Hoover set to lose pounds 20m over free flights fiasco: Task force moves in to sort out chaos after three top executives are fired

Michael Harrison,Industrial Editor
Tuesday 30 March 1993 23:02

HOOVER FIRED three top executives yesterday after admitting that its ill-fated and controversial free flights offer will lose it at least pounds 20m.

The company's US owners meanwhile sent a task force into Hoover's South Wales headquarters with orders to clear up the wreckage from the sales promotion that succeeded beyond its wildest dreams.

Under the offer anyone buying a Hoover product costing more than pounds 100 was eligible for two free return air tickets to the US or Europe. Customers purchasing the cheapest qualifying product, a pounds 119 vacuum cleaner, could receive two tickets to New York, costing Hoover more than pounds 500.

The company appears to have gambled on people being put off by the small print attached to the offer. But it underestimated the tenacity of the buying public when confronted with such a gift horse.

Hoover refused to say how many customers had entered the promotion or what the total bill would be. According to some estimates, however, up to 100,000 people may have applied for free tickets - suggesting that the cost will be much higher than pounds 20m.

The company is negotiating with British Airways to buy up to 20,000 extra tickets on scheduled flights to New York and European destinations to meet its commitments.

The promotion was at the centre of controversy almost from the minute it was launched last August, with customers flooding into shops selling Hoover products but then finding it difficult in some cases to obtain their free flights. Labour called on the Department of Trade and Industry to investigate while trading standards officers in Mid-Glamorgan, where Hoover's Merthyr Tydfil head offices are based, received more than 300 complaints.

Although the offer ceased at the end of January, customers may apply to travel on flights any time up to next April.

Many consumers bought Hoover products they did not want simply to obtain free flights. The result was a flourishing second-hand market in brand new domestic appliances still in their boxes.

In a statement issued last night Maytag Corporation, Hoover's US parent, apologised to its customers and said the offer, available in the United Kingdom and Ireland, had led to 'tremendous difficulties plus significant unanticipated costs'.

Leonard A Hadley, chairman of Maytag, said: 'These promotions were flawed and we are taking strong steps to rectify the situation. We regret the inconvenience it has caused Hoover customers in the United Kingdom and Eire.'

The executives dismissed yesterday are William Foust, managing director of Hoover Limited and president of Hoover Europe, and the two directors most closely involved with the promotion - Brian Webb, Hoover vice-president of marketing, and Michael Gilbey, director of marketing services.

Maytag, which owns a string of other domestic appliance brands in the US, said that a reserve set up to cover the cost of the promotion would not be enough, forcing it to take a one-off charge against first quarter profits of dollars 30m to cover extra costs.

When the ill-fated promotion was launched Hoover calculated it could buy all the tickets it needed cheaply through charter operators. However, Maytag said the travel operators retained by Hoover were unable to fulfil their contractual responsibilities in the light of demand.

A variety of hurdles were put in the way of customers. Receipts and application forms had to be sent off within 14 days; after that would-be travellers had to go through a lengthy procedure of nominating airports, dates and destinations.

Hoover also required customers to book accommodation and insurance through affiliated travel companies. Customers who booked separately were given the tickets only when they produced receipts.

According to a BBC1 Watchdog programme to be broadcast next Monday the travel company organising the offer, Free Flights Europe, used a system known as 'wising' deliberately designed to dissuade customers from taking up their free flights unless they spent at least pounds 300 on extra services such as car hire or insurance.

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