Question

The annual report of Maytag Corporation contained the following excerpt:

The Company announced the restructuring of its major appliance operations in an effort to strengthen its position in the industry and to deliver improved performance to both customers and shareholders. This included the consolidation of two separate organizational units into a single operation responsible for all activities associated with manufacture and distribution of the Company's brands of major appliances and the closing of a cooking products plant in Indianapolis, Indiana, with transfer of that production to an existing plant in Cleaveland, Tennessee.

The restructuring cost Maytag $40 million and disrupted the lives of many of the company's employees.

Discuss why you think management felt it was necessary for the company to undertake the restructuring.

Answer 1

The answer is based on personal opinion as the information provided in the question is very limited.

______

There could be a lot of different reasons which may have forced the management to undertake the restructuring and are provided below:

1) The cooking products plant in Indianapolis, Indiana may have been operating at a loss and the management may have realized that by merging its operations with the other existing plant in Cleaveland, Tennessee, it will be able to control/minimize the losses associated with the operations of the cooking products plant. Such losses may be on account of cost of employee salaries, maintenance of production equipment and so on. It could also be possible that the demand for cooking products may have gone down and the resources available at the cooking products plant couldn't be utilized to their optimum capacity.

2) The management may have thought that by merging the two plants and by centralizing the manufacturing and distribution processes of its major appliances, the company will be in a better position to control its operations which in turn may reduce the possibility of cost overruns and disruptions in supply-chain network which may be associated with the management of two independent business units. Centralization of business operations may result in improved supervision, better inventory management and faster processing and delivery of customer orders.