Lovell: Amid slump, Maytag’s Hake moves quickly
There has been precious little good news from Maytag Corp. in recent weeks. Profits are down and so is the company’s stock price. Industry sales are slumping. Competition is rising.
At least 500 salaried workers are going to lose their jobs soon. Other employees at the appliance maker’s Galesburg, Ill., plant will be cut as that factory’s manufacturing is moved to Mexico and other factories.
Last week, the company’s woes reached a new apex when Maytag announced that Keith Minton, head of its floor-care division, had suddenly “retired.”
Though Minton has worked at the company since 1969, it’s more probable that Maytag Chief Executive Ralph Hake lopped his head off for failing to deliver improving results.
The announcement came a week after Hake singled out Minton’s unit, best-known as the maker of Hoover vacuum cleaners, as one of the primary reasons the company’s first-quarter profits tumbled 39 percent from a year earlier.
“Industrywide sales of floor-care products were down dramatically in the first quarter, and sales volume, pricing and mix of our Hoover floor-care products sharply declined,” Hake said in a statement.
This is one of Hake’s most trying moments in his two years as head of the nation’s No. 3 appliance manufacturer. He’s likely to be tested once more in May when the company hosts its annual meeting in Newton. Last year, amid the burgeoning shareholder activism that grew out of the scandals at Enron Corp. and WorldCom Inc., Maytag management lost several votes on shareholder proposals.
It isn’t yet clear how shareholders will behave this year. The bulk of America’s publicly traded companies haven’t yet held their annual meetings. On Wednesday, General Electric shareholders nearly passed two measures that would have boosted manager’s accountability.
With the Dow Jones industrial average down for a third consecutive year and the occasional corporate scandal still popping up, Maytag’s stockholders are probably going to be just as active as they were last year.
Items on Maytag’s ballot this year include electing all board members annually, letting shareholders vote directly on takeover attempts and requiring executives to hold on to 75 percent of their stock until their employment at Maytag ends.
Maytag’s stockholders have reasons to be upset. The company’s shares have fallen 55 percent in the past year and are trading at their lowest level in more than five years. Roughly $2 billion in market value has been wiped out in the past year.
The drop means that many of the company’s stock options, given to employees to provide motivation, are below their strike price and currently worthless.
Despite the troubles, or perhaps because of them, Hake last week bought 15,500 shares of the company’s stock, spending roughly $300,000 to do it. This wasn’t a company grant. Hake spent his own money, bringing his total stake to nearly 70,000 shares. It was a strong show of confidence, even if the stock market shrugged it off.
Hake made another move last week that will draw considerable investor interest over the coming months: appointing Thomas Briatico as Minton’s successor as president of the floor-care division.
Briatico is widely credited with returning Dixie-Narco, Maytag’s vending machine-making division, to profitability by embracing innovation and winning new customers. He has a strong record of success, and an extensive background in the financial side of the business.
“Tom’s got a heck of a row to hoe,” said Laura Champine, an analyst at Morgan Keegan, who has a “market perform” rating on Maytag’s stock. “But he’s in the process of engineering a very impressive turnaround for Maytag’s vending business.”
Part of Maytag’s problems stem from its cost structure. For the first quarter, the company said its cost of sales rose 2 percent, even though sales fell 3.5 percent. Moving some production to Mexico is expected to help. All told, Maytag hopes to slash expenses by $40 million this year and by $65 million each year afterward.
The speed of Minton’s fall, coupled with the other recent moves, indicates that Hake is losing patience with Maytag’s status quo. As he puts a more active hand on the tiller, the news that comes out of Newton over the next year will likely be anything but sleepy.
Des Moines Business Record staff writer Michael Lovell writes a weekly column on business issues affecting Greater Des Moines. He appears on Sunday mornings to talk about business trends on WHO-TV. Contact him at 288-3336 or by e-mail at email@example.com.