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issue: January 2005 APPLIANCE Magazine

Appliance Industry Association Forecasts - Association of Home Appliance Manufacturers
AHAM 2005 Forecast

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by Joseph M. McGuire, president, Association of Home Appliance Manufacturers (AHAM)

Home appliance makers are prepared for 2005 with individual company goals and plans. Competitively they will engage and collectively they will continue to deliver value and innovation to the consumer. Manufacturer strategies must stand up against many factors that cannot be predicted in January. These include the health of the economy, interest rates, consumer confidence, the weather, costs of materials, energy, and the like.

Joseph M. McGuire

Will expectations for 2005 be met? Not possessing any powers of clairvoyance, I am content to describe some of the important questions the appliance industry has for the New Year. The focus of appliance producers and their suppliers through the AHAM forum is on what can be done collectively (and lawfully) to help the industry flourish. The questions we ask this year—and every year—include the following: What can be done to help manufacturers avoid unnecessary costs? What can we do to foster an environment conducive to innovation and growth?

What can we do to help our members better serve their customers?

Quite often our collective efforts in these areas center on the role of government. In light of the November election results in the U.S., there is a sense of optimism that progress can be made in Washington on reducing unnecessary costs of manufacturing in the U.S. There are broad-scale reforms that can be enacted, such as tort reform, and there are specific issues relating to the appliance industry in which we must engage. Research sponsored by the National Association of Manufacturers estimates that external, non-production costs add approximately 22 percent to unit labor costs of U.S. manufacturers (nearly U.S. $5 hour) relative to their major foreign competitors and are the primary competitive challenge facing manufacturers. These costs include corporate tax rates, employee benefits, regulatory compliance, energy, and litigation.

Manufacturing has always equated with innovation—the engine that grows our economy and generates productivity increases.

But innovation is at risk if the manufacturing climate in the U.S. does not become more conducive. While it is true that manufacturing still accounts for two-thirds of all private sector research and development, the spending by manufacturers on R&D has grown recently at only half the pace of the previous decade.

Now is the time with a second Bush Administration and a new U.S. Congress to enact pro-manufacturing policies. In the case of the appliance industry, we will be engaged on broad issues and on appliance-specific matters. From an overall manufacturing perspective, we will organize and prepare our grassroots network to lend support to efforts to enact tort reform. Tort reform has already been identified by President Bush as a priority and will most likely be taken up by the Congress and the states incrementally. AHAM’s role will be defined and targeted. Where we can, through our industry’s constituent presence, make a difference with key legislators on important votes, we will be prepared with specific examples of how the runaway costs of frivolous litigation are impacting our members. A good place to start is in class action reform.
According to the U.S. Chamber of Commerce’s Institute for Legal Reform, businesses spend millions of dollars each year to defend against the filing and even the threat of frivolous class action lawsuits. While small companies take in 25 percent of America’s business revenue, they bear 68 percent of business tort costs—a staggering $88 billion! Those costs could otherwise be used to expand business, create jobs, and develop new products. In some cases, a company will be forced out of business because of expensive litigation.

Legislation such as the Class Action Fairness Act, which would move large, multi-state class action lawsuits from state to federal court, preventing widespread “venue shopping” by trial lawyers, needs to be enacted. This bill made it through the House of Representatives last year but was killed in the Senate.

Closer to home, AHAM’s primary public policy work will be on energy, environmental, and other appliance issues before Congress and the federal agencies. Unfortunately, the demise of U.S. national energy legislation in the last two congresses has resulted in important incentives for the manufacture of super-efficient appliances to go unrealized and has prompted energy-efficiency advocacy groups to turn to state legislators to cobble a patchwork approach to national energy policy. This was a bad idea in the 1980s and remains one today. It is, therefore, a priority of the appliance industry to again seek updates to our national energy policy in the 109th Congress.

Clearly, a major emerging issue for appliance and other consumer product manufacturers is product recycling. This global issue encompasses future requirements on material content and responsibility for product disposal. The AHAM role in addressing product recycling and other collective endeavors will be guided by our strategic plan, initially approved in 2000 and undergoing revisions in 2005. The new 5-year association blue print will be unveiled at our annual member meeting in April in Washington D.C., U.S.


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