NEW YORK – Appliance maker Maytag Corp. (MYG) will cut about 20 percent of its salaried work force and merge its Hoover unit with other products in a major restructuring to improve competitiveness, it said on Friday.
The company also said full-year earnings would fall far below its forecast as Maytag takes charges from the restructuring. Maytag also said second-quarter profit would fall short of its outlook.
Maytag share slid 7.8 percent in early trade on the New York Stock Exchange.
"I think it's a very aggressive restructuring move that's going to significantly improve the cost structure," said Eric Bosshard, an analyst for FTN Midwest Research (search). "The downside of the equation is that there is obviously still some fundamental challenges in the floor care business and some headwinds in the major appliance business."
Operations at Hoover's North Canton, Ohio, facilities, a major manufacturing center, will be reduced, and staff at Maytag Appliances and its corporate headquarters will be trimmed, the company said.
Hoover will join existing units, such as Maytag and Jenn-Air (search), within the company's marketing organization, as the major appliance and floor care businesses serve many of the same customers, Maytag said.
After the announcement, Fitch changed its outlook on Maytag to negative from stable, and affirmed its 'BBB' senior unsecured and 'F2' commercial paper ratings.
"While credit statistics remain well in line with the current rating category, Fitch is concerned by Maytag's continued restructuring efforts, which to date have produced limited results," Fitch said.
Newton, Iowa-based Maytag expects to save $150 million annually from the restructuring, expected to be completed by the end of 2004.
Company officials were not immediately available to comment on the job cuts. Maytag is hosting a conference call later this morning.
The company said it reduced the second-quarter and full-year outlooks due to lower-than-expected sales volume at Hoover and Maytag appliances, lower factory output as it tweaks inventories and higher steel and resin costs.
For the full year, it now expects reported earnings of $1.00 to $1.10 per share, reflecting charges of about $1 per share for the restructuring and the previously announced closure of a Galesburg, Illinois, plant. Maytag did not provide guidance for the second quarter.
Analysts, on average, forecast a profit of $2.30 per share this year, according to Reuters Estimates.
Fitch said Maytag's earnings could be further affected by ongoing labor negotiations at its Newton, Iowa, manufacturing facility.
While Maytag continues to see progress in the talks, "the potential impact of the outcome is unclear," Chairman and Chief Executive Ralph Hake said in a statement.
Maytag share slumped $2.04 to $24.25.
Its washers, dryers, refrigerators, cooking appliances and vacuums are sold under such brands as Amana, Admiral, Magic Chef and Maytag.