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Maytag Investors Not Amused By Vacuum Subsidiary’s Air Travel Blunder Version also moving on

April 28, 1993

Maytag Investors Not Amused By Vacuum Subsidiary’s Air Travel Blunder Version also moving on general news wire

LONDON (AP) _ The Maytag Corp.’s Hoover Europe vacuum cleaner subsidiary can take comfort from the fact that it isn’t losing as much money on air travel as most airlines are.

But that’s little consolation to Newton, Iowa-based Maytag’s shareholders, who already are distraut over the company’s slumping performance and large executive pay packages.

One investor used words like ″fiasco″ while grilling Chairman Leonard Hadley Tuesday about a European sales promotion that ran amok and ended up costing Maytag $48.8 million and three Hoover executives their jobs.

Hoover announced Tuesday it has chartered airplanes and booked blocks of seats on 1,100 airline flights to make good on an offer to thousands of Britons and Irish who bought vacuum cleaners in return for promises of free international air travel.

Customers realized the obvious - vacuum cleaners are cheaper than airline tickets - and snapped up available Hoovers.

Hoover managers underestimated the response to the offer for trips to European and U.S. destinations. But the clamor for tickets was overwhelming, with an estimated 200,000 people saying they were entitled to free flights.

Last month, Hadley announced that Maytag was taking a one-time $30 million charge against earnings to resolve the problem.

Hadley also announced the firings of William R. Foust, president of Hoover Europe; Brian Webb, Hoover’s United Kingdom vice president of marketing; and Michael Gilbey, director of marketing services.

That didn’t satisfy one Des Moines shareholder, who on Tuesday called the Hoover promotion a ″fiasco″ and asked the chairman what was being done to ensure nothing like it happened again.

Hadley said a task force is reviewing the matter with an eye toward strengthening corporate control over the wayward subsidiary, which Maytag acquired in 1989.

Hadley said it was hard to understand how Hoover got itself into the multi- million dollar mess.

″(Maytag) has been in business 100 years, I’ve been here 34 of them, and I’ve never seen anything that approaches this,″ he said. ″It’s like a bad accident which has happened and you are unable to determine what was in the driver’s mind when it happened.″

The promotion helped produce a first-quarter loss of $10.5 million, or 10 cents per share, Maytag, the No. 3 U.S. appliance maker said Tuesday. In the same period of 1992, the company lost $282 million, or $2.66 per share, mainly due to $307 million in charges for required accounting changes.

For all of 1992, Maytag lost $315.3 million after accounting changes and a costly restructuring of its operations.

Hoover Europe said Tuesday its massive airlift should get all qualified customers to their destinations.

″We have Hoover-chartered planes flying to European and U.S. destinations featured in the promotion as well as blocks of booked seats,″ said Richard Rankin, vice president of European marketing services. ″The schedule will enable the travel operators to allocate more flights quickly and give customers better information on their requested flights.″

Hoover spokeswoman Caroline Knight declined to say how many people will be flown or how many planes Hoover has chartered. Nor did she identify the 11 carriers selling blocks of seats to Hoover.

″It’s difficult to get a fix on it because people are still making applications,″ Knight said.

The Hoover promotion angered a number of travel executives who worried about lost business, but it is now helping airlines fill empty seats.

Industry sources said one big beneficiary is British Airways.

A British Airways spokeswoman confirmed Tuesday the carrier was selling seats to Hoover. The spokeswoman, who did not want to be identified, declined to comment on whether there was any embarrassment about being connected with the ill-fated promotion.

″We’re one of the airlines and we’ll leave the rest to Hoover,″ she said.

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