issue: July 2006 APPLIANCE Magazine
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by Tim Somheil, Editor
Beijing in May. It’s a warm morning and the streets are bustling in front of the Beijing Expo Center as the Appliance World Expo opens. The people in the sidewalk crowds exhibit a sort of post-holiday exuberance. After all, millions of Chinese just got back from a week of vacation.
If you need even more evidence of the growing affluence of what may become the world’s biggest capitalist market, what better example than a dramatic surge in Chinese leisure travel?
China’s celebration of the international Labor Day is now a weeklong work holiday, and leisure travel during that week grows every year. The Chinese Embassy reported a 17-percent surge in attendance at 116 tourist attractions on the first day of the holiday week. Beijing visitors were up 11.6 percent. Tourists traveling to the popular destination city of Hangzhou were up 94 percent and Shanghai’s population swelled with the addition of 3.9 million visitors.
China is an evident symbol of globalization. Manufacturing continues to migrate into China from almost everywhere else in the world. Other business follows it. Much of China’s population is clearly benefiting with increased living standards.
Even as I walked the floors of the Appliance World Expo, back home in the U.S. Whirlpool was making public its plans for consolidating newly acquired Maytag Corporation, including plant closings and layoffs.
Many in the U.S. see a direct correlation between growing prosperity in China and job losses in the U.S. Isn’t it all a part of globalization?
It’s Not That Simple
But globalization is far too complicated to be summed up in such simplistic terms.
The upheaval caused by the Whirlpool/Maytag merger has brought me a flood of phone calls from U.S. media who want to pick the brain of an industry watcher. Many of these reporters, unfortunately, have a one-dimensional notion of the state of the industry based on too little information and a lot of gloomy media reports. They call me wanting to know how the industry got to this place—as if the Whirlpool consolidations are a climactic event in the demise of appliance manufacturing in the U.S. Even reporters close to the unfolding story of the Maytag/Whirlpool merger can have an amazing lack of understanding of the decades of acquisitions that preceded it. Let’s look at Maytag alone: The companies that were absorbed into Maytag over the decades include Hardwick Stove Company, Jenn-Air, Magic Chef, The Norge Company, The Admiral Corporation, The Hoover Company, Amana Corporation, and Modern Maid Inc. Many more names were a part of Maytag history, some of which are still vital brands and some long forgotten: Litton, Blodgett, Crosley, Dynasty, Jade, Frialator, Gaffers & Sattler, Dixie-Narco, Glenwood, MagiKitch’n, and others.
It’s clear that the Whirlpool/Maytag merger is simply the latest step in the ongoing evolution of the industry.
The shifting of appliance manufacturing has been happening since appliance manufacturing started. Globalization is impacting manufacturing in other parts of the world in much the same way as in the U.S.
In the last year, Electrolux came to the decision to close its plant in Nuremberg, Germany and move manufacturing to Italy and Poland. Just a few weeks ago, Matsushita Electric Industrial Company announced the pending shutdown of its Panasonic AVC Networks Germany GmbH (PAVCG), which develops and produces DVD recorders for European markets, and move to less costly manufacturing in Slovakia.
Cost is the reason these moves are happening. Electrolux, in the face of strikes and shutdowns, delayed and negotiated the Nuremburg closure for months. “We finally had to conclude that there is no way to bridge the large cost gap that would make production in Nuremberg competitive,” says Johan Bygge, head of Electrolux Major Appliances Europe and Asia Pacific, in a statement.
In Japan, the story is much the same. Reports in June said Sanyo would move some manufacturing from Japan to China. Refrigerator and “mass produced” washing machine production would move to China or elsewhere in Southeast Asia
But the truth is that some manufacturing is staying put, in all regions. Usually production of value-added or premium appliances remains close to home. Sanyo intends to keep high-end washer production at home in its Japanese plant in Otsu, Shiga Prefecture.
Globalization Has Advantages
Companies around the world are focusing on the growing affluence of the massive population in China as a huge market opportunity.
There’s another promising new market for the appliance industry: the U.S. While the European population decreases, U.S. numbers are growing and demographics shifts in the U.S. are creating more demand for premium appliances, with potentially better profit margins than the “mass-produced” products. Some makers of premium appliances are coming to the U.S. market and bringing their manufacturing with them.
Some industry outsiders—including the reporters who call me looking for insight—are clearly stunned to learn that new appliance plants have been built in the U.S. It’s not like we’ve been keeping it a secret. BSH Home Appliances Corporation, the U.S. unit of Germany’s BSH Bosch und Siemens Hausgeräte GmbH, broke ground on a factory in New Bern, North Carolina 10 years ago and China’s white goods giant Haier opened a plant in Camden, South Carolina, in 2001.
Last year, New Zealand-based appliance maker Fisher & Paykel actually shut down Australian and New Zealand manufacturing of washing machines, and the line making its sophisticated washer motors, and moved both lines to Clyde, Ohio. Dryer production followed and manufacturing commenced last March.
U.S.-based companies are also investing heavily in manufacturing in the U.S. Several weeks ago, Viking Range Corporation broke ground on a new dishwasher manufacturing facility next door to its distribution center in Greenwood, Mississippi.
And Whirlpool Corporation—which may now lay claim to being the biggest and most thoroughly globalized appliance company—is investing heavily in new manufacturing, too. In Ohio.