The U.S. appliance sector will grow little in 2007 while the industry and its suppliers adjust to the blockbuster Whirlpool Corp.-Maytag Corp. merger of last spring.
The Association of Home Appliance Manufacturers predicts shipments of major appliances will be relatively flat this year, following an estimated 3.3 percent rise in 2006. Most appliance categories will show minor growth, although home comfort goods such as room air conditioners and dehumidifiers will slip 1 percent, the Washington trade group forecasts.
New residential housing construction - one barometer of appliance sales - will continue to be slow into the second half of 2007, according to David Seiders, chief economist for the Washington-based National Association of Home Builders. Modest recovery will begin in the third quarter when interest rates are cut slightly, Seiders said in a conference call.
Home remodeling has been growing weakly through 2006 and should continue to do so in 2007, Seider added. Manufactured housing, however, has been depressed and will stay that way this year, he predicted.
There are no signs that appliance makers will announce major production shifts that equal the dramatic changes begun in 2006 after Whirlpool and Maytag combined into the biggest appliance firm in the world, surpassing Electrolux AB of Stockholm, Sweden.
``We've made all the announcements we are going to make regarding plant consolidation in the Maytag integration,'' Whirlpool spokeswoman Jody Lau said in a recent interview.
Whirlpool, based in Benton Harbor, Mich., is expanding laundry appliance production in Clyde and Marion, Ohio, creating some 1,500 jobs, to offset closures of all of Maytag's laundry product factories. Those plants comprise Maytag's former Newton, Iowa, headquarters, as well as sites in Herrin, Ill., and Searcy, Ark.
Among its own plants, Whirlpool announced job cuts of about 1,200 in Arkansas and Indiana over the next few years as it shifts more refrigerator production to Mexico. The cutbacks will be balanced by expanding the refrigerator plant in Ramos Arizpe, Mexico. The firm also said it will boost freezer output at the former Maytag plant in Amana, Iowa, creating another 400 jobs.
The long-standing Hoover Co. brand is under new ownership, after Whirlpool agreed to sell the former Maytag business to Techtronic Industries Co. Ltd. of Hong Kong in late 2006. It's unclear whether the new owner will remain committed to manufacturing the floor products in North America.
Rivals turn up heat
Meanwhile, Whirlpool's competitors are turning up the heat in the U.S. market through expansion investments.
Sweden's Electrolux is Whirlpool's biggest competitor in the United States, with a 20 percent market share - after taking business away from Maytag, according to analyst Laura Champine at Morgan Keegan & Co. of Memphis, Tenn.
Electrolux is investing $40 million to expand its refrigerator plant in Ciudad Juarez, Mexico, and will add 1,000 jobs there. The project reflects the firm's strategy of relocating work to lower-cost markets. A Greenville, Mich., plant that closed in 2006 was just one of 16 global sites that Electrolux recently shuttered. Also in Juarez, Electrolux is building a washer and dryer plant.
BSH Home Appliances Corp. will add production of midpriced dishwashers in New Bern, N.C., where it now makes high-end dishwashers. The firm is a subsidiary of the world's third-largest appliance maker, Bosch and Siemens HausgerÃ¤te GmbH of Munich, Germany.
The $11 million expansion is expected to add more than 200 jobs to BSH's current staff of about 1,000 at two plants in New Bern and one in LaFollette, Tenn. BSH already invested $200 million to expand its New Bern operation in 2004.
Chinese appliance major Haier Group Co. intends to build a second factory in Camden, S.C., where it now runs a small unit making refrigerators. The new unit due on stream in 2008 would make central air conditioners.
Whirlpool is counting on innovation to stimulate the market and keep rivals at bay. The company has added several new washers and dryers to its lineup and debuted new products in kitchen offerings.
``Customer response to our new product innovation remains strong as we continue the largest new product launch in our company's history,'' Whirlpool Chairman and Chief Executive Officer Jeff Fettig said in a recent financial report.
New polystyrenes debuted by Ineos Americas LLC illustrate the kind of innovation suppliers come up with to support appliance customers. Ineos introduced a stiffer PS and a related capstock that allow downgauging for refrigerator liners.
Plastics suppliers are adjusting their logistics to follow appliance makers' moves.
Wilbert Plastic Services Inc. is planning a large injection molding plant in Bellevue, Ohio, to supply Whirlpool's expanding production in Ohio.
Another Whirlpool supplier, Rehau Inc., is expanding in Mexico, along with Whirlpool, including setting up a PVC gasket extrusion plant in Monterrey to supplement a current operation in Celaya, Mexico.
Spartech Corp. is expanding its Ramos Arizpe sheet extrusion plant to meet growing orders from Whirlpool's refrigerator production. Spartech President and Chief Executive Officer George Abd said the extra sheet business for Whirlpool will push his firm's appliance sales up by more than 4 percent this year.
Moll Industries Inc., meantime, cut a big chunk of its appliance business in late 2006 because, it said, profit margins under renewed Whirlpool contracts would be too thin. Whirlpool accounted for a $60 million slice of business that started more than 50 years ago. Moll closed two plants and sold a third to a former Moll president, Ron Embree, who bought the Fort Smith, Ark., facility mainly to mold for Whirlpool's Fort Smith plant.
Moll continues in the appliance sector to a lesser degree and is trying to offset lost business with more work in medical, consumer goods and automotive.