Appliance shipments continue to grow on the strength of housing activity and new product innovation. Manufacturers, however, can't be complacent in an onslaught of rising costs and foreign competition.
Dominating the landscape in 2006 is the pending merger of two U.S. giants. When Whirlpool Corp. and Maytag Corp. merge - perhaps as early as in the first quarter - effects will ripple through supply chains. The new entity will hold nearly half the U.S. appliance market.
Whirlpool's $1.7 billion bid for Maytag is seen widely as a way for Whirlpool to have fended off Asian competition, at least for a time. The Benton Harbor, Mich., company stymied China's Haier Group bid and beat New York equity firm Ripplewood Holdings LLC. In Haier's case, Whirlpool prevented the Chinese company from establishing a U.S. beachhead, leveraging Maytag's brand name with Haier's access to low-cost labor in China.
``The merger will help [Whirlpool] get on a more even footing,'' said Eric Bosshard, an analyst with FTN Midwest Research in Cleveland.
Meanwhile, foreign pressure mounts in the form of LG Electronics, the South Korean appliance major making its mark on the U.S. retail scene.
Whirlpool already has embarked on a major cost-cutting program. The firm last month said it will lay off 730 workers in October at its refrigerator plant in Fort Smith, Ark. Whirlpool will move the work to a new plant in Ramos Arizpe, Mexico. The Mexican plant will employ about 1,000 to make side-by-side refrigerators.
In addition to refrigerators, Fort Smith makes trash compactors and ice makers. Until the recent layoff notice the facility had been growing, hiring some 800 workers since 2003. Now employing 4,600, Fort Smith expects to rehire some workers affected by the layoff.
``We continue to strengthen and extend our manufacturing base in North America, specifically in the U.S. and Mexico, to better improve our operating platform and to continue to remain competitive,'' said David Smith, Whirlpool executive vice president for North America.
Expansionary moves in the past year designed to strengthen Whirlpool included equipping its Clyde, Ohio, operation to make new top-loading clothes washers, and preparing its Marion, Ohio, site for new clothes dryers. Meanwhile the firm began making new front-loading clothes washers in Monterrey, Mexico. In all, Whirlpool spent about $250 million in 2005 to boost productivity and innovation.
Newton, Iowa-based Maytag, too, is trimming house prior to wedding Whirlpool. It plans to close its Florence, S.C., laundry products plant early this quarter because it has too much capacity for the category, according to the firm's senior vice president for supply chain, Steve Ingham. About 60 workers will lose their jobs at the underutilized facility. Consolidation moves also have occurred at laundry products plants in Herrin, Ill., and Searcy, Ark.
Floor-care products also suffer from excess production capacity. Maytag has said it will move Hoover production from North Canton, Ohio, to lower-cost areas. Texas and Mexico are possible destinations, speculated International Brotherhood of Electrical Workers officials quoted in a Reuters article.
Plastics part suppliers already have seen some of the impact of changes at Maytag. Kamco Plastics Inc. had a plant-in-plant set up to supply Maytag in Florence, but was affected when Maytag announced it was closing the plant.
For Kamco, 88 percent of business is in the appliance industry, said Jack Shedd, vice president of sales and marketing, in a recent telephone interview.
Shedd said there's a renewed trend for appliance makers to have more modern plants in North America, especially Mexico.
``They know the product has to at least be made in North America,'' he said.
In addition to that trend, molders have to work with appliance makers to help them take costs out of their operations. Kamco worked with one manufacturer to take $8 million worth of costs out of one refrigerator facility.
A lot more rationalization could fall out of the Whirlpool and Maytag merger, according to analyst Bosshard.
``The issue is, both have excess capacity,'' Bosshard said. ``There will be a push to remove the excess and choose the best manufacturing.''
Electrolux, the world's biggest appliance firm, has cut its costs around the world. In the United States it trimmed capacity for refrigerators, moving it to Ciudad Juarez, Mexico. Among productivity moves there, it installed high-output Krauss-Maffei machinery for polyurethane insulation.
While U.S. costs are chasing away some manufacturing, they haven't deterred an investment from New Zealand. Fisher & Paykel Appliances Holdings Ltd. plans to make top-loading clothes dryers in Clyde, Ohio, by late 2006.
The United States counts as Fisher & Paykel's largest customer base, so locating a plant there ``makes good business sense,'' said Chief Executive Officer and Managing Director John Bongard in a news release. Eventually the firm expects to employ 65 in Clyde, the same level now staffing its Aukland, New Zealand, dryer plant.
Clyde is attracting other appliance-related investment. Beside's Whirlpool's recent spending there for new washers, Revere Industries LLC, formerly Titan Plastics Group, is adding 14 injection presses in Clyde for new Whirlpool programs.
Plastics News staff reporter Angie DeRosa contributed to this report.