issue: September 2007 APPLIANCE Magazine
In the Midst of Transition
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Tim Somheil, Editor
The world’s two biggest producers of major appliances continue to aggressively cut costs and launch new products at a rapid pace. They can do no less to remain competitive on a global scale.
As we move well into the second half of 2007, Whirlpool is still making changes to take advantage of its Maytag acquisition. Strong second-quarter net earnings, up 60%, came at least in part from the efficiencies of integrating Maytag. Whirlpool is in the midst of a manufacturing shift, as well. Most plant closures announced in mid-2006 as a direct result of Maytag have been completed, but Whirlpool this summer announced plans for relocating single-cavity freestanding ranges from Cleveland, TN, U.S. to Tulsa, OK, U.S. and Celaya, Mexico, with Cleveland production scheduled to cease by the end of 2008.
Tim Somheil, Editor
Whirlpool is also getting out of some non-core manufacturing businesses and will soon cease dehumidifier and air purifier manufacturing in LaVergne, TN. Whirlpool-brand dehumidifiers and air purifiers will be made by third-party manufacturers.
Electrolux is also a company in transition, and these changes are also huge in scale. The company is in the midst of a multiyear manufacturing shift from Western to Eastern Europe, intended to capitalize on lower labor costs.
Growth through Innovation
Whirlpool and Electrolux are taking advantage of their internal structural changes to ramp up new product development. It’s not enough to cut costs, after all. Bringing successful new products to market is also key.
Whirlpool is making the most of the Maytag dependability reputation with the launch of new washers with commercial-grade materials and parts. It also reintroduced the Maytag repairman to remind consumers. It launched impeller-driven washers under the Maytag name, a whole suite of Jenn-Air–brand major kitchen appliances with the Oiled Bronze finish, and steam-assist cooking and induction cooktops under the KitchenAid brand. Whirlpool-brand Evolution Emotion hoods and Bauknecht-brand SuperEco energy-efficient washers were introduced in Europe. Brastemp brand in Latin America launched the One Fitness microwave with a new, rounded exterior design and special fitness-oriented cooking programs, while Consul brand introduced washers with new ease-of-use functionality. Whirlpool Asia launched a frost-free refrigerator that automatically adjusts its temperature based on the exterior environment and the food inside the unit.
Electrolux’s product development track may be even more ambitious. President and CEO Hans Stråberg describes it as the most extensive campaign of product introductions in Electrolux history, with new products coming to market throughout Europe and renewing 15% of its product offering. Stråberg is probably making an understatement when he calls it “a complex task.”
To help address this complex task, Electrolux last year made a substantial investment in a product development management system. Sopheon’s Accolade software was integrated first in the floor care business in 2006, and is now being expanded to take all Electrolux’s regional product development processes to the global level (see “Managing Global Innovation,” APPLIANCE magazine, August 2006).
Whirlpool’s corporate-wide optimization will last well into 2008. Electrolux will make a major effort throughout the rest of 2007 and well into 2008 to get product development up to speed; in July, Stråberg voiced his disappointment at the slow pace of product launches in Europe.
The important U.S. market is in a slump in 2007. The Association of Home Appliance Manufacturers (AHAM) reports factory unit shipments for the big-six white goods categories—washers, dryers, dishwashers, refrigerators, freezers, and ranges ovens—were down 4.4% for the year as of the end of July.
New home sales, already slowing at the start of the year, suffered another hit when the subprime mortgage lenders crisis became big news and home loans became harder to get. New home sales were down a dramatic 22.3% in June compared to the previous year. July looked a little better, only 10.2% below the previous year. “The tightening of lending standards and problems in the financial sector…will delay housing’s recovery at least until mid- to late-2008,” said the National Association of Home Builders chief economist, David Seiders.
But housing is only one factor impacting major appliances in the U.S., and the question remains: Can the market be turned around before year-end 2007?
Speaking in July, Whirlpool chairman and CEO Jeff M. Fettig said, “We are positive about the trends exiting the second quarter and believe demand will begin returning to moderate growth levels in the second half of this year.”
Electrolux hasn’t changed its February 2007 outlook on the North American industry, still expecting an overall decline in 2007 compared to 2006. Still, that decline doesn’t seem too troublesome to CEO Stråberg, who reported that Electrolux overcame North American market weakness and decreased shipments “…and continued to grow and gain market share while increasing operating income.”