and take care of our customers.”

Maytag board member Lester Crown, whose Crown Group holds more than 5 million Maytag shares, said in the statement the deal is in the best interest of shareholders.

“After careful consideration in conjunction with our independent advisors and an independent committee of Maytag‘s board consisting of all non-management directors, we have concluded that this transaction is in the best interest of our shareholders.

“This transaction will also provide Maytag with greater flexibility as a private company to accomplish long-term goals set out for the company.”

In a statement, Ralph Hake, Maytag CEO said, “Ripplewood has an excellent track record of building value at its portfolio companies by providing strong financial and strategic support. Ripplewood is active in the global markets and brings extensive operating expertise in Asia and Europe as well as North America, to Maytag.”

Tim Collins, founder and CEO of Ripplewood, said the investment group plans to help Maytag become a global low-cost appliance manufacturer.

Maytag is a legendary company, with a portfolio of world-class brands and a long history of producing high-quality, innovative products,” he said in a statement. “We see an opportunity to leverage these strengths and build Maytag into a global leader as the fragmented home and commercial appliance industry consolidates.

“Our objectives for Maytag are to continue to take action to become a global low-cost producer and to accelerate growth by introducing innovative new products, expanding its presence in international markets and pursuing selective acquisitions.

“We very much look forward to working with Ralph Hake and his management team, employees, customers and retail partners to restore the luster that this well-known consumer and home appliance company enjoyed for so many decades.”

Maytag has faced difficulties in recent years. It closed a refrigeration plant in Illinois and moved production to Mexico, and its recently acquired Amana operation in eastern Iowa. It cut 20 percent of its salaried workforce and shutdown management operations at its North Canton, Ohio, Hoover company. It was also socked by a class-action lawsuit over problems with early generation Maytag Neptune washers and was forced to pay the litigation costs associated with a lawsuit involving Amana.

The company continues to look at its “manufacturing footprint” as it tries to compete with low-cost competitors.

Locally, company officials have met with union leaders to try to bring the Newton plant in line with some of its other manufacturing operations in terms of cost and productivity. Those discussions continue, company officials said.

Daily News staff writers John Jennings and Andy Karr contributed to this report.

Maytag slashes dividend to fund manufacturing restructuring

May 13, 2005
Maytag slashes dividend to fund manufacturing restructuring
 
Date May 13, 2005
Section(s) Local News
Brief  
 
By The Associated Press

Daily News Staff

Home and commercial appliance maker Maytag Corp. on Thursday said its board voted to slash the company’s quarterly dividend in half, effective immediately, to finance its restructuring plan and free additional cash to repay debt and fund pensions.

The 9-cent-per-share dividend is payable June 15 to shareholders of record June 1.

The company also said it will invest the additional cash in its business as Maytag steps up advertising and R &D expenses in the second half of 2005 with new product introductions.

“Today’s decision by the board to immediately reduce the dividend by 50 percent should allow the company more financial flexibility to fund our restructuring plan and to have additional cash available for debt reduction and pension funding,” Maytag Chairman and CEO Ralph Hake said. “Also, the additional cash will be invested in our business as we step up our advertising and R &D expenses in the second half of 2005 with the many new product introductions that are planned.

“The decision to reduce the dividend was not taken lightly. The board understands the importance of the dividend to our shareholders; however, it is essential that our dividend payout is more in line with current earnings trends.”

Through 2005, Maytag will finalize its plan to restructure certain manufacturing operations, including the possible closure of the Newton manufacturing facility, and determine the investments necessary to support the initiative. The restructuring may require asset write-offs and accelerated depreciation as well as cash costs and investments.

The company said it is also seeking a new credit agreement that will provide more flexibility and funding stability to meet financing requirements. Maytag said it has received financing commitments from banks for multi-year credit facilities and expects to replace its current agreement during the second quarter.

Earlier Thursday, Hake took harsh criticism from shareholders at the company’s annual meeting, but reaffirmed a plan that may include closing the company’s flagship factory in Newton and moving the jobs. Shareholders complained that exporting jobs is bad for Maytag‘s corporate image.

Hake said that the company has discussed its cost concerns with the leadership of the local union. He said the company is in the process of determining where to build a new line of high-efficient Neptune washers and said he would “like to build them here” (in Newton) but if the Newton membership “chooses to continue its current wages, benefits and work rules, we will not be able to make that investment here.”

He said the plant would remain open at least until the current contract expires in July 2008. The corporation’s headquarters, he said, will remain in Newton as long as he remains CEO.

Maytag shares fell 1 cent to close at $10.48 on the New York Stock Exchange. It was up 59 cents to $11.07 in early trading today.

Preemptive warning

May 13, 2005
Preemptive warning
 
Date May 13, 2005
Section(s) Columnists
By Peter Hussmann Editor  
 
Two weeks ago, Maytag fought back from the negative press coverage it was receiving over its first quarter results by sending a note to employees that the situation was not as dire as being said by some in the media. The quarter saw a profit, market share gains had been made and efforts were under way to address additional cost and structure problems within the company, the letter to employees said.

The company took the issue a step further last week by writing a cautionary note to employees about potential inaccuracies in a not-then-released news report on the company — a sort of preemptive warning of potential fallacious reporting.

I mention this only because the company urged employees to “please feel free to make copies of this document and share them with your family, friends and neighbors who may have an interest in understanding the real truth about Maytag.”

Well, I do, someone did and here you go.

“As you are well aware,” the memo to employees went, “since Maytag reported its first quarter sales and earnings, the corporation has been inundated with negative media coverage, much of which has been inaccurate. As employees, this has been understandably distracting and possibly even confusing — that’s why we have been attempting to set the record straight with the right information that you deserve to have.

“In the spirit of that effort, we are letting you know in advance that we anticipate that The Des Moines (Register) will carry a large story on Maytag in its Sunday, May 8, edition. Given what we know about the reporter’s focus, we expect that this article might also contain inaccuracies … of the facts concerning our business and our future.”

The accompanying note signed by CEO Ralph Hake goes on to say many of the same things mentioned in last week’s column — Maytag is profitable, has many new products in the pipeline, it intends to “move swiftly and aggressively to bring our costs more in line with our competitors in terms of production, benefits and wages,” plans to meet with unions in hopes of negotiating “substantial changes that will reduce manufacturing costs at certain plants” (i.e. Newton and North Canton) and it expects to prove its critics wrong.

Again, more interesting spin coming out of the Newton headquarters in response to the recent negative press.

——

DURING THE SHAREHOLDER’S meeting on Thursday, one person asked why Maytag did not attempt to follow the lead of Harley Davidson and attempt to position itself in the same American icon mold.

Good idea, Hake agreed, but for a couple of problems.

First, he noted to reporters at a press conference following the meeting, is that Harley Davidson is sold to buyers through dedicated retail outlets. Maytag products, however, are sold at the wholesale level to numerous big box retailers which have leverage in negotiating prices at the same time demanding a full spectrum of product price points for consumers. While Maytag is able to get premium prices for several of its product lines, just like Harley Davidson, the differences between the “utilitarian” products Maytag produces and the recreational products Harley makes separate the products to such a degree that Maytag is not able to solely play the American icon game available to the Milwaukee-based motorcycle company.

MR. HAKE ALSO MADE a comment during this discussion that gave me pause and likely will be the subject of some additional newsprint in the coming months.

Whereas Harley Davidson has been able to generate a cooperative understanding with its unions in bringing product to market and facing its competitive pressures from foreign-made road bikes, Maytag has “chosen to have conflict when necessary” with its unions to address its production cost concerns, he said.

The CEO did not expand on the comment during Thursday’s brief meeting with reporters — and to be fully forthright, no follow up questions were asked about the comment — but I assume (and you know what that means) the collision course between the realities of manufacturing in America today and the union’s long-held place as the protector of the dignity of the American worker may not be able to be diverted.

Hopefully, that will not be the case.

Analyst recommends withholding votes on Maytag directors

May 10, 2005
Analyst recommends withholding votes on Maytag directors
 
Date May 10, 2005
Section(s) Local News
Brief  
 
DES MOINES (AP) — A corporate analyst said Monday that Maytag shareholders should withhold their votes on four directors seeking re-election at the company’s annual meeting, citing poor returns and decreased stock price.

Withholding the votes at Thursday’s meeting would send a message that the board “needs to become more involved in the company’s planning,” said Jim Melican, managing director for policy with Vienna, Va.-based PROXY Governance.

Those directors up for re-election are Barbara R. Allen, a director since 1995 and a partner with The Everest Group, a strategy consulting firm.; Howard L. Clark, a director since 1986 and vice chairman of Lehman Brothers, Inc.; Lester Crown, a director since 1989 and chairman of Material Service Corporation; and William Kerr, a director since 1998 and chief executive officer of Meredith Corp.

The directors will be elected for either one- or three-year terms depending on the outcome of a shareholder ballot item which calls for directors to be elected on an annual basis from a classified basis. The board of directors is recommending shareholders approve the change.

Proxy’s report suggests a shake up in Maytag‘s management is needed because the company’s stock is trading at a 14-year low, dropping from more than $45 per share in April 2002 to the $10 range.

“We can’t imagine the directors aren’t saying at every meeting, ‘What are we doing about this?”‘ Melican said.

Melican said shareholders seemed to send a message last year by withholding an unusually high percentage of votes for three directors.

The report also cited the appliance-maker’s failure to meet internal targets.

Maytag produces appliances under the Maytag, Amana, Hoover, Jenn-Air and Magic Chef brand names.

Maytag stocked was up 23 cents to close Monday at $10.37 per share on the New York Stock Exchange. It was down 8 cents at midmorning today.

Newton Daily News Editor Peter Hussmann contributed to this story.

Government officials discuss newton plant future with Maytag executives

May 9, 2005
Government officials discuss Newton plant future with Maytag executives
 
Date May 09, 2005
Section(s) Local News
Brief  
 
By DAVID PITT

Associated Press Writer

Newton Daily News Staff

Government officials emerged from a meeting with Maytag Corp. officials on Friday saying they planned to continue to discuss the future of central Iowa manufacturing jobs with the appliance company.

“By sitting around the table, federal state and local governments, management and labor, all in the same room you can create the opportunity to begin to find ways to mutually help each other and today was the start of it,” said Mike Blouin, director of the Iowa Department of Economic Development.

The meeting was called by Rep. Leonard Boswell, D-Iowa, who said there was an open discussion with company and union officials.

Boswell said Maytag CEO Ralph Hake was among those present.

Hake told analysts last month that the company was studying the future of manufacturing in Newton, which he has said is the company’s most expensive plant to operate. He suggested work could be transferred to lower cost plants in the United States. The company also has manufacturing operations in Mexico.

Maytag has about 1,300 workers making washers and dryers in Newton, where the company also has its corporate headquarters.

Boswell said he’s concerned about losing the Iowa jobs.

“We’re always concerned about jobs, that’s natural,” he said. “We want this company to continue to be here, be solid and not be solid only in Newton, but in our state and our country. They have been very viable and it’s my opinion that they still are.”

Blouin and Boswell were not specific about how the state or federal government could help keep the jobs in Newton.

“Today was a step to have good communication. We had a good meeting.” Boswell said, “We’re going to go off and digest it and probably talk some more.”

Blouin said Maytag could be eligible for state funding from economic development programs if it were to add new products to its manufacturing plants here.

“Everybody’s going to think about what we can do collectively,” he said. “I think everybody in that room wants to keep jobs in Iowa — keep Newton strong.”

Maytag spokesman John Daggett said after the meeting the company shared its challenges “in the very competitive global appliance marketplace and the particular business challenges we face at the Newton laundry plant.”

He said the company will hold discussions with the UAW and finalize plans over the next several months.

“We will then discuss those plans with the government officials before final decisions are made and announced later this year,” Daggett said.

Newton City Council member Mike Hansen found the meeting informative.

“I got a great education on what it means to operate a global corporation,” he said, adding that Maytag officials recognized the Newton plant as the “mother factory” and “they want it to be here for years and years to come.”

Maytag will hold its annual shareholder’s meeting at 8:30 a.m. on Thursday at the DMACC auditorium.

Newton Daily News staff members Andy Karr and Peter Hussmann contributed to this story.

Ralph fights back

May 6, 2005
Ralph fights back
 
Date May 06, 2005
Section(s) Columnists
By Peter Hussmann Editor  
 
Ralph Hake appears to have had enough. Last week, the CEO attempted to stop the bleeding and reassure workers that Maytag was not on the final rinse cycle.

In the week following the release of Maytag‘s first quarter results — where earnings were off 80 percent from the same period a year ago — Hake stood by as business analysts took turns telling shareholders their take on the reasons for Maytag problems, which pushed stock prices to 15-year lows.

“Apparently there’s a new washing machine setting: the tailspin cycle,” wrote David Meier on the Motley Fool investment Web site. “On Friday, Maytag found that setting a bit harsh on the threads, as its shares fell $4.21, or 28 percent, to $10.89.”

“Last Friday, Maytag Corp., shocked investors by missing first-quarter profit estimates by a proverbial country mile and slashing its outlook, and then suffered the indignity of having its bonds downgraded to junk status and questions raised about the long-term viability of this American icon,” wrote Angela Barnes under a headline titled “The Maytag repairman sure has his work cut out.”

“With sales flat, retailers starting to drop its products and debt load weighing the company down, one analyst figures Maytag “is a 2-inch putt from bankruptcy,” wrote Michael V. Copeland in “Business 2.0.”

“We believe it may be too late to salvage this company as an independent player in the major appliance business,” analyst David MacGregor wrote in a report.

And analyst Nicholas Heymann likely put Mr. Hake over the edge when he wrote to investors that “nobody ever wants to see a great company slip away to irrelevance and possibly cease to exist. Maytag‘s franchise in the market simply seems to be slipping away faster than the company has the resources to rebuild and recapture it.”

Stop Already, Hake seemed to Say. In a letter to Maytag employees written late last week — and circulated fairly widely in the community this week — Mr. Hake put his spin on the factors causing Maytag‘s stock drop and the company’s continuing plan toward a business turnaround.

“Many of the analysts’ reports that have been written following our release of earnings have not been favorable,” the letter to Maytag employees states. “This is concerning for a number of reasons. First, it is important to remember that the basic role of analysts is to study the financial performance of a company and then recommend to investors whether to ‘buy,’ ‘hold’ or ‘sell’ its stock. Those that recommend ‘sell’ do not usually make positive comments.

“As a publicly held company, we must realize that we are subject to criticism — and I respect the thoughts of those whose job it is to write about our business.

“However, in reviewing much that has been written about us recently, I believe there to be a real lack of understanding of our situation and solutions to our issues. With respect to the analyst community, I would challenge many of their opinions and comments as being speculative or extreme. The mere suggestion by an analyst report of Maytag possibly entering into bankruptcy is totally misleading and inappropriate. What is true is that we are a profitable company with strong cash flow that is reducing our debt each year.”

OK, no blood pours from the nose of any analyst from that retort, but Mr. Hake can be seen standing up to the onslaught just the same.

The Maytag CEO goes on to try to calm nervous employees.

“I know that people are concerned so I feel that it is important to provide you with my perspective and appropriate context,” Hake wrote.

“It’s important that you understand a few facts. As I emphasized during our recent meeting session, our overall performance during the first quarter really wasn’t as bad as the headlines suggest. Our sales were down, but we must remember that the common Wall Street barometer measures only a year-over-year comparison, and we did very well in the first quarter 2004. Our sales trends are showing improvement.

“I believe the real reason for most of the negative press is due to our lower earnings-per-share (EPS) guidance for the remainder of the year. We lowered our outlook on the remainder of 2005 because of the fact that we did not see the pricing actions that we took in January providing us with the top-line boost that we had anticipated, as well as the higher fuel and energy-related raw material costs that we continue to face.”

Hake goes on to dismiss specific claims made by analysts.

He says Maytag market share gains show “consumers believe in, and are buying, our brands.” Company “debt levels are down $126 million from the prior year.” Standard & Poor recently gave Maytag a “stable” outlook, a “vote of confidence,” according to Mr. Hake.

Further, Maytag plans to introduce some 30 new product launches under the One Company organization in the coming months, he said.

While the letter appears to be directed to employees company-wide, Mr. Hake makes a couple of comments of particular importance locally. However, the specifics behind the comments are unclear and give little insight for the future of operations in Newton.

“We have identified several initiatives associated with manufacturing, retiree health care and raw materials that will allow us to further bring our costs in line,” Hake wrote.

“We are moving forward on a new credit agreement to fund our manufacturing restructuring and refinance our 2006 debt maturities.”

Mr. Hake tries to end on a reassuring note.

“Clearly our business message to our external audiences is interpreted in a skeptical and sometimes negative manner,” he wrote. “In the end, however, we must realize that our actions will speak louder than any words possibly can. We must continue to demonstrate sequential, quarter-by-quarter improvement in sales, market share and profitability.

“Looking forward, let’s not allow ourselves to become distracted by inaccurate headlines. I encourage you to stay focused and to continue to support our customers and your co-workers who may have a more direct impact in the marketplace. As I said in the employee meeting, sell more or help those who sell, to sell more. Together, we’ll continue work toward our business turnaround and give our critics something they can really write about.”