Maytag has set Dec. 16 as the date for shareholders to either endorse or vote down the company's proposed acquisition by Whirlpool.
In a conference call, Ralph Hake, chairman/CEO, said he expects both shareholders and the Justice Department to approve the merger agreement, and anticipates that the transaction will close as early as the first quarter.
Regardless of the outcome, Maytag must “significantly improve our overall performance,” Hake said, and is working to “fix the business” by reducing excess manufacturing capacity stemming from increased outsourcing.
Sourced products represented about 20 percent of Maytag's major appliance sales during the third quarter, primarily in laundry and top-mount refrigerators, while over 30 percent of the company's floor-care unit volume came from sourced merchandise, he said. Outsourcing permits growth and rapid innovation with reduced R&D and capital commitments, he noted, but the resulting underutilization at Maytag's four laundry and three floor-care factories negatively impacts profitability.
To address the problem, Maytag concentrated production of top-load washers at its plant in Herrin, Ill., and dryers at its facility in Searcy, Ark., during the quarter. Besides improving plant utilization, the move is expected to lower costs, improve overall product quality and simplify the product lines.
Hake described the action as only a first step toward lowering production costs, which he plans to achieve by further consolidating production, and by redesigning and outsourcing products. The manufacturing restructuring will be financed with a $600 million secured revolving credit facility, which is expected to close in the early fourth quarter.
At the same time, Maytag plans to launch “several new and innovative, high-impact products in the coming quarters,” Hake said, which include “significant offerings in the refrigeration, floor-care and dishwasher categories that we expect to have meaningful, positive impact on our marketplace position.”
During the third quarter Maytag “held its own” in market share year-over-year, he said, based on industry growth of 3.8 percent in five core categories as reported by the Association of Home Appliance Manufacturers (AHAM). The statement was later amended after AHAM adjusted Core 5 appliance unit shipment growth upward to 4.7 percent for the period, which outpaced Maytag's 4.1 percent unit shipment growth in the third quarter. After incorporating similar adjustments for the second quarter, Maytag's second-quarter shipments were in line with industry growth, rather than exceeding industry growth as referenced in Hake's remarks.
Nevertheless, Maytag's 6.5 percent gain in top-line sales during the third quarter indicates that “clearly, customer and consumer demand for our brands and products continues to be strong,” Hake said. “Winning in the market is the first necessary step to recovery. Rapidly improving our cost structure is second.”
In other Maytag news, the company has been reimbursed by the supplier of 5,000 front-load washers sold from April through May that were voluntarily recalled, and Maytag indicated that a quality issue on a sourced refrigeration product stored in its warehouses and distribution centers was discovered late in the third quarter.