Maytag Corporation Business Information, Profile, and History

Company Perspectives

The combination of Whirlpool and Maytag will create significant value for our shareholders and direct benefits for consumers, trade customers, employees and shareholders. Whirlpool, together with the Maytag brands, will continue to provide the highest-quality products to consumers around the world.

History of Maytag Corporation

Maytag Corporation, purchased by Whirlpool Corporation in 2006, manufactures washers, dryers, refrigerators, ranges, cooktops, irons, freezers, wall ovens, microwaves, disposers, dishwashers, central heating and cooling, and water heaters. In 2005, its Home Appliances business segment was responsible for over 95 percent of company sales. Its products are sold under the Maytag, Amana, Hoover, Jenn-Air, and Magic Chef brand names. Whirlpool secured its position as the leading home appliance manufacturer in the United States after its acquisition and integration of Maytag. A well-known and successful company since the late 1800s, Maytag will continue to operate as a brand of Whirlpool.

Origins

Maytag Company was started by Frederick Louis Maytag and three partners in 1893 to produce threshing-machine band cutters and self-feeder attachments. The company soon began to produce other pieces of farm machinery, not all of it top quality: its corn husker, called the Success, caused the partners many problems because of its poor quality, and farmers often called Maytag out to their fields to fix the Success. When Maytag bought out his partners in 1907, he had learned his lesson; a Maytag product would always be dependable.

Maytag built his first washer in 1907, to bring his agricultural-equipment company through the slow-selling season as well as to fill a need for home-use washing machines. Home washing machines were already on the market, but Maytag wanted to make them more efficient. His first washer, called the Pastime, revolutionized washing. It had a cypress tub with a hand crank that forced the clothes through the water and against corrugated sides. The washer was a hit, and Maytag continued to improve on it. In 1911 he brought out the first electric washing machine, and in 1914 he introduced the gas-engine Multi-Motor for customers without access to electricity. The first aluminum washer tub was brought out in 1919, and the Gyrofoam, the first washer to clean with only water action, rather than friction, entered the marketplace in 1922. This revolutionary washer was the first with an agitator at the bottom of the tub instead of the top. This change allowed for the elimination of friction. Sales of this machine pushed Maytag, previously the 38th-largest U.S. washing machine company, into first place.

At this juncture, the farm-implement portion of the business was discontinued. L. B. Maytag, son of the founder, became president of the company in 1920. Under his direction the company began to market nationally. In 1925 Maytag incorporated and was listed on the New York Stock Exchange. In 1926 another Maytag son, E. H. Maytag, assumed the presidency and held the position until his death in 1940. Over the next several years, a number of interesting attachments were offered on washers. A butter churn and a meat grinder were two options offered to buyers. By 1927 Maytag had produced one million washers.

During the Great Depression, Maytag held its own; the company even made money. At his father's death in 1940, Fred Maytag II, grandson of the founder, took over the presidency. During World War II, the company made only special components for military equipment. In 1946 production of washers started up again, and in 1949 the first automatic washers were produced in a new plant built for that purpose. In 1946 Maytag began marketing a line of ranges and refrigerators made by other companies under the Maytag name. During the Korean War the company again produced parts for military equipment, although washer production continued.

Premium Brand in Postwar Years

During the 1950s the appliance industry grew rapidly. Maytag first entered the commercial laundry field at this time, manufacturing washers and dryers for commercial self-service laundries and commercial operators. During these years full-line appliance producers began targeting Maytag's market. Full-line operators--such as General Electric, Whirlpool, and Frigidaire--provided washers and dryers, refrigerators, stoves, and other appliances. Maytag was much smaller than the full-line producers. It limited itself to the manufacture of washers and dryers, which it marketed with ranges and refrigerators built by other companies, and established its reputation as a premium brand.

The ranges and refrigerators Maytag had been marketing with its washers and dryers were dropped in 1955 and 1960, respectively, but the company soon reentered the field with its own portable dishwasher and a line of food-waste disposers in 1968. When Fred Maytag II, the last family member involved in the company's management, died in 1962, E. G. Higdon was named president and George M. Umbreit became chairman and CEO.

By the late 1970s over 70 percent of U.S. households were equipped with washers and dryers. Laundry-equipment sales had peaked in 1973 and the lifetime of such equipment was 10 to 12 years--often longer for Maytag. To help boost sales, prices became more competitive. Chairman Daniel J. Krumm, who had been elected president in 1972, set the company in a new direction in 1980 when he made the decision to make Maytag into a full-line producer, eventually selling a wide range of major appliances rather than just washers, dryers, and dishwashers.

Full-Line Producer in 1982

The expansion was effected by acquisition. The first purchase was Hardwick Stove Company in 1981, followed in 1982 by Jenn-Air Corporation, the leading manufacturer of indoor electric grills with stove-top vent systems. These products added a full line of gas and electric cooking appliances to the Maytag line and were sold under the Maytag umbrella. Maytag Company intended this diversification to increase its sales in both the new-home market as well as the replacement market; companies make bids to developers based on kitchen packages, not individual components. The larger replacement market had also changed: large chains selling several brands side by side dominated the market. Chairman Krumm felt the diversification was necessary despite the cyclical nature of the building industry.

The new strategy paid off. Consumers began to buy again, and Maytag's sales increased in all areas in 1983. In May 1986 the move toward becoming a full-line producer continued with the purchase of the Magic Chef group of companies in a $737 million stock swap. Magic Chef's Admiral brand gave Maytag a presence in the refrigerator and freezer sector. Besides Admiral refrigerators, Magic Chef also produced other home appliances under the names Toastmaster, Magic Chef, and Norge. The merger gave Maytag the fourth-largest share of the U.S. appliance market. It also brought vending machine manufacturer Dixie-Narco Inc., with its number one position in soft-drink vending equipment, into the fold.

The Magic Chef purchase also helped protect Maytag from the threat of takeover. As the industry consolidated and other companies began to sell higher-priced appliances--Maytag's traditional forte--Krumm responded by moving into the medium-priced market. Magic Chef was Maytag's first step into that market.

The merger of Maytag and Magic Chef doubled Maytag's size and necessitated a restructuring. Maytag Company's name was changed to Maytag Corporation and three major appliance groups were formed: the Maytag appliance division, Magic Chef, and the Admiral appliance division (the Admiral division was consolidated into the other groups in 1988). Hardwick Stoves and Jenn-Air were included in the Maytag division. The president of Magic Chef remained as head of that division, which included Toastmaster--sold in 1987--Dixie-Narco, and Magic Chef air conditioning operations. The Admiral division included Norge and Warwick product lines, part of the old Magic Chef. Each division was given a great deal of autonomy. Other mergers within the industry during 1986 resulted in four companies--Whirlpool, General Electric, White Consolidated Industries, and Maytag--controlling 80 percent of the industry.

By the late 1980s Krumm was ready to move Maytag into foreign markets. With the aim of being a European competitor before the unification of the European Economic Community in 1992, Maytag bought Chicago Pacific Corp. in early 1989 for $961 million. The primary reason for this purchase was Chicago Pacific's Hoover division. Hoover produced and sold high-quality washers, dryers, refrigerators, dishwashers, and other products primarily in Great Britain and Australia, but also in continental Europe. It also sold vacuum cleaners in the United States, a new product for Maytag. (Chicago Pacific also owned furniture operations, which Maytag sold later in 1989 to Ladd Furniture for $213.4 million.) Another reason for the Chicago Pacific purchase was to further ward off takeover. The $500 million debt the company assumed with the acquisition helped make the company less attractive to raiders. Meanwhile, 1989 also saw the debut of the first refrigerators bearing the Maytag brand.

Retrenchment

Maytag's acquisitions spree led directly to a troubled period in the early 1990s. Profits declined each year from 1990 to 1992 as the company was hit hard by the recession and the increased competition that it engendered, and was further weakened by a continuing high debt load. The acquisition of Hoover was turning into a near-disaster as the European operations were in the red year after year, a situation made even worse in 1992 when Hoover Europe made a serious miscalculation in offering two free transatlantic airline tickets to anyone buying a Hoover product in the United Kingdom for as little as $165. More than 220,000 people responded to this almost-too-good-to-be-true deal, leading not only to a financial folly but also to a near public relations disaster when the company delayed getting tickets to people claiming them, as well as to litigation that continued for years to come. The fiasco led to the firing of three top executives at Hoover Europe, as well as Maytag being forced to take a $30 million charge in 1993 to cover the costs of the ill-fated promotion.

In the midst of these troubles, Krumm--the architect of the 1980s expansion--retired in late 1992, and was succeeded as chairman and CEO by Leonard A. Hadley, who had been company president. It did not take Hadley long to determine that it would be best in the long run if Maytag pulled back from its overseas ambitions and concentrated on putting its North American house in order. Hoover Europe alone had lost a total of $163 million from the date of its purchase by Maytag through 1994. In late 1994 Maytag sold its Hoover Australia unit to Southcorp Holdings for $82.1 million in cash, resulting in an after-tax loss of $16.4 million. In the second quarter of the following year, Maytag sold Hoover Europe to Italian appliance maker Candy SpA for $164.3 million in cash, resulting in an after-tax loss of $135.4 million. Maytag retained the Hoover North America operation. Proceeds from these sales were largely used to pay down the company's long-term debt, which stood at just $488.5 million by 1996, compared to nearly $800 million in the early 1990s.

By 1996, Maytag was on the upswing. Although revenues of $3 billion were slightly lower than at the beginning of the decade in part due to the divestments of 1994 and 1995, the net income of $162.4 million represented a high point for the decade so far. That figure would have been even higher, if it were not for the $24.4 million restructuring charge the company took early that year in connection with the consolidation of its two separate major appliance operations into a single operation called Maytag Appliances, which was handed responsibility for all sales, marketing, manufacturing, logistics, and customer service functions for the Maytag, Jenn-Air, Admiral, and Magic Chef brands.

Freed from its overseas headache, Maytag also began to revitalize its appliance lines through record 1996 capital spending of $220 million, much of which went toward new product development and improvements in existing lines. Among new products introduced were washers and dryers tagged with a new brand: Performa by Maytag; these were priced lower than Maytag brand products but carried some of the Maytag cachet. On the high end of the scale, the company jumped onto the front-loading washer bandwagon with the March 1997 debut of the Neptune high-efficiency model. In the refrigerator arena--Maytag's weakest product line--a three-year, $180 million redesign effort culminated with the April 1997 introduction of a new generation of Maytag, Jenn-Air, Magic Chef, and Admiral models that had increased capacity, were quieter, included several pull-out features, and boasted of faster temperature recovery following the opening of the freezer or refrigerator door. Some of the credit for these innovations went to Lloyd D. Ward, whom Hadley had recruited from PepsiCo's Frito-Lay unit in early 1996 to become executive vice-president of Maytag and president of Maytag Appliances--and perhaps heir apparent to Hadley.

Despite the heavy investments in North America, Maytag had not entirely given up on overseas growth. Like numerous other companies in the mid-1990s, Maytag decided to move into the burgeoning Chinese market. It did so in September 1996 with an initial $70 million investment to set up a series of joint ventures with the Hefei Rongshida Group Corporation, the leading washing machine firm in China, marketing its products under the well-known RSD brand. Maytag initially teamed with Hefei Rongshida in the production and marketing of washing machines, but planned to extend the venture into refrigerators during a second phase.

Further evidence of the stronger financial position of Maytag came with the $93.5 million purchase of G.S. Blodgett Corp. in late 1997. The privately held Blodgett--which traced its origins to the Blodgett Oven Co. founded in Burlington, Vermont, in 1848--was a manufacturer of commercial ovens, fryers, and charbroilers for the food service industry, thus representing a logical extension of Maytag's product lines and customers. Blodgett was the company's first acquisition since that of Chicago Pacific in 1989.

The Maytag Corporation of the late 1990s was stronger than it had been in years. Through heightened new product introductions; strategic, manageable acquisitions; and selective overseas ventures the company was positioning itself for steady, profitable growth, while at the same time maintaining its reputation for quality.

Changes in the New Millennium

Despite the success of the late 1990s, problems were on the horizon for Maytag as it entered the new millennium. Falling profits brought on by a slowing economy, increased competition, and high costs forced the company into action. Maytag began to implement a $100 million cost-cutting reorganization program that included plant closures and employee layoffs. At the same time, chairman and CEO Lloyd Ward resigned suddenly, citing differences with the company board concerning Maytag's strategic direction. Leonard Hadley came out of retirement and took over until Ralph Hake was named CEO in 2001.

Hake immediately set plans in motion to get Maytag back on track. He shuttered unprofitable businesses and continued cutting costs including moving various plant operations to Mexico where labor was cheaper. On the acquisition front, the company added Amana Appliances to its arsenal in 2001. Even with these efforts, sales continued to fall well into 2004 and high material costs ate into company profits.

As early as 2000, takeover talks began to surface as changes in the company's corporate bylaws allowed for an easier acquisition process. Sure enough, Maytag announced in May 2005 that Triton Acquisition Holding Company, an investment group led by Ripplewood Holdings LLC, had made an offer to take the company private in a $1.13 billion leveraged buyout. The company's share prices rose nearly one dollar upon news of the deal, and Whirlpool Corporation swooped in with a $1.62 billion offer including the assumption of $977 million in debt. Whirlpool had outbid Ripplewood by nearly 43 percent and had sweetened the deal by offering to pay Triton a $40 million termination fee if the Whirlpool/Maytag deal went through. It also offered to pay Maytag $120 million if the deal failed to meet regulatory guidelines and an additional $15 million to retain certain Maytag employees.

Triton chose not to raise its bid for Maytag, paving the way for Whirlpool to complete its purchase. The acquisition cleared regulatory hurdles and in March 2006, Whirlpool completed its acquisition of Maytag and secured its position as one of the world's top manufacturers of home appliances. The company began the integration process immediately with Whirlpool management heading up the combined company in Benton Harbor, Michigan. Nearly 4,500 positions were cut as manufacturing facilities in Iowa, Illinois, and Arkansas were consolidated into Whirlpool's plants in Ohio.

Whirlpool was optimistic about its future with the Maytag brand. Still, as an independent company, Maytag was finished. Former CEO Hadley made his feelings about the acquisition and Maytag's performance known in a June 2006 interview. "I'm extremely disappointed with what has been happening in the last five years. Just extremely disappointed," he stated. "I can't tell you how it hurts. That was my life for 40 years." Indeed, Maytag Corporation had a long run as a venerable appliance manufacturer in the United States. While economic changes, shifts in consumer demand, and heightened competition got the better of Maytag Corporation, Maytag brand appliances would no doubt remain in stores for years to come under Whirlpool's watchful eye.

Principal Competitors

AB Electrolux; LG Electronics Inc.

Chronology

• Key Dates
• 1893 Frederick Louis Maytag and three partners establish a company to produce threshing-machine band cutters and self-feeder attachments.
• 1907 Maytag buys out his partners and builds his first washing machine.
• 1911 Maytag launches his first electric washing machine.
• 1922 The Gyrofoam, the first washer to clean with only water action rather than friction, enters the marketplace.
• 1925 Maytag incorporates and lists on the New York Stock Exchange.
• 1949 The first automatic washers are produced.
• 1981 Maytag purchases Hardwick Stove Company.
• 1982 Jenn-Air is acquired.
• 1986 The move toward becoming a full-line producer continues with the purchase of the Magic Chef group of companies.
• 1989 Chicago Pacific Corp. is acquired.
• 1997 The Neptune high-efficiency front-loading washing machine is launched.
• 2001 Amana Appliances is purchased.
• 2006 Whirlpool Corporation completes its acquisition of Maytag.