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Maytag Restructures Operations To Cut Costs

Maytag has undertaken a sweeping corporate restructuring designed to resuscitate its ailing floor-care business, streamline operations, cut costs and position major appliances for further growth.

The self-described “one company transformation” folds Maytag’s corporate operations and formerly freestanding Maytag and Hoover business units under a single sales and marketing umbrella that includes the Maytag, Jenn-Air and Amana majap brands, the Hoover floor-care portfolio, plus a group comprised of Maytag housewares and Hoover diversified products.

As a result of the consolidation, Hoover’s headquarters in North Canton, Ohio will be reduced to a manufacturing and research and development site, and about 20 percent of the salaried workforce will be cut company-wide. Corporate headquarters will also be downsized, the company said, for a total headcount reduction of 1,100.

Also eliminated is Bill Beer’s post as president of Maytag Appliances and Tom Briatico’s role as president of Hoover, along with their respective senior staffs. Beer and Briatico are being reassigned to the Office of the President, a new structure, although their responsibilities are “indeterminate at this time,” CEO Ralph Hake said in a conference call.The restructuring, to be completed by year’s end, is expected to save $150 million annually and help achieve the goal of an 8 percent operating profit margin by the first quarter of 2005. Maytag will also incur estimated restructuring charges of $75 million to $100 million in severance costs and the disposition of underutilized assets.

“This restructuring will cause hardship and challenges for many of our employees and their families,” Hake said. “However, in order to succeed and grow, Maytag must rapidly reduce costs and improve market execution.”

He said the consolidation will eliminate redundancies across the organization in such areas as logistics, IT, human resources and finance, and will also yield savings in infrastructure costs.

The re-organization will also make it easier for retailers to do business with Maytag by presenting them with one sales force and one marketing organization, Hake noted. He explained in the conference call that Hoover’s top four accounts, Sears, The Home Depot, Lowe’s and Best Buy, are also the appliance group’s largest customers, and that going forward floor care specialists would be joining the dedicated appliance sales teams that call on those and other chains.

As a result, “Maytag will be a much leaner organization, capable of better serving customers and more rapid decision making,” Hake said.

Separately, Maytag lowered its earnings outlook for the full year as a result of lower than expected sales at Hoover and Maytag Appliances, higher steel and resin costs, and lower factory volume as the company works down excess inventory.

Within a week of announcing the structural overhaul, Maytag was also hit with a strike by union workers at the company’s washer and dryer assembly plants here. The action, prompted by disagreements over employee health care contributions and other benefits, followed the expiration of an existing contract on May 31. Both sides had reportedly prepared for the walkout months in advance by stockpiling inventory and family savings.