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Get Four
|  | JULY 30, 2004
Why Whirlpool Is Cleaning Up [Page 2 of 2] Q: Your No. 1 retailer is Sears, which has been slipping lately. What's the outlook for Whirlpool and Sears? A: Sears has lost share in major appliances over the last three years. I think we need to put this in perspective, first of all. This is off their all-time high base of 40% of the entire retail market. They're now around 36%. We also look at the market in terms of conversion and draw. Conversion is when somebody comes in looking for an appliance and buys one. Draw is simply how many people come in. The conversion side is outstanding. Sears converts more shoppers by far than anybody else in the industry. The issue has really been a draw issue. Sears, for the first time, has been out-stored by its competitors. Sears is beginning to address a store-expansion program, and that will help the appliance business. Q: In your conference call with analysts, you talked about raising prices. Can you give me more detail about this? A: In September, we're going to raise prices on selected brands and selected models. It's basically on existing products that haven't been renewed in the last few months. It's around 2% to 2.5%. Q: Do you have more price leverage with consumers today vs. a year or two ago? A: I don't believe this is a consumer issue. Two percent on a $500 appliance is $10. I don't think that will determine whether a consumer buys or doesn't buy. To your question on what has changed: Everybody is getting significant raw-material price increases that can't be absorbed any other way, other than passing it through the marketplace. I think we're a very productive company, but I don't think any company that can overcome the magnitude of raw-material increases with productivity. Q: To keep costs down, one of the things you've done is move more production to China, to India, to Brazil, to Eastern Europe, where labor costs are much lower. What's the future in terms of offshoring at Whirlpool? A: We haven't moved a lot. We have grown a lot in these low-cost countries, but it wasn't a transplant, per se. So we do have significant facilities in Mexico, in Brazil, in Central Europe, in India, and in China that serve domestic markets, and now, increasingly, are serving other markets around the world. The second point is we don't completely subscribe to the belief out there that all manufacturing is going to move to low-cost countries. Let me give you an example: The largest washing-machine factory in the world is in Clyde, Ohio. It's ours. We produce probably 5 million washing machines a year, seven days a week, 24 hours a day. And there's no place in the world where we can make washing machines better. Now some of the components that go into that washing machine which may have been made in the U.S. 10 years ago may be made in Mexico today and may be made in China or Malaysia or Poland tomorrow. Like building wire harnesses. We don't even do that anymore. We've outsourced that to a company that does that in Mexico. But we still do the final assembly in Clyde, Ohio. There's no one-size-fits-all for us.
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