While demand for appliances has been slow and
business has been impacted by high-priced material, the chief
executive of the world's largest consumer appliance maker said
an improvement is coming.
Jeff Fettig, chairman and chief executive
officer of Whirlpool Corp., Benton Harbor, Mich., said the cost
of the material his company uses to make consumer goods like
washing machines and refrigerators is expected to increase
between $450 million and $500 million from last year. And that
number could rise even more, he said during a presentation in
June at the J.P. Morgan Basics and Industrials conference in
"One big change we've seen since we gave
guidance in February was the continued escalation of material
cost," he said. "In February, our guidance talked about $450
(million) to $500 million, but when you look at base metals and
the dramatic increases we've had and the continued increases in
steel, this may wind up to be even bigger than what we saw in
terms of material cost inflation."
But while commodity prices are high and the
slow housing market is decreasing the number of appliances
Whirlpool is building, a turnaround appears to be near, Fettig
said during Reuters' Consumer and Retail Summit in June. "The
good news, from the demand standpoint, is I think we've seen
the worst," he said. "We had a very significant decline in the
U.S. demand market in the fourth quarter and again in the first
quarter, but we've seen that start to moderate. We think in the
second half of the year there will be small growth."
Because of commodity material cost inflation
and, in the case of the United States, a down industry market,
Whirlpool's management of costs is essential and critical, he
said at the J.P. Morgan event. "We continue to make good
progress in driving total cost productivity in every part of
our business worldwide," Fettig said.
Part of that push toward productivity has
resulted in combining operations. In June, Whirlpool announced
that it would begin outsourcing the manufacture of its
dehumidifiers and air purifiers, which currently are produced
at its LaVergne, Tenn., plant, eliminating 330 jobs.
Additionally, Whirlpool said it is eliminating approximately
400 jobs by relocating work done at its Cleveland, Tenn.,
single-cavity freestanding range manufacturing plant to
facilities in Tulsa, Okla., and Celaya, Mexico. It also is
consolidating the industry, buying up such brands as
KitchenAid, Jenn-Air, Amana, Magic Chef, Roper, Brastemp,
Bauknecht and, most recently, Maytag.
"Commodity and material prices remain a major
problem," Fettig said. "But we're able to offset that through
productivity, through efficiencies we've driven through the
Maytag acquisition and our ability to bring innovation into the
marketplace. All those things combined, and with an improving
demand trend we feel positive about the balance of the
Innovation includes making products that are
energy efficient, he said. "We think it's almost mandatory,"
Fettig said. "The whole package brings people into the
marketplace to buy. There are wins for the consumer and the