Mexico's market for major appliances probably will tumble this year, but it might not fall as far as suppliers first feared when the peso began to plummet. Initial forecasts pegged the market to slump by about 30 percent in 1995, ``but we are finding the decline is not so severe,'' said Steve Dodge, manager of market planning for the Maytag International division of Maytag Corp. of Newton, Iowa.
Dodge estimated the Mexican appliance market in early 1995 was 10-15 percent behind sales in the comparable 1994 period.
Major appliance sales were strong in Mexico last year, according to figures from the Asociaci¢n Nacional de Fabricantes de Apparatos Domesticos. The trade association reported about a 20 percent increase in 1994 unit sales for the three product categories it tracks. The U.S. appliance industry's 52.6 million unit shipments last year were 8.5 percent above 1993 levels.
Dodge blamed the peso devaluation for the anticipated 1995 slowdown.
``Disposable income has gone up less than inflation,'' Dodge said from Maytag International's Chicago head office. ``Meanwhile, the cost of [appliance] products has gone up significantly.''
Sales for Whirlpool Corp.'s Mexican joint venture slipped by less than 5 percent in the first quarter of 1994, said spokesman Terrance Reid. Despite the sales decline, Vitromatic SA ``broke even for the quarter,'' he said.
Reid said Whirlpool overall was not hurt badly by the peso slump because Mexico represents a small part of its business. The Benton Harbor, Mich., appliance giant has a 49 percent interest in Vitromatic, a producer of clothes washers and ranges based in Monterrey, Mexico. Vitromatic also makes most of its own plastic parts.
Whirlpool's U.S. exports to Mexico, mainly concentrated in market niches for U.S.-style appliances, are lower than Vitromatic's production, Reid said.
Dodge said Mexico's market for refrigerators and televisions is relatively mature and demand in those two categories is largely driven by replacement needs. The washing machine market, however, is immature and demand for clothes dryers and dishwashers is so low thatANFAD has not been tracking them. Mexico only imported 36,800 clothes dryers and 6,700 dishwashers from the United States in 1993, according to U.S. Department of Commerce data.
Higher prices for plastics, metals and other materials - combined with a low peso value - boosted appliance prices in Mexico, said Dodge. Mexico's appliance makers source many plastic parts domestically but import critical components such as motors from the United States, paying for them in dollars.
Dodge said Maytag's Hoover division manufactures in Mexico on a relatively small scale. Whirlpool and GE Appliances are the major U.S. firms involved in Mexico; their joint ventures probably have about 85 percent of the market, he estimated.
Major U.S. firms have not flocked to produce appliances in Mexico for export because labor costs are only a few percent of production costs, Dodge said. He said Daewoo Corp. of Seoul, South Korea, plans to start up a washing machine plant near Mexico City this fall.
Reid said a weak peso can have a small positive effect on firms manufacturing in Mexico. Some costs, such as labor, are lower in U.S. dollar terms.