Suppliers of appliances and housewares face a mixed outlook in 2004.
Low interest rates in 2003 spurred major-appliance purchases as consumers acted on pent-up demand.
Appliance sales this year, however, are forecast to be flat or down slightly, according to figures released by the Association of Home Appliance Manufacturers in Washington.
Housewares sales promise to grow modestly after gaining strength in late 2003. Growth in the sector is fueled partly by consumers placing more emphasis on the value of their homes and household contents, said Perry Reynolds, IHA vice president of marketing and trade development.
Appliance sales have been riding a crest of remodeling activity in the United States. Most remodelers expect continued strong activity in early 2004, according to the National Association of Home Builders.
``Low interest rates, rising home values and strong home sales are definitely contributing to the remodeling fervor among homeowners,'' NAHB remodelors' council Chairman Mike Weiss said in an analysis of an NAHB survey.
NAHB also predicts continued strength in new-home construction, another appliance-sales driver, in early 2004. Attractive mortgage rates and house prices drove new-home sales to a record of more than 1 million units in 2003, the Washington association reported. Housing sales were 11 percent higher than the previous record in 2002.
Beyond early 2004, homebuilders have concerns about higher interest rates as the U.S. economy heats up, said NAHB chief economist David Seiders.
Sales of appliances gained strength through the year in concert with new-home sales.
AHAM revised its 2003 appliance sales forecast upward in November when its initial May forecast proved to be too conservative.
Appliance majors are starting to reap gains from restructuring moves begun a few years ago when companies were in tough financial straits.
Whirlpool Corp. said it will boost its dividend by 26 percent in the first quarter of 2004.
The windfall reflects Whirlpool's stronger financial position, its ability to generate free cash flow and the firm's brand momentum worldwide, said Whirlpool Chairman and Chief Executive Officer David Whitwam.
Whitwam predicts earnings will rise in 2004 as the U.S. economy stabilizes and as the Benton Harbor, Mich., company grows in other global regions.
Whirlpool is in the midst of a $100 million retooling of its production operations. The program includes consolidating manufacturing of top-loading clothes washers in Clyde, Ohio, and various expansions at Findlay, and Marion, Ohio; Evansville, Ind.; LaVergne, Tenn.; Oxford, Miss.; and Tulsa, Okla.
As well, Whirlpool plans to build a refrigerator plant in Mexico for new side-by-side models and some products now made at Fort Smith, Ark.
Maytag Corp. said it hopes to outperform the U.S. appliance industry this year by introducing more premium-priced appliances and by competing aggressively on lower-priced goods.
The company said it intends to open 30 more Maytag stores in 2004 to attract customers with a ``try before you buy'' program.
Maytag's Hoover floor-care division, a drag on Maytag's financial results, unveiled programs to boost operating results this year. Hoover's North Canton, Ohio, plant will cut costs through a renegotiated labor contract, layoffs and sourcing of some manufacturing from Asia and Mexico, according to Hoover President Tom Briatico.
Hoover will introduce an air purifier, market-test a mobile carpet-cleaning business and hike research and development spending by 20 percent.
Maytag plans capital spending of $175 million or more this year. To lower costs it will close its Galesburg, Ill., refrigerator plant in December and move production to Iowa and to a new plant in Reynosa, Mexico.
Housewares sales have been growing at an annual average of just under 4 percent for the past five years as consumers exploit increasing functionality and style, said IHA's Reynolds in a telephone interview. In 2002, U.S. housewares sales were about $58 billion, he said.
``It's not spectacular growth, but when most businesses are down, [housewares] stay the course,'' Reynolds said.
Categories registering higher-than-average growth rates include home storage and organization, cleaning, electrics, cook- ware and tabletop appliances, Reynolds said.
Cost-cutting remains the major challenge facing housewares producers as they compete for shelf space at mass retailers' outlets.
Newell Rubbermaid Inc.'s most recent cost-cutting plan focuses on Wooster, Ohio, the former headquarters of Rubbermaid Inc. Wooster will lose its plastics molding factory and most white- collar jobs for the Home Products division.
While Newell Rubbermaid consolidates production on several fronts, its overall plastics strategy is unclear - which might offer opportunities for other plastics molders.
The company wants to outsource more molding, get out of some low-profit products and sell weak operations.
Newell Rubbermaid also wants to reduce its reliance on plastic resin. That could mean Newell Rubbermaid might exit plastics-intensive businesses such as storage containers, or it might expect plastic part suppliers to absorb resin price hikes.
High resin prices were a factor in Home Products International Inc.'s decision to close its Eagan, Minn., kitchen and plastic storage plant this month. HPI lost $10.8 million in its third quarter ended Sept. 27, the third consecutive quarter in which it posted a loss.
However, competitor Newell Rubbermaid reported only a slight dip in profit to $75.2 million for the third quarter, while rival Tupperware Corp. broke even.
Expansion announcements were rare in plastics housewares, but Sterilite Corp. said it will invest $65 million in a new facility in Clinton, S.C. When the plant opens in midyear it will be the sixth for the Townsend, Mass., company.
Late-breaking news in 2003 included the Dec. 22 announcement that Israeli major Keter Plastics bought European rival Allibert Group.
The acquisition was the biggest consolidation in housewares since Newell Inc. and Rubbermaid Inc. merged in 1999.