Asian competition and rising resin costs are taking their toll on another North American industry, with home appliance makers shuffling business plans to stay ahead of the game.
The latest maneuvers take aim at the long-term ownership of Maytag Corp., with competitor Whirlpool Corp. going up against a private equity fund in hopes of buying the Newton, Iowa-based firm.
``The combination fits Whirlpool's strategy, and capabilities will create strong value for shareholders and provide direct benefits to consumers and trade customers,'' Whirlpool Chief Executive Officer and President Jeff Fettig said in a July 17 news release announcing his firm's bid for Maytag.
Benton Harbor, Mich.-based Whirlpool is offering $2.3 billion in a combination of cash, debt and stock worth $17 a share for Maytag. In May, Maytag had announced it had reached an agreement with financial group Ripplewood Holdings LLC for a $2.1 billion cash sale, valued at $14 per share.
A third bid from a consortium that included Chinese appliance maker Haier Group, valued at $16 per share, was pulled from consideration after Whirlpool entered the fray.
Maytag shareholders are slated to vote on the Ripplewood offer Aug. 19. Maytag announced July 21 its board of directors has yet to determine if the Whirlpool bid is the financially superior proposal and is evaluating the offer.
Maytag is North America's third-largest home appliance maker, with $4.7 billion in sales last year, to claim about 14.3 percent of the market. Its brands include Amana, Hoover and Jenn-Air in addition to Maytag. Whirlpool is the largest, claiming 33.3 percent of the market.
The action surrounding the Iowa firm comes as it and its competitors are under increasing pressure, said Jean C. Stout, an analyst with New York-based ratings agency Standard & Poor's.
Asian appliance makers, including South Korea's LG Electronics, are beginning to have an impact on the domestic manufacturing.
``The U.S. appliance retail environment dynamics have changed with the growing importance of home improvement centers such as Home Depot Inc. and Lowe's Cos. Inc., which now claim an estimated one out of every four retail dollars spent on appliances,'' Stout noted.
Home Depot recently began selling Asian-made appliances, while the retail outlet Best Buy dropped Maytag.
The pressure to compete has seen Maytag become ``very aggressive'' in chasing ways to cut costs, noted one Iowa appliance industry supplier.
Standard & Poor's put Whirlpool, with a BBB+ credit rating on credit watch with negative implications because of concerns of the level of debt it would take on to buy Maytag.
Added to that competition is the rising cost of materials.
Whirlpool executives called 2004, with $13.2 billion in sales, a ``challenging year,'' with ``significantly rising'' costs in both metal and resin.
North America's second-largest appliance maker - the Swedish-owned Electrolux AB - has responded with a global restructuring that is shifting production to lower-cost countries. That has included closing manufacturing lines in cities like Greenville, Mich., and El Paso, Texas, in favor of Ciudad Juarez, Mexico.
Whirlpool is pegging strong brand identity for future growth, executives noted in the company's 2004 annual report. Its line of businesses includes the KitchenAid and Whirlpool brands. It also manufactures Kenmore products.
Maytag's well-known brands would add to Whirlpool's consumer portfolio.
``We operate in a highly competitive marketplace where trade customers and consumers have a large and growing choice of brands, products and suppliers, including a growing number of foreign appliance companies,'' Fettig noted in his letter to Maytag proposing the acquisition.
``Together we can achieve substantial efficiencies that will deliver cost savings, increased innovation and better asset utilization. And as part of Whirlpool, we can ensure that Maytag remains a trusted brand for years to come.''