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issue: March 2007 APPLIANCE Magazine

A Lot Can Happen in a Year

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By Tim Somheil, editor

March 31, 2007 marks the 1-year anniversary of Whirlpool Corporation's acquisition of Maytag.

David L. Swift, President, Whirlpool North America

When the months of negotiation and approvals were finally settled and the transaction was closed on the acquisition of Maytag, Whirlpool's work was just beginning. Luckily, the company had used the time for extensive pre-integration planning. "We identified more than 5,000 separate tasks that we were going to have to get after," Whirlpool North America President David L. Swift told me in February. "We've been able to plow through those."
    Swift seemed pretty satisfied overall with what Whirlpool accomplished in that relatively short time. The ultimate success of the merger requires the revitalization and profitable positioning of the Maytag brands without cannibalizing existing Whirlpool brands. Success also hinged on delivering the U.S. $400 million in efficiencies that Whirlpool had said would come from the merger.
    Whirlpool knew it would have to take some unpleasant steps in order to unite the components of the two companies. Some of the Maytag pieces were simply not going to fit in. Within 6 weeks of the acquisition Whirlpool announced the first major steps in its integration strategy. Three Maytag manufacturing facilities would close, as would Maytag's Newton, Iowa headquarters. Maytag's Amana plant, on the other hand, would be expanded, as would some Whirlpool facilities and its headquarters in Benton Harbor, Michigan.
    It put up For Sale signs on the Maytag businesses that weren't a part of its long-term vision: the troubled Hoover floor-care business, Jade Commercial, Dixie-Narco vending machines, and Amana Commercial Microwave.
    Whirlpool didn't dally. By year-end 2006, two of the three plants had closed and the people moves had been completed. The closure of the third plant is on-schedule, expansion of the Amana refrigeration plant and Whirlpool plants happened as planned, and it began adding an expected 400 new job positions at its headquarters. The extraneous business units, for the most part, have been sold off. All the physical changes and movement of personnel, Swift said, happened according to plan.
    "We exceeded the expectations of what we thought we would do in efficiencies in 2006," Swift said on February 7th, just hours after Whirlpool reported its full-year 2006 results.  It was also opening day of the International Builders' Show (IBS), where Whirlpool brands had a major presence. "We raised our forecast for what we expect to get from our efficiencies in total."

Now, About Those Brands

As of April 2006, Whirlpool had become the biggest home appliance company in the world (depending on how you measure such things), with a stable of some of the biggest U.S. appliance brand names—many of them rivals for the same customer segments. Whirlpool has professed its intention to keep all the biggest brands, and keep them vital.
    "We spent quite a bit of time in 2006 making sure that we would have very clearly articulated brand positions, (each) with very specific target customer segments," Swift said. "and then (have) enough innovation to ensure that we could differentiate products along those dimensions."
    Some of those new products were rolled out at IBS—including the first post-merger Maytag appliances. "As we say, we're putting the Maytag back into Maytag," Swift said. That translates into a focus on dependability and durability, embodied in new Maytag laundry appliances. The old top-load washer and dryer appliances, once produced at the heritage Maytag factories, went away with the closing of those plants. The new designs are now in-production at Whirlpool laundry plants, on display at IBS and already shipping to customers.
    "We feel very good about doing what we said we were going to do in terms of revitalizing the Maytag brand, particularly in laundry, because that was where they were having some of their biggest challenges," Swift said.
    The other side of the coin is the Maytag bottom-mount refrigerator business, produced in Amana, Iowa. "It was a great business, and continues to be a great business," Swift said, pointing out that IBS was the launch pad for a new counter-depth Ice2O™ refrigerator made in Amana. New Maytag dishwasher designs were also launched at the show.
    Another way in which Whirlpool is "putting the Maytag back into Maytag" is by bringing back the Maytag Repairman, the longest-running real-life character in network TV. Nationwide auditions will help choose the next incarnation of Ole Lonely.
    Whirlpool also managed to make 2006 one of the biggest launch years ever for new appliance designs under its heritage Whirlpool brands, including Cabrio top-load laundry appliances and the Duet Sport front-loader washing machine. Whirlpool intends to make 2007 another big year in terms of new products. "This year will continue to be a very big year for us at KitchenAid with the Architect Series 2 launch across all products," Swift said.

KitchenAid and Jenn-Air: Finding Distinctions

It seems to me that one of the major Whirlpool challenges will be in how it differentiates KitchenAid, which became part of Whirlpool in 1986, and Jenn-Air, which was adopted in the Maytag merger. Both are successful, higher-end appliance lines.
    But, as I asked Swift, what's the difference to the appliance buyer?
    "When we talk about the customer for Jenn-Air the term we use is The Proud Gourmet," Swift said. He described the Jenn-Air buyer as someone who may have more of an artistic bent, who places a great deal of importance on design aesthetics, and is a little more contemporary in their view. Swift said Jenn-Air products launching at IBS reflect this design approach by making use of new finishes and materials, such as the floating glass look. "But…still with a very clear focus on the gourmet cook," he added.
     "When we talk about KitchenAid, the term we use is Kitchens for Cooks," he said. He described this user as someone who enjoys the process of cooking. "To these users, the robustness of the cooking paraphernalia is incredibly important."
    This is represented in the KitchenAid stand mixer—no lightweight appliance. The heft and solid feel of the iconic mixer is being built into everything KitchenAid, from gadgets like pizza cutters to 48-inch, eight-burner ranges.
    "That sort of brand language we carry through with all the components of our products," Swift said. "The people who buy those products get that. And the builders that we've tested see the difference very clearly, based on what their customers are asking them for in built-in kitchens."

Premium Posers?

Swift has his opinions about the premium appliance market in the U.S.—who's in it, and who's only playing at it.
    He won't name names, but said, "I think a lot of our competitors like to believe that they are playing in the premium space. I think that's certainly a better message for them to be able to share with their investors and shareholders. Our view is that, when you actually look at how some of that pricing cascades, it would be hard to argue, frankly, that some of those prices are premium."
    Nevertheless, Swift firmly believes in this approach to the appliance business. "We've been able to demonstrate that, if you can create some truly unique innovation in your products that satisfies a compelling customer need, consumers will pay more than what you would have thought."
    Swift's favorite example is close to home. He pointed out that the average family income of Whirlpool Duet washer and dryer buyers is roughly $40,000—not much when you consider a Duet pair may retail at $2,000. That exemplifies a huge change in the attitudes of U.S. major appliance consumer from just 5-10 years ago, but it's still not difficult to understand.
    "Because there's a compelling case in the benefit to the consumer, the design aspect, the water/energy story, the robustness of the design—when consumers see that and they can understand it in simple terms, you (have) a consumer that's willing to up-buy," Swift said.
    Swift and Whirlpool see the intangible features, like energy efficiency, becoming a more important factor in product success. This is borne out in the Whirlpool consumer studies. "More and more—particularly in laundry, but also in refrigeration—one of the key drivers is energy efficiency."
    This is helped significantly when U.S. states provide benefits to consumers for purchasing Energy Star-compliant appliances. The Energy Star gives consumers an easy way to spot, at a glance, those appliances that offer a level of energy efficiency substantially higher than federal standards. "We take the recognition we've received on Energy Star seriously and we'll continue to," Swift said.

2006? That Was the Easy Part

It must be a good feeling to cross 5,000 items off your to-do list.
    But I imagine Swift, and Whirlpool, have a new list that's even more challenging. After all, the Maytag brand product lines remain a mix of pre-merger/post-merger products, which is not conducive to controlled brand positioning. I foresee a 2007 flood of new appliances from all Whirlpools' North American brands. Some will be design tweaks, some will leverage major innovation to create truly unique appliances, and all will be aimed at solidifying the identity of the different brands.
    It will be another year, I think, before we can step back and get a good picture of where Whirlpool North America is really headed.
    2007 will see further efforts to make North American manufacturing more efficient. Most recently came the announcement of a plan to move some cooking appliance manufacturing out of Cleveland, Tennessee (with job losses expected through attrition rather than layoffs), and go to a plant in Tulsa, Oklahoma and a new plant in Mexico. Even though the Mexico plant is still in the planning stages (at press time), the move is scheduled to be complete in 2007. Having witnessed in 2006 just how quickly this giant can move, that schedule seems quite doable.
    But the real test of Whirlpool's nimbleness has nothing to do with its production infrastructure and everything to do with its ability to make all the pieces simultaneously successful. For that, we'll just have to wait and see.

Suppliers mentioned in this article:
Whirlpool Corporation

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