160-C01A

1/1/01

Maytag Corporation (A)

“When you are a small company competing against giants, you have to have an
edge, and with us it’s quality. The day we lose that quality edge, we lose our
meal ticket.”

Daniel J. Krumm, CEO

Maytag Corporation
December, 1985

Headquartered in Newton, Iowa (population 15,000, “Washing Machine Capital of the

World”), Maytag Corporation had reported record sales and earnings in 1984 and 1985 (Exhibit
1). This was also a period in which the company had received increased recognition from the
business press. An April, 1984, article by Fortune cited Maytag as one of the 13 “corporate
stars,” which had maintained an average return on equity of more than 20% during the previous
decade. By way of contrast, the Fortune 500 industrials’ median return for this period had
averaged 13.2%. This same year Maytag was named to Consumer Digest’s Hall of Fame for its
responsiveness to consumer needs and durability/reliability of its products as well as being
subject of a 40-page article in Appliance magazine. In December, 1985, Dun’s Business Month
featured Maytag in one of several articles devoted to the “best-managed companies in America.”

While bemused by all this press, Maytag’s senior executives were more concerned with
how they should position the company over the next several years. Demand conditions were
expected to remain generally positive through the remainder of the 1980s, with continued
strength in replacement sales and with high-priced segments gradually increasing their share of
consumer purchases. However, Maytag also expected significantly increased competition from
larger rivals.

Management’s debates about future direction centered on whether Maytag should remain
a limited line producer focused on the high end of the U.S. market or whether it should expand
via acquisitions into other appliance categories and other price segments. Some executives
favored aggressive growth. Others argued that this could significantly reduce profit margins as
well as tarnish the Maytag brand image. Those favoring more rapid growth countered that
margins were likely to come under pressure in any event and that upgrading acquired brands
Professor Stephen Allen of Babson College prepared this case as a basis for class discussion rather than to illustrate
either effective or ineffective handling of an administrative situation.
Copyright © by Stephen Allen 1995 and licensed for publication at Babson College to the Babson College Case
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Maytag Corporation (A) 160-C01A

represented an opportunity for earning additional returns from Maytag’s capabilities in

producing and marketing high quality appliances.

CEO Daniel Krumm stated, “It makes no sense to become a billion dollar company just
to become one. However, I would not be opposed to leveraging our balance sheet for the right
acquisitions.”1

Company History
Maytag had been producing washers for nearly 75 years. Its strategy and fortunes can be
described in terms of several overlapping stages of development, or eras.

Foundations
F. L. Maytag grew up in an Iowa homestead, the eldest of 10 children. In 1880, at age
22, he moved to Newton, where he became a salesman at a farm equipment dealership,
McKinley & Bergman. Within 18 months he had saved $800, bought out McKinley’s share, and
married Bergman’s sister. In 1890 F. L. sold his share in the dealership. Over the next twenty
years he invested in a number of ventures most of which failed. These included a lumberyard,
organizing a railroad, and producing automobiles.2

In 1893 Maytag and three others had founded Parsons Band Cutter and Self-Feeder
Company, which grew into a profitable producer of farm implements. In 1907 the company
introduced a ruggedly constructed, hand-cranked clothes washer, the Pastime, intended to
compensate for seasonal shortfalls in farm implement demand. In 1909 F. L. bought out his
partners and began to place increased emphasis on washers.

With the aid of Howard Snyder, an inventor and mechanic, Maytag was able to generate
a number of product improvements during the next decade -- first reversible wringer, divided
wringers, electric and gasoline powered models, first successful casting of an aluminum washer
tub. Marketing strategy was directed at setting up independent dealers in rural areas and small
towns. The company was marginally profitable.

National Leadership (1922-40)

Under the direction of Lewis B. Maytag, a son of the founder, the company developed
nationwide distribution during 1920-26. In 1921 Maytag was the eighth largest U.S. producer of
washers and recorded a loss $280,000.

In 1922 it introduced the Gyrofoam model, which combined an aluminum tub and a
washer action that pushed water through clothes rather than dragging the clothes through the
water. At age 64, F. L. Maytag went on the road to sell the Gyrofoam. Sales reached 258,000
units in 1926 with profits of $6.8 million. The company went public in 1925 with a NYSE
listing.

1
Quoted in “Maytag: Wizard Of White Goods,” Dun’s Business Month, December 1985.
2
The Maytag-Mason, designed with help of the Duesenberg brothers during 1909-11.

2
Maytag Corporation (A) 160-C01A

During the late 1920s and 1930s Maytag held 40-45% of the U.S. washer market. The
company was solidly profitable, even during the Depression. When F. L died in 1937, he left
between $1,000 and $50,000 apiece to 200 of Newton’s residents and $1,000 to each Maytag
employee who had been with the company for three or more years. Sons and grandsons of the
founder headed the company up through 1962.

Opportunity Lost (1946-54)

During World War II the company’s factory was converted to production of aircraft
components.

In 1947 Bendix Corporation, a newcomer to the appliance industry, introduced the first
automatic washer; and sales of wringer models began to decline. Maytag was focused on
meeting a backlog of demand for wringer models, and its management was unwilling to bring
out an automatic model until it was certain it could meet stringent quality standards. Maytag’s
first automatic was introduced in late 1949, followed by a dryer in 1954. In 1954 its share of the
U.S. washer market had fallen to 8%.3

High-End Focus (1955-69)

In 1956 Maytag developed the Helical Drive washer transmission, eliminating a
significant source of washer failure and further cementing its reputation for highly reliable
products. Over the next decade recently installed professional managers set about positioning
the company as a high-end producer of laundry equipment. By 1969 Maytag held 10% of the
washer market and 9% for dryers. Sales had remained essentially flat through 1966. However,
return on equity had averaged 27%.

During this period the company had experimented unsuccessfully with both product and
geographic diversification. Ranges and refrigerators manufactured by other companies were
marketed under the Maytag name beginning in 1946. This program was discontinued in 1960
due to quality concerns. In the 1950s Maytag had set up subsidiaries in the UK, Germany, and
Belgium to market exports from the U.S. These units were closed during the late 1960s.

Exploiting and Extending the Franchise (1966-85)

During the mid- to late 1960s management set out to grow Maytag’s share of the laundry
market and expand its appliance range. These efforts received further impetus when Mr. Krumm
was named President in 1972. By 1977 Maytag held 15% of U.S. markets for washers, electric
dryers, and gas dryers.

During 1966-69 Maytag launched a line of dishwashers and disposers. Its strategy was to
price slightly below the premium brand, KitchenAid, and to emphasize a quality image through
heavy advertising. By 1980 Maytag held 6% of the dishwasher market. However, KitchenAid
remained the leading premium priced brand, with a 15% share. Terming the dishwasher program

3
Maytag produced wringer washing machines until 1984. At that point, it announced commitment to providing
repair parts for a further 25 years.

3
Maytag Corporation (A) 160-C01A

“moderately successful,” Mr. Krumm noted, “We were surprised how hard it was to transfer an
image from one product to another.”4

The market for disposers had proven even harder to penetrate. These devices were
difficult to differentiate with advertising, and many were purchased through contractor channels
(where Maytag had limited representation). By 1985 the disposer segment was dominated by
two companies -- Emerson Electric (In-Sink-Erator) with 60% share and Tappan/Anaheim
(owned by Electrolux) with 30%. Maytag’s share had never risen above 2%.

Cooking Appliance Acquisitions

In 1979 Leonard Hadley was reassigned from his job as Assistant Controller to the newly
established position of Vice President of Corporate Planning. His mandate was to develop the
company’s first systematic analysis of the appliance industry and to undertake a search for
attractive acquisition candidates.5

The conclusions of Mr. Hadley’s industry analysis were:

• Refrigerators, though a large category, did not represent an attractive

opportunity for Maytag. Unit growth was expected to average 1-2% per
annum through the end of the decade. Three large producers -- GE, Whirlpool,
WCI -- dominated the market with a combined share of 77%.

• Due to slow growth of demand for appliances, acquisitions were the only
practical means for Maytag to expand into other appliance categories.

• Cooking appliances -- gas and electric ranges and ovens -- were the most
attractive growth opportunity for Maytag. Unit demand was expected to grow
4-5% over the next several years. Competition was somewhat less
concentrated. The three largest producers had combined shares of 58% for
electric ranges and 62% for gas ranges. Because ranges and ovens came in a
wide range of sizes and features, they offered greater opportunities for
segmentation than most other appliance categories.

• Microwave ovens were a question mark. Demand was likely to grow 20% per
annum during the 1980s. While the market was fragmented, it was subject to
intense price competition from large Japanese producers, which were eroding
positions of U.S. companies that had pioneered this product (Raytheon, Litton,
GE). Maytag had no experience with the underlying technologies.

4
Quoted in “The Appliance Boom Begins,” Fortune, July 25, 1983.
5
In 1978 Mr. Hadley, a marketing manager, and a manufacturing executive had been appointed to a task force which
developed five-year financial scenarios for Maytag. This had been the company’s first exercise in long-range
planning.

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Maytag Corporation (A) 160-C01A

Hardwick Stove
On January 6, 1981, Maytag acquired Hardwick Stove Company for $28.1 million ($4.5
million in cash plus Maytag shares with a market value of $23.6 million). Based in Cleveland,
Tennessee, Hardwick was privately held and had no debt. It produced gas and electric ranges,
microwave ovens, and gas outdoor grills. Its products were sold on a branded basis through
independent dealers and on an OEM basis to other appliance producers. Its largest OEM
customer was Whirlpool, for which it produced gas ranges.

Hardwick’s results prior to acquisition were ($ mill.):

1979 1980
Sales 54.5 48.4
Net income 2.6 1.9
Return on sales (%) 4.8 3.9

During 1982-83 Maytag and Hardwick engineers developed a line of 20 gas and electric
ranges, built-in ovens, and microwaves targeted at high and upper mid-price segments. These
new models were sold under the Maytag label through Maytag dealers and a newly developed
network of distributors serving builders and remodelers. Hardwick continued to market mid-
priced ranges and microwaves under its own brand name.

Jenn-Air
On June 25, 1982, Maytag acquired the Jenn-Air Corporation from United Technologies
Corporation in a transaction valued at $50.8 million ($20.8 million in cash plus a $30 million,
15-year promissory note). Based in Indianapolis, Indiana, Jenn-Air produced a premium-priced
line of indoor electric grills and ovens. Its built-in and free-standing grills/cook tops employed a
unique down-draft ventilation system, which eliminated the need for overhead vents. The
majority of sales were through contractor channels for new homes and kitchen remodeling.
Jenn-Air also manufactured power ventilating systems for commercial, industrial, and
institutional buildings.

Carrier, in turn, had been acquired by United Technologies in 1980. Results prior to
acquisition by Maytag were ($ million):

1977 1978 1981 1982

Sales 64.7 80.2 111.2 84.6
Net income 4.5 4.9 (2.0) (5.5)
Return on sales (%) 7.0 6.1 neg. neg.

During 1983-84 Jenn-Air introduced a second generation of cooking appliances, added

Maytag produced dishwashers and disposers to its offerings to builders, and expanded capacity.
A task force of Maytag engineers had moved to Indianapolis during this period to help upgrade
manufacturing processes and oversee installation of a second production line.

Jenn-Air had returned to profitability by early 1984. In 1985 Maytag announced plans to
double capacity at the Indianapolis plant.

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Maytag Corporation (A) 160-C01A

Operations in 1985
In 1985 Maytag held a unit share of 4.1% of the total U.S. market for major home
appliances, up from 2.9% in 1980. Its 1985 revenues of $684 million represented 3.9% of
manufacturers’ sales of major home appliances in North American markets. Exhibit 2 shows
trends in unit shares by appliance category. Exhibit 3 details trends in units produced.

Marketing
From the outset, Maytag had employed a straightforward business approach: build the
most reliable and durable laundry appliances and dishwashers available and charge a premium
price for them. Its message to consumers was that the higher price was an investment that
provided a good return over the life of the appliance: substantially lower repair costs, longer
appliance life, avoiding the inconvenience of scheduling repairmen.

Over the years, Maytag’s appliances had consistently won top ratings from Consumer
Reports. Owners of Maytag washers replaced them on a 14-year cycle (v. an average of 10 years
for competitors). Maytag typically priced at premiums of 10-20% over direct competitors,
depending on the appliance. For example, in 1985 its premium over the GE brand was 13% for
washers, 10% for dryers, and 20% for dishwashers.

Maytag emphasized a “pull” type marketing strategy aimed at creating an image of

dependability, durability, and high quality in the minds of consumers. Its Ol’ Lonely ad
campaign, which portrayed a Maytag repairman with no work to do, had been initiated in 1967
and was supported with the highest advertising to revenue ratio in the industry (3.7% in 1985 v.
0.9% for Whirlpool). Maytag owners exhibited the highest brand loyalty in the industry (roughly
70% typically repurchased).

Establishing a differentiated/premium priced position in cooking appliances required

different approaches. Cookers and ovens did not operate under the same demanding conditions
as laundry appliances and dishwashers (e.g., water bearing, moving parts, dependent on
motors/transmissions). Thus, differences in durability and reliability among competitors’
offerings were narrower.

Jenn-Air did occupy a premium-priced niche, based on unique features. These included
its downdraft ventilation system, built-in or freestanding configuration, and a wide selection of
plug-in cook top modules (indoor grill, electric wok, several choices of burner elements). Its
new generation of products added self-cleaning and convection ovens.

Hardwick produced cooking appliances offered less scope for differentiation. Its Maytag
branded designs were positioned on the basis of high quality construction and offering
consumers a wide range of choices in designs and features. Nevertheless, higher quality metal
work and interior/exterior finishes did not translate into longer cooker life or higher reliability.
A Whirlpool executive opined, “We don’t think they can command the same margin on those
ranges that they do on laundry. Just because they slap the Maytag name on them doesn’t mean
that the customer believes.”6 Maytag Vice President of Marketing, Ralph Nunn, countered, “We

6
Quoted in Fortune, op. cit., July 25, 1983.

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Maytag Corporation (A) 160-C01A

are selling more Maytag electric ranges than originally anticipated. We felt it might be easier to
compete in gas ranges than electric. Surprisingly, we not only met our goals in gas ranges but
have done better than expected in electric.”7

Distribution Channels
Maytag branded appliances were sold through 10,000 authorized, independent retail
dealers in the U.S. and Canada. The company distributed directly to most of these dealers, which
did not carry competing laundry equipment. In 1985 roughly half carried Maytag cooking
appliances. The company had recently initiated a floor plan financing program aimed at helping
dealers carry larger inventories and wider model mixes.

Montgomery Ward had begun selling Maytag branded laundry equipment in 1982 and
dishwashers in 1985, giving the company access to 300 retail outlets and 2,000 catalog stores.
Sales through this channel were roughly $10 million in 1985. Mr. Krumm noted,

We see this as a way to broaden our selling base and reach consumers through a
national chain offering revolving credit. A recent survey showed that availability
of Ward’s consumer credit card was the single most important reason given for
purchasing a Maytag washer there. This led us to believe that most people buying
Maytag appliances from Ward were previous customers of large national chains
offering credit. They were not customers of Maytag’s traditional retail dealers.8

Jenn-Air cookers were distributed by 70 wholesalers to builders, remodelers, and

appliance retailers. Hardwick branded cookers were distributed via wholesalers to independent
dealers. Maytag hoped to expand the number and geographic scope of Hardwick dealers.

In late 1985 the company announced a “Builders Choice” program under which Jenn-
Air’s marketing department would coordinate distribution of Maytag, Jenn-Air, and Hardwick
appliances direct to builders and remodelers. Mr. Krumm stated,

Traditionally, Maytag has paid only modest attention to the builder market
because our laundry products were not a big factor there. Today, however, we
have three brands of kitchen appliances, and the builder market represents good
potential for increasing sales without detracting from our existing retail channels.
Also, the builder market is becoming somewhat less price sensitive, as
homebuyers place growing emphasis on quality and features of installed
appliances.9

7
Quoted in “The New Maytag,” Appliance, March, 1984.
8
1985 Annual Report, pp. 2-3.
9
Op. cit.

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Maytag Corporation (A) 160-C01A

Maytag also sold coin -- and ticket-operated models of its laundry equipment through 50
independent distributors selling to self-service laundries, apartment complexes, colleges, and
military installations.

The company employed 640 people in the marketing, distribution, and service area. Of
these, 200 were field sales personnel operating out of 20 branch locations to serve retail dealers.
Field warehouses were maintained in Newton and 70 other locations in the U.S. and Canada.

Research And Development

While Maytag did not publicly disclose data on R&D expenses, industry observers
believed that it typically spent 2-2.5% of sales (v. 1.9% for Whirlpool and 1.1% for Magic Chef
in 1985). Roughly half of the R&D budget went to new product development and product
improvement, the other half to manufacturing process improvements.

Nevertheless, the company was generally not first to market with new product features.
Its approach was to continuously refine product designs, components, and manufacturing
processes. New models were introduced only when it was certain that they incorporated superior
reliability and durability. According to Mr. Krumm, “It has never been our objective to be first,
just to be best. Unless we can present a high quality, reliable product to the market, we will not
present it at all.”10 Management pundits Tom Peters and Robert Waterman observed, “Maytag’s
form of quality does not come from exotic technology. It built its reputation on solid
dependability, not jazziness. It makes things good and simple.”11

Manufacturing
The company’s appliances were produced in a factory complex in Newton, Iowa, plus
plants in Indianapolis (Jenn-Air) and Cleveland, Tennessee (Hardwick). See Exhibit 4 for
production charters. These factories were operating at 80% of rated capacity in 1985.

Although Maytag’s products generally required more expensive raw materials and
components, the company actively sought fabrication and assembly efficiencies through a
combination of product and work simplification and investments in advanced automation.
Management estimated that productivity increases had averaged 5% per annum during 1976-85.

The company’s first work simplification program had been initiated in 1947, and it had
received 14 national awards during 1970-85. Maytag was also an early practitioner of statistical
quality control methods and supplier quality certification.

The work simplification program featured cash awards for workers. An average of 95%
of workers submitted suggestions for improvements each year. Maximum award was $7,500 for
an implemented improvement, depending on savings achieved. Management estimated that cost
reduction programs resulted in savings of $4-6 million annually. Vice President of
Manufacturing Sterling Swanger noted, “We have never sacrificed a quality principle or feature

10
Appliance, op. cit., March, 1984.
11
In Search of Excellence (Harper & Row, 1982), p. 174.

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Maytag Corporation (A) 160-C01A

for a cost savings, but we have found that we often get improved quality when we install a cost
savings project.”12

The Newton complex had the highest level of vertical integration among laundry
appliance producers. While it sourced motors from external suppliers, it fabricated its own
washer transmissions, rubber parts, die castings, and powdered metal bearings. It milled large
steel and porcelain-enameled parts, assembled wiring harnesses, and even zinc plated its own
screws. According to Mr. Swanger, “We make our own whenever we can do it less expensively
than suppliers or when we cannot obtain the quality we require.”13 Jenn-Air and Hardwick had
lower levels of vertical integration.

Newton, workers were represented by the United Auto Workers union, those in
Indianapolis by the Sheet Metal Workers. While labor relations had generally been peaceful, the
UAW had conducted a five-month strike in 1971.

During 1974-79 Maytag had spent more than $60 million on upgrading manufacturing
facilities and increasing capacity by 75%. Mr. Krumm noted,

Our goal was to make the Newton facilities the most efficient and modern in the
industry. By 1980, when some of the giant appliance makers were beginning to
deal with outmoded factories, we had substantially completed our updating.14

Management Organization
Maytag was organized along functional lines, with Jenn-Air and Hardwick operating as
separate business units. Strong emphasis was placed on cross-functional teams and task forces to
manage new product, quality, and design for manufacturability projects.

The company prided itself on its ability to develop managers from within, imbued with
the “Maytag way.” All senior managers had spent their entire careers with the company. See
Exhibits 5 and 6 for profiles of senior executives and directors.

Financial Policies
Maytag generated cash substantially in excess of that required to finance ongoing
operations (Exhibit 7). Much of this free cash flow was returned to shareholders in the form of
dividends. During 1980-85 dividends had averaged 72% of net income. Also, in 1981 and 1984
the company had spent some $29 million to repurchase 800,000 shares in the market (equal to
2.8% of shares outstanding).

Despite dividend payouts, acquisitions, and active capital spending, the company’s
balance sheet remained conservative and liquid (Exhibit 8). Debt, at $24 million, represented

12
Appliance, op. cit., March, 1984.
13
1985 Annual Report, p. 2.
14
1985 Annual Report, p. 2.

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Maytag Corporation (A) 160-C01A

8.5% of total capital. Cash and marketable securities stood at $89 million, equal to 24.4% of
assets.

Operating Results
Exhibits 9 and 10 show income statements and operating ratios for 1980-85. Exhibit 11
compares Maytag’s 1985 results with five U.S. competitors.

Wall Street Reactions

Maytag shares were generally viewed as a “widow and orphan” stock -- providing
significant dividend income modest capital gains prospects, and high safety/price stability (Beta
= .90). During 1976-85 Maytag shares had provided an average annual return to investors
(appreciation plus reinvested dividends) of 13.4% (v. a 14.2% median return for the Fortune 500
industrials). See Exhibit 12 for 1980-85 share price behavior and per share data.

In late 1985 institutional investors held 43% of outstanding shares, individuals 57%.
Insiders held 1%. Average shareholding was 978 shares.

Financial analysts were generally positive on the stock in 1985 and recommended it for
conservative investors. For example, Value Line stated,

Maytag’s recent earnings momentum leads us to believe that the stock will
outperform market averages during the next four quarters. Income oriented
investors should be attracted by the 5% dividend yield.

The stock offers worthwhile total returns through 1988-90 because of the high
dividend yield. Capital appreciation is not expected to be overly xciting,
however, because of the maturity and cyclicality of the appliance industry.1

Changing Competitive Situation

Maytag’s most important direct competitors by appliance category were:

Washers Negligible
Dryers Whirlpool, GE
Dishwashers KitchenAid, GE
Electric ranges Tappan (Electrolux), Caloric (Raytheon), GE
Gas ranges Tappan, Caloric

During 1983-85 these competitors had made several moves that were causing some
consternation among Maytag executives.

1
Value Line Investment Survey, December 27, 1985.

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Maytag Corporation (A) 160-C01A

General Electric
GE’s Major Appliance Group competed in most product categories with two North
American brands: GE (mid and upper-mid price points) and Hotpoint (mid to lower-mid price
points). During 1977-82 this group had been something of a sleeping giant. Despite an
extensive, company-owned service network and a leading share in contractor channels, the
Group had been only marginally profitable. It had become a “cash cow” within the GE corporate
portfolio, with limited funding of R&D and capital projects. Quality ratings of some appliances
had declined. GE’s recently appointed CEO, Jack Welch, was debating whether to make major
investments to turn the unit around or to divest.

In the event, Welch opted to invest and in 1982 announced plans to spend $1 billion over
the coming ten years for redesign of dishwashers, refrigerators, and ranges and automation of
their production.

The first of these projects centered on dishwashers. Dubbed Project C, it involved

replacement of steel/plastic dishwasher tubs and door liners with an all-plastic design along with
development of a flexible manufacturing system. During 1981-84 some $60 million was spent
for automation and a near doubling of capacity. Consumers accepted the new plastic tubs, and
GE’s share of the dishwasher market grew from 20% in 1981 to 38% in 1985. Overall consumer
ratings of GE dishwashers (features and quality, relative to price) had reached parity with those
of Maytag by 1985, and GE had pre-empted much of Maytag’s opportunity to grow dishwasher
sales in builder markets.

Whirlpool
Roughly half of Whirlpool’s revenues came from the Whirlpool brand, which competed
at mid-price points in most appliance product categories. Most of the remainder came from
contract manufacturing of Kenmore appliances (low-price points) for Sears. In early 1985
management announced a strategic plan with the following elements:

• Spending of $1 billion on upgrading existing production facilities.

• Expansion from its leading position in mid- and low-price segments into all
price segments of the U.S. market.
• Establishing a major presence in non-U.S. markets through acquisitions and/or
joint ventures.

In January 1985, Whirlpool announced plans to acquire KitchenAid, a subsidiary of Dart

& Kraft, Inc., for $150 million. Magic Chef and White Consolidated Industries filed antitrust
suits aimed at blocking the transaction. After Whirlpool and Emerson Electric amended
restrictive provisions in a supply agreement related to the acquisition the U.S. Court of Appeals
in Cincinnati ruled that the acquisition was likely to increase competition and that no public
interest would be served by enjoining it.15

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Maytag Corporation (A) 160-C01A

Upon completion of the acquisition in January 1986, Whirlpool announced plans to

transform KitchenAid from a producer of dishwashers, disposers, and compactors into a full-line
brand targeted at the high end of the U.S. market.

Electrolux
In February 1986, Swedish based AB Electrolux, announced a $711 million unsolicited
bid for White Consolidated Industries. Electrolux already participated in the U.S. market
through earlier acquisitions -- Tappan (1979), Eureka vacuum cleaners (1974).

Electrolux had 1985 sales equivalent to $4.6 billion, 57% of which came from major
appliances. It was the leading global producer of vacuum cleaners and was Europe’s largest
producer of white goods (15% market share). Industry analysts opined that Electrolux had both
the financial and technical wherewithal to transform White Consolidated into a more potent and
profitable competitor in the U.S. market.

Raytheon
While Raytheon’s appliance brands (Amana, Caloric, Speed Queen) enjoyed a strong
quality image among consumers, they had been only marginally profitable in recent years.
Industry observers speculated that Raytheon would either have to acquire other producers to
establish a critical mass in the marketplace or exit the business.

15
Concurrent with the acquisition, Whirlpool planned to sell KitchenAid’s dishwasher and disposer plants to
Emerson Electric. Emerson agreed to continue manufacturing these products for KitchenAid.

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Maytag Corporation (A) 160-C01A

Exhibit 1
Historic Overview of Sales, Profitability, Employment

Sales ($mill.) Net Income Return on Return on Employees

($mill.) Sales Average Equity
1966 131 16 12.2% 22.5% n.a.
1967 140 17 12.1 23.6 n.a.
1968 157 21 13.4 27.1 n.a.
1969 166 22 13.3 26.4 n.a.
1970 174 23 13.2 26.1 n.a.
1971a 132 12 9.1 10.3 4,192
1972 207 28 13.5 30.9 4,019
1973 227 29 12.8 29.0 4,099
1974 229 22 9.6 20.8 4,137
1975 238 26 10.9 23.5 3,637
1976 275 33 12.0 27.5 3,852
1977 299 35 11.7 26.7 3,748
1978 325 37 11.4 26.0 3,758
1979 369 45 12.2 28.8 3,689
1980 349 36 10.3 20.0 3,529
1981b 409 37 9.1 19.2 4,217
1982c 441 37 8.4 19.1 4,683
1983 597 61 10.2 29.0 4,703
1984 643 63 9.8 27.9 4,847
1985 684 72 10.5 29.7 4,930

_____________________________________________________________________
a
Results reflect effects of five month strike.
b
Acquired Hardwick Stove Co. on January 6, 1981 (1980 sales of $48.4 million).
c
Acquired Jenn-Air Corp. on June 25, 1982 (1981 sales of $111.2 million).

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Maytag Corporation (A) 160-C01A

Exhibit 2
U.S. Market Shares By Appliance Categorya
(%)

1980 1981 1982 1983 1984 1985

Washers 15 15 15 15 15 16
Electric dryers 15 15 15 13 13 13
Gas dryers 15 15 15 15 14 14
Dishwashers 6 6 6 7 7 6
Disposers 1 1 1 2 1 1
Electric ranges -- 2 7 7 6 5
Gas ranges -- 10 11 10 10 8
Microwaves -- 1 1 1 1 1

_____________________________________________________________________
a
From Appliance magazine annual surveys. Share data are based on percentage of total units produced by all
manufacturers for sale in the U.S. market, including imports. Reflects acquisition of Hardwick in 1981 and Jenn-Air
in 1982.

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Maytag Corporation (A) 160-C01A

Exhibit 3
Company Production By Appliance Categorya
(000 units)

1977 1978 1979 1980 1981 1982 1983 1984 1985

Washers 768 792 777 707 701 627 648 757 899
Dryers 543 552 540 479 474 423 419 487 517
Dishwashers 134 178 210 163 154 134 214 244 215
Disposers 29 31 33 29 31 27 70 41 42
Electric ranges -- -- -- -- 53 148 199 190 161
Gas ranges -- -- -- -- 150 152 158 173 146
Microwaves -- -- -- -- 45 43 60 87 103
Total 1,474 1,553 1,560 1,378 1,608 1,554 1,768 1,979 2,083

_____________________________________________________________________
a
Based on Appliance magazine annual survey data. Data reflect units produced for sale in the U.S. market and may
differ from annual sales, due to changes in inventory.

15
Maytag Corporation (A) 160-C01A

Exhibit 4
Plant Network

Location Square Feet Product Charter

Floor Space
Newton, IA 2,972,000 Laundry appliances, dishwashers, disposers
Cleveland, TN 735,000 Gas and electric ranges, microwaves, portable outdoor
gas grills
Indianapolis, IN 388,000 Electric ranges, power ventilating equipment
Jefferson City, MO 114,000 Component manufacturing, parts distribution

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Maytag Corporation (A) 160-C01A

Exhibit 5
Senior Executives

Age Yrs. with Board

Maytag Member
D. J. Krumm President, CEO 59 31 X

L. A. Hadley VP-Corporate Planning 51 26 X

R. L. Nunn VP-Marketing 62 35 X

S. O. Swanger VP-Mfg. 63 36 X

J. C. Mellinger VP-R&D 56

C. W. Creagan VP-Labor Rel. 56

J. A. Schiller VP, CFO 53 X

J. R. Storey VP-Personnel 57

D. C. Byers Gen. Counsel 60

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Maytag Corporation (A) 160-C01A

Exhibit 6
Non-Executive Members of Board of Directors

F. W. Considine Chairperson, CEO-National Can Corp.

H. L. Hahn Partner-Hahn, Cazier, Smaltz (law firm)

L. B. Maytag Retired Chairman, CEO-National Airlines

F. A. Plummer Retired Chairman-Alabama Bancshares

R. D. Ray President, CEO-Life Investors (Cedar Rapids, IA)

J. T. Schanck Chairman, CEO-Signode Industries (Glenview, IL)

J. A. Sivright EVP, Harris Trust (Chicago, IL)

P. S. Willmott Chairman, CEO-Carson Pirie Scott (Chicago, IL)

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 Maytag Corporation (A) 160-C01A

Exhibit 7
Cash Flow Data
Years Ending December 31
($ mill.)

1980 1981 1982 1983 1984 1985

Cash generated by operations:
Net income 36 37 37 61 63 72
Depreciation,
amortization,
etc. 8 12 14 19 18 17
44 49 51 80 81 89
Cash required by operations:
(Increase) decrease net
working capital 0 0 0 (1) (1) (7)
Capital expenditures-net (12) (8) (8) (17) (19) (30)
(12) (8) (8) (18) (20) (37)
Net cash flow from
operations 32 41 43 62 61 52
Financial activities:
Acquisitionsa (28) -- (42) -- -- --
Debt-additions -- -- 21 -- -- --
Stock-issued (repurchased) 24 (13) 1 1 (16) 1
Dividends (28) (30) (30) (37) (41) (45)
Other 0 1 (4) (9) (8) 2
(32) (42) (54) (45) (65) (42)
Increase (decrease) in cash 0 (1) (11) 17 4 10

___________________________________________________________________
a
Net of cash of acquired units.

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Maytag Corporation (A) 160-C01A

Exhibit 8
Consolidated Balance Sheets
December 31
($ mill.)

1980 1984 1985

Cash and equivalents 62 63 72
Accounts receivable 26 47 58
Inventoriesa 50 78 79
Other current assets 8 5 6
146 193 215

Other assetsb 1 25 24
Property, plant, and equip. (net) 88 112 126
Total Assets 235 330 365

Accounts payable 7 16 20
Other current liabilities 23 36 38
30 52 58
Long-term debt -- 24 24
Other liabilities 10 25 26
Shareholders’ equity 195 229 257
Total Liabilities and Shareholders’ Equity 235 330 365

________________________________________________________________
a
LIFO valuation.
b
Includes marketable securities of $15 and $17 million in 1984 and 1985, respectively.

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 Maytag Corporation (A) 160-C01A

Exhibit 9
Consolidated Income Statements
Years Ended December 31

($ mill.)

1980 1981 1982 1983 1984 1985

Net sales 349 409 441 597 643 684

Cost of sales 231 282 296 386 422 433

Selling, general, admin. expenses 61 72 84 102 109 122
292 354 380 488 531 555
Operating profit 57 55 61 109 112 129
Other income-net 8 13 10 9 9 8
Interest expense -- -- (2) (4) (4) (4)
Income taxes (29) (31) (32) (53) (54) (61)

Net income 36 37 37 61 63 72

Supplementary data:
Depreciationa 7 9 11 13 14 15
Capital expenditures 12 9 9 18 20 30
Advertisingb 12 15 16 21 23 25

___________________________________________________________________________
a
Included in cost of sales and selling, general, administrative expenses. Maytag employs straight-line depreciation
for financial reporting.
b
Included in selling, general administrative expenses.

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Maytag Corporation (A) 160-C01A

Exhibit 10
Operating Ratios

1980 1981 1982 1983 1984 1985

Expenses and margins
(% sales):

Cost of sales 66.2 69.0 67.1 64.7 65.6 63.3

Gross margin 33.8 31.0 32.9 35.3 34.4 36.7
Selling, general, admin. 17.5 17.6 19.1 17.1 17.0 17.8
Operating profit 16.3 13.4 13.8 18.2 17.4 18.9
Interest expense -- -- 0.5 0.7 0.6 0.6
Depreciationa 2.0 2.2 2.5 2.2 2.2 2.2

Profitability:

Return on sales (%) 10.3 9.1 8.4 10.2 9.8 10.5

Sales ÷ average assets (X) 1.59 1.76 1.75 2.00 1.97 1.97
Avg. assets ÷ avg. equity (X) 1.22 1.20 1.30 1.42 1.44 1.43
Return on avg. equity (%) 20.0 19.2 9.1 29.0 27.9 29.7

Other:

Sales per avg. employee

($000) 97.2 97.0 94.2 126.9 132.7 138.7
Gross plant, equipment per
average employee ($000) 47.4 41.5 42.6 45.6 47.7 52.6
Accounts receivable turn
(days) 19 13 23 21 19 22
Inventory turn (mos.):
Raw materials, WIP 1.7 1.4 1.7 1.5 1.3 1.3
Finished goods 0.9 0.7 0.9 0.9 0.9 0.8
Total 2.6 2.1 2.6 2.4 2.2 2.1

________________________________________________________________
a
Included in ratios for cost of sales and selling, general, administrative expenses.

22
Maytag Corporation (A) 160-C01A

Exhibit 11
Comparative 1985 Financial Footprints for Six Major Appliance Producers

Maytag Whirlpool WCIa Magic GE Raytheon

Chef
Sales ($ mill.) 684 3,475 1,636 1,062b 3,452 785

P&L ratios (% sales):

Cost of goods sold 63.3 79.1 81.0 79.7
Gross margin 36.7 20.9 19.0 20.3
SGA expense 17.8 13.0 12.5 10.5
Operating profit 18.9 7.9 6.5 9.8 13.5 5.4

R&D expense 2.2c 1.9 n.a. 1.1

Advertising expense 3.7 0.9 n.a. 2.6
Depreciation, amortizationd 2.2 2.5 1.5 1.7 2.3 2.8

Sales/av. operating assets (X)e 2.59 2.56 2.28 1.98 2.49 1.72
Operating profit/av. op. assetse 49.0 20.2 14.8 19.4 33.6 9.3
Capital expenditures/sales(%) 4.4 5.4 2.9 2.7 4.2 2.7
Gross plant, equipment/ 52.6 31.9 33.1 20.9
employee ($000)

_______________________________________________________________________
a
Based on 1984 home appliance business segment data. White Consolidated Industries was acquired in early 1986
by Electrolux.
b
White goods accounted for $732 million of sales. The remainder came from small appliances (Toastmaster), soft
drink vending machines, and heating/air conditioning equipment.
c
Casewriter’s estimate.
d
GE employs accelerated depreciation (sum-of-the-years-digit method) for financial reporting.
e
Operating assets are treated as total home appliance segment assets minus cash. Operating income is before
interest, taxes, other income.

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Maytag Corporation (A) 160-C01A

Exhibit 12
Per Share and Stock Price Dataa
($, except where noted)

1980 1981 1982 1983 1984 1985

Earnings per share 1.34 1.32 1.34 2.18 2.32 2.64
Av. shares outstanding (mill.) 28.80 27.70 27.70 27.80 27.10 27.20

Dividends per share 1.06 1.08 1.08 1.36 1.50 1.66

Dividend yield (%)b 8.30 8.00 7.30 5.60 6.90 6.00

Book value per share 6.78 6.86 7.16 8.00 8.44 9.44
Stock price (range) 11-15 12-15 11-20 18-28 18-28 22-40
Price-earnings multiple (average) 9.50 10.10 11.00 11.10 9.40 10.40
Relative P-Ec 1.26 1.23 1.21 .94 .88 .84

________________________________________________________________
a
Adjusted for 2-for-1 stock split in December, 1985.
b
Dividends per share divided by average share price.
c
Company P-E divided by P-E of Standard & Poor’s 500 stock index.

24