Shareholders vote to sell

Shareholders vote to sell
 
Date December 22, 2005
Section(s) Local News
Brief  
 
By PETER HUSSMANN

Editor

and ANDY KARR

Staff Writer

As expected, shareholders today approved the sale of troubled appliance manufacturer Maytag to rival Whirlpool in a $1.7 billion cash and stock offer.

Maytag, in a five-minute special meeting at the Sodexo DMACC Conference Center this morning, announced preliminary results that showed overwhelming support for the merger. Of the 56 million votes cast in advance of today’s meeting, 97.8 percent of the votes were cast in support of the merger. There are a total of 80 million shares outstanding. A final tally will be released later.

Shareholder approval of the sale was one of the two remaining steps for the merger to move forward. The antitrust division of the U.S. Justice Department is reviewing the merger proposal and needs to lend its approval before the takeover can be finalized. Maytag and Whirlpool have said closure on the deal will not be completed prior to Feb. 27, 2006, or later depending upon federal regulator approval.

Maytag Chairman and CEO Ralph Hake, in brief comments prior to the preliminary vote announcement, thanked the generations of Maytag employees who helped build the company into an American icon.

“I would like to acknowledge the many generations of Maytag employees who contributed to this American icon,” he said. “I want to thank you for your hard work. This company was built with integrity.”

But, he noted, shareholder approval of the sale could mean “painful” changes for workers and the community.

“We have to have an ending to have a beginning,” he said. “We need to proceed with optimism.”

The DMACC auditorium was packed to overflowing as shareholders, many former Maytag workers, waiting to here the fate on the historic vote to end the Newton-based American icon.

Most of the shareholders in attendance indicated they voted in favor of the merger, although those who spoke to the Daily News said they did so with a heavy heart.

Retired Newton stockbroker Richard Means was one of those shareholders.

“It’s in the best interest of the company, probably not for the community,” he said, adding that he saw no other option for Maytag at this point.

Ed Smith of Newton worked for Maytag for nearly 38 years as a tool and dye maker. He faulted recent management for Maytag‘s falling share prices and ultimate sale to Whirlpool.

“It seems that everything went downhill pretty quick,” he said. “It’s a sad thing to see what’s happening.”

Former UAW president Lonnie White huddled with other Maytag retirees and shareholders on the sidewalk outside DMACC in what they called a “silent protest” — not a protest of the sale, but what they view as poor management over the last 15 years that led Maytag to today’s merger.

“I think the board of directors should be investigated for allowing the management to do what they did to the company,” White said.

While the sale itself had members of the group shaking their heads, they said they voted in favor of the move. For them, there was no other option.

“I’d just as soon see it go to Whirlpool as Electrolux or General Electric — or China,” White said. “If there had to be a buyer, I prefer Whirlpool. It’s just sad that it’s got to be sold.”

The thought of the Newton-founded Maytag leaving the community that drove it into a Fortune 500 corporation is perhaps the bitterest pill to swallow.

“Five minutes for a 112-year-old company,” White said, shaking his head at the brevity of today’s meeting.

Cristina Nedrow, spokesperson for the machinist’s union, which represents Maytag employees in Herrin, Ill., issued a statement saying, “Despite the tremendous drop in stock price, sales, profitability — Hake and clan got a windfall … In total, without the most recent additional stock option grants, the top executives are expected to obtain a windfall totaling $26.5 million. This begs the question, was this intentional?”

Maytag has seen its position in the appliance marketplace slip in recent years due to the influx of foreign competitors. It has attempted to cut costs to remain competitive, slashing 20 percent of its salaried workforce last year, closing a refrigeration factory in Illinois and moving the product to Mexico and Amana and announced the closure of another washing machine factory in South Carolina. Maytag lost $18 million in the last quarter.

Maytag has long said the Newton plant has been its highest cost operation and last year said no new product platforms would be launched from the facility until a number of factors, including costs, were trimmed. Workers at the plant went on strike for three weeks in the summer of 2004 before agreeing on a four-year contract that contained a number of cost-saving concessions, including the assumption of additional health care costs. Maytag said the concessions were still not enough to allow Newton to be considered for new product platforms and began a program to concentrate specific product platforms at lower cost facilities.

The future of Maytag operations in Newton are uncertain pending the outcome of the merger. In information provided in the shareholder proxy statement concerning the sale, Maytag put together future financial forecasts based on the closure of its Newton washer and dryer facility and its North Canton, Ohio-based Hoover vacuum unit. Its Florence, S.C., washing machine factory, acquired with the acquisition with Amana, also was targeted for closure, an action Maytag has already taken.

Most appliance industry analysts believe positions at Maytag‘s headquarters will be eliminated as part of the transition into Whirlpool. What the future holds for the production facility in Newton remains unknown though local labor representatives have said they would be willing to work with Whirlpool in an effort to retain local jobs.

UAW Local 997 President Ted Johnson said the union looks forward to the possibility of increasing its local operations.

“It’s an exciting time. We want to rejuvenate this plant and this community and the UAW is wholeheartedly interested in engaging Whirlpool,” he said. “I think our people pretty much sell themselves. That plant is operating at 30 percent capacity. We’ve got the capacity. We’ve got the manpower.”

If local Maytag operations in Newton should close following completion of the merger, the big question is just how bad it will be?

On the surface, the loss of some 2,000 local jobs could be expected to buckle this community of 16,000 people. But a number of factors indicate that Newton is in better shape to weather the blow than it would first appear.

In the last few years, Maytag has already shed some 2,000 local jobs at its factory and headquarters facilities. At the same time, U.S. Census data shows the community growing. Birth rates at Skiff Medical Center are on target to surpass the record of 260 in 1978. The number of school children entering the district also has shot up, forcing the district to expand the number of sections offered. Student enrollment figures this year showed growth for the first time in several years.

Newton’s housing market also remains strong. Although the number of homes on the market has increased, buyers are still out there and paying higher prices for the properties.

“Through November, we’ve sold more homes, for a substantially higher price, than we ever have,” said Dennis Combs, a local realtor and member of the Newton Community Board of Education. “Buyers are still out there.”

Newton Mayor Chaz Allen said today that Newton is working to expand and diversify its economy at the same time offering a hand to Whirlpool to become a part of the community.

“With this vote, as one of the first steps in the successful Whirlpool acquisition of Maytag, our community stands ready to work with Whirlpool to retain and expand employment in Newton,” he said.

Allen said the city also is working locally, and also in collaboration with state and federal officials, on new initiatives to spur growth. He said Newton plans to aggressively pursue recruitment of all facets of business activity. He cited recent discussions on the establishment of a venture capital fund to assist local business entrepreneurs, the possible use of a local option sales tax to spur development opportunities and a new regional marketing effort comprised of a five-county east central Iowa consortium.

“We have a long and successful history of partnering with businesses looking to locate in our community,” he said. “If you are a business considering relocation or expansion, we invite you to take a look.”

Allen also said the development of the Iowa Speedway in Newton will serve as a catalyst for additional development. The $70 million facility is under construction with races slated for late next summer.

“Though it is not yet certain what effect the purchase of Maytag by Whirlpool will have, the addition of the Iowa Speedway, the multi-million dollar expansion of the airport and an ideal location in the center of Iowa directly on Interstate 80 gives Newton a strong base from which to build a future full of promise,” he said.

Newton Development Corporation Executive Director Kim Didier sees this morning’s meeting as just another step in the merger process.

“I think everybody is hoping that the process is as short as possible,” she said. “It’s nice to get to the next step and move the process along.”

NDC is examining different options that could help influence Whirlpool to keep jobs in Newton once the merger is finalized. Options discussed include capturing revenue with a 1-cent Local Option Sales Tax and working with the state to put together an incentive package to keep or lure jobs to Newton.

“We’re poised to do what we can in making a very convincing argument to Whirlpool,” Didier said. “In addition, we’re also working on other things around the community, around entrepreneuralship.”

Didier noted that Newton has a lot to offer potential employers, like the recently renovated Newton Airport, which can handle corporate jets; new developments like the Iowa Speedway and a great neighborhood-based school system.

As time goes by and the community becomes more accustomed to the idea of life after Maytag, its easier for Didier to get people to see the potential for positive changes.

“I think significant change always brings some anxiety, but as people can learn to live with it and see the positive, it gets better and better,” Didier said. “We’re not only surviving, we’re thriving and that’s what we need to let people understand.”

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