AABP Award 728x90

Maytag to cut 500 salaried workers; first-quarter profit sinks


Maytag Corp., the No. 3 U.S. maker of appliances, said first-quarter profits slid 39 percent and that it would eliminate about 8 percent of its salaried positions in a bid to slash costs by an additional $20 million this year. Its shares fell 14 percent Wednesday.

The company said about 500 salaried workers would lose their jobs by June and that it expects a second-quarter charge of about $20 million related to the reductions. The company has about 20,900 workers, roughly 6,400 of whom are salaried.

Maytag is getting pinched worse than expected amid an industrywide slump in demand for washers, dryers and floor-care products. The manufacturer of Hoover vacuum cleaners said sales from its floor care unit were “down dramatically” in the first quarter and that sales of its major appliances slipped more than expected. Planned cost reductions weren’t enough to offset rising costs in some areas.

“Cost increases for steel, pension and health care were expected to be offset by cost reductions, but these actions were insufficient in the first quarter,” said Ralph Hake, Maytag’s chairman and chief executive, in a statement.

The price for Maytag’s shares fell about $3.14 to $18.72 on Wednesday, the day of the announcement. They had declined about 58 percent in the past year, including Wednesday’s drop.

The company warned on March 11 that first-quarter profits and sales wouldn’t meet analysts’ expectations, largely because of slumping demand for its floor-care products. Without providing specific earnings guidance, the company said operating earnings in February were about 25 percent below expectations.

Maytag hopes to save $40 million this year by streamlining logistics, benefits and its workforce. It anticipates those savings will grow to $65 million annually after this year.

For the first quarter, net income fell to $34.5 million, or 44 cents per share, from $56.8 million, or 74 cents, a year ago. Analysts polled by Thomson First Call had expected profits of 57 cents. Sales were $1.14 billion, down slightly from $1.18 billion a year ago.

For the full year, the company said it expected to have per-share profits of $1.80 to $1.90, including a charge of 50 cents related to the closure of its Galesburg, Ill., manufacturing plant and the workforce reductions announced last week. That forecast is well below the $2.73 average estimate of analysts polled by First Call.  

nyemaster web 080123 300x250