Issue: January 2009 APPLIANCE Magazine
Hope for 2009
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After a year of disastrous economic news, the industry needs to set a positive course.
The appliance industry suffered along with the global economy in 2008. Problems that hit the industry in the United States expanded to encompass Europe, Latin America, and Asia.
Recession and the worst housing market in decades have been a painful combination for the industry in the United States, with 2008 likely to end with big decreases in appliance unit shipments (units shipped from the factory, or imported, for U.S. consumption). After major appliance shipments reached all-time highs in 2005, most categories suffered small decreases in 2006. As the housing market went into crisis and remodeling slowed, significant decreases in major appliance shipments were seen in 2007.
Last year was worse. APPLIANCE magazine is forecasting 2008 cooking appliance shipments (gas and electric ranges, ovens, and cooktops) to be down about 13.7% from 2007. Total shipments of laundry appliances will be down about 7%. Dishwashers will be down 12.7%, refrigerators as much as 17.9%.
The only major appliance category that will show growth is freezers, although just over 1%. As anxious consumers go into “economy” mode, they’re buying in bulk and stocking up on food items.
HVAC will have fared little better in 2008, once the final tally is known. APPLIANCE is projecting room air shipments will be down about 3.5%, unitary air down 3.1%, gas furnaces down as much as 15%, and gas and electric water heaters down 5.1%.
We develop our forecasts primarily through surveys of the appliance producers themselves. Keep in mind that these are unit shipments. Just because the number of dishwasher shipments is down 7% doesn’t mean the industry’s dishwasher revenue is down 7%. In fact, the industry is working very hard to increase the income it receives for each appliance shipped, and the steps it must take are not always pleasant. That includes layoffs, of course, and the appliance industry job toll has risen in recent months as economic woes heightened.
Decreased shipments are, in part, a result of financial losses taken by one of the appliance industry’s most promising customer demographics, the baby boomers. Some boomers saw their retirement savings diminish during the financial mayhem in the second half of 2008. Suddenly, many would-be retirees are planning on working longer while those who have already retired are suddenly less well off than they once were. They’re nervous about the future, and much less eager to make big purchases. But then, so is just about everybody, regardless of their demographic niche.
As Michael Traub, president and CEO of U.S.-based BSH Home Appliances Corp. tells APPLIANCE in our annual Forecast report (starting on page 25), consumer attitudes have a direct impact on the appliance market. Bad news can create more bad news. Right now, it’s tough to find reasons for optimism. But changes are coming that are intended to spur the U.S. economy, and some new federal initiatives may be founded on fostering U.S. innovation in energy efficiency.
President Barack Obama and the newly empowered Democratic Congress are seen as more predisposed to regulating energy efficiency than the previous administration. If green technology development is to help drive economic recovery in the United States, green regulation needs to be considered carefully by the new administration and the new Congress. Bad regulation—that creates unnecessary costs for manufacturers and consumers—will slow down the adoption of green technology. Onerous and patchwork regulations will be product development speed bumps—or roadblocks. They create headaches and needlessly complicate engineering, manufacturing, and distribution.
There’s no more effective way to dampen industry progress than through unproductive bureaucracy.
On the other hand, regulation that fosters efficient product development, making it easier and less costly for manufacturers to design and scale-up green technology on a competitively level playing field, will result in less-expensive consumer products getting to market quicker. That makes for more enthusiasm on the part of consumers and producers.
Right now, there’s nothing the United States and the world need more than some hope and enthusiasm.