issue: December 2004 APPLIANCE Magazine
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APPLIANCE talks with Jeff M. Fettig, Whirlpool's new chairman, president, and CEO.
Already established as the largest U.S. major appliance maker, Whirlpool Corporation is striving to hold that title globally. The company’s strategy is to continue its focus on innovation in order to claim the global recognition it has set out to acquire.
After a successful 17-year reign, long-time Whirlpool CEO David Whitwam retired, turning over the helm to Jeff Fettig, former president and COO. Under Mr. Fettig’s leadership, Whirlpool declared record-setting second-quarter net earnings of U.S. $106 million compared to $94 million in 2003. Second-quarter net sales increased 9.2 percent year-over-year to $3.3 billion, helping the company fend off rising raw material costs. However, material costs hit the appliance industry hard in the third quarter, including Whirlpool, which reported a lower than expected profit.
APPLIANCE recently talked to Mr. Fettig about what the industry can expect from Whirlpool as the company anticipates fourth-quarter results and strives for continued
Q: What are your plans as Whirlpool’s new CEO, and what strategies will you implement?
A: Whirlpool’s leadership team and I are very committed to executing the strategy that we have articulated over the last couple of years—to build strong brand pride by bringing continuous innovation to the marketplace. Our intentions are to accelerate that. Given the global industry and the markets that we operate in, we will continue to aggressively put in place the plans and actions required to ensure that we remain at world-class competitiveness in all of our operations. The strategy is not going to change. We expect the rate of speed of our execution to accelerate simply because we think we are capable of it.
There certainly will be differences just because Dave Whitwam and I are different people. I wouldn’t contrast these as differences, but I have grown up in our global operations. I know our capabilities very well in all parts of the world. We expect to double the rate of innovation that we bring to the marketplace in the next few years versus what we have done in the last 3 years, which has been quite a bit. We will step up the investments in our key consumer brands around the world to help support our brands and innovation awareness with consumers. Although we start at very different places around the world, we are executing the same strategy in all key markets around the world. Lastly, we are now into our third year of executing our global-offering platform, which is really taking Whirlpool’s global leverage to the next level, from manufacturing to technology to procurement.
Q: What capabilities allow you to accelerate innovation, and how do you intend to do that?
A: For 5 or 6 years, we very aggressively established innovation as a core competency of Whirlpool that we needed to embed throughout our organization in all 68,000 employees. We made significant progress over the last 5 years. During that time, we were building what we call an innovation pipeline of ideas and projects. Our view is that if we want to bring 20 new innovation projects to the marketplace this year, we have to have 500 ideas in active work going on in the pipeline. We test, we pilot, we experiment, we prototype, and then the things that make it through the pipeline, we actually commercialize and bring to the market.
The second thing that enables it is our ability to leverage this globally. We don’t just have people in the U.S. working on this; we have people working on it around the world. Through our global product development process, we can bring innovation to multiple markets much faster, much more consistently than when we operated on the market-by-market or region-by-region basis. What may be innovative in India or China or Europe may be something we have had in the marketplace in the U.S. for the last 2 or 3 years and vice versa.
Q: How has Whirlpool been able to effectively manage rising material costs and availability?
A: There have been significant increases in the raw materials market—certainly much higher in the second half than we saw in the first half. In the first half, we were able to largely offset them through all of our other productivity efforts. From an availability standpoint, a tight materials market coupled with a strong demand did create some availability problems. We did have some spotty availability problems, but in general we had a good level of availability and that has to do with our ability to manage rapidly our supply chain. In April, we announced and implemented a price increase for all stainless steel products. Our view was [that material costs] were of such an extraordinary magnitude, it was very appropriate for us to take the price increases to the marketplace.
Q: Are you concerned about the future of U.S. manufacturing?
A: Certainly from a job level standpoint, I think everyone is. Our focus is that we’ve got to do three things extraordinarily well. We have to ensure that we innovate in the products and business practices that we use in our factories. We have to ensure that we have the latest training and educational capabilities to drive productivity. We have to best serve customer needs out of those factories better than anyone else can. If we do those three things, we are going to have a lot of manufacturing jobs in the U.S.
Q: Do you think there will be major shifts in market share over the next couple of years?
A: I think as an industry a lot of the participants are trying to figure out ways to remain competitive in their markets. Ours are not big bang—ours are continuous. That is the standard that we place on our factories, products, and businesses. That is just what we try to do every day, and we will continue to do that. It is a globally competitive industry that everyone is trying to remain competitive in. In terms of market share changes, I can’t forecast that other than to say I think those that best meet customer needs are going to win market share. We expect to be one of those.