Maytag challenges lawmakers’ letter to Justice

Maytag challenges lawmakers’ letter to Justice
 
Date January 16, 2006
Section(s) Local News
Brief  
 
By PETER HUSSMANN

Editor

Maytag Corp. expressed disappointment over a letter sent to the U.S. Justice Department by two members of Iowa’s congressional delegation asking that it block the planned sale of the Iowa-based manufacturer to rival Whirlpool.

In a statement released Friday afternoon, Maytag said the two lawmakers, Sen. Tom Harkin, D-Iowa, and Rep. Leonard Boswell, D-Iowa, were ignoring “the fundamental realities of the appliance industry.”

On Thursday, Harkin and Boswell sent a letter to attorneys in the Justice Department saying they are “very troubled” by the merger plan and the unfair market advantage the combined companies would have within the North American appliance industry.

“Along with the uncertainty of the future of the Newton plant, this proposed buyout may be bad for consumers across Iowa and the country,” Boswell said in announcing delivery of the letter to federal regulators asking that the move be blocked. “The Justice Department needs to thoroughly and quickly examine all the issues.”

In its response to the lawmakers’ antitrust concerns, Maytag noted that the four largest U.S. retailers now control more than 65 percent of U.S. appliance sales and “exert tremendous pressure on appliance suppliers to be competitive on price and features.” The 112-year-old Newton-based company also said foreign competitors like LG, Samsung, Haier and Bosch-Siemens are expanding rapidly at these and other retail outlets.

Maytag said the planned merger, which is currently being reviewed by the Justice Department, would result in “significant efficiencies” that will make a combined company better able to compete with the growing foreign influx of appliance products, as well as its traditional U.S. rivals. The company also disputed marketshare figures cited by Harkin and Boswell in their opposition to the merger calling them “significantly overstated.”

While the lawmakers’ letter to the Justice Department focused on antitrust concerns, Boswell later said his intention was to get some sort of commitment out of Whirlpool that Maytag jobs would remain in Newton and other production and distribution facilities in Iowa.

“I’m very concerned about the workers,” Boswell said when contacted late Thursday. “There are no assurances Whirlpool gives a hoot about Newton.”

The two lawmakers said that if the Justice Department decides to approve the merger, it should at least require Whirlpool to divest itself of Maytag laundry operations to a buyer willing to continue operations.

Maytag reiterated its statement that its plants need to be cost competitive to continue to operate. For years it has said its Newton facility is its highest cost center and financing projections used in the merger agreement forecast future earnings based on closing the Newton plant. In addition, the North Canton, Ohio, Hoover plant is contemplated for closure. Maytag announced plans to close its Florence, S.C. plant late last year.

“Through their letter, it is obvious that Sen. Harkin and Rep. Boswell are concerned about job loss in Iowa,” Maytag said in its statement released on Friday. “However, it is important to note that whether or not a transaction occurs, the tough environment in which appliance industry manufacturers operate will continue to impact employment levels at facilities that are not cost competitive.”

Federal regulators are reviewing Whirlpool’s $21 a share, $1.7 billion offer to purchase Maytag. Maytag shareholders approved the sale at a special meeting in Newton just days before Christmas.

Maytag‘s top executives stand to make millions if the merger is completed as part of the termination clauses contained in their contracts. Maytag CEO Ralph Hake is expected to garner more than $20 million while numerous other executives will make more than $2 million each.

Stock analysts covering the industry say if the merger is not completed, Maytag would likely be unable to continue to operate as an independent company much longer.

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