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February 25, 2008 01:00 AM

Innovation is answer for shrinking market

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    Whirlpool Corp. stood out in the stock market slump on Super Tuesday. The world's biggest appliance maker reported higher-than-expected fourth-quarter results, and its shares soared as much as 11 percent.

    All the positives, however, don't cover up the fact that the North American market continues to shrink. Whirlpool controlled the sales decline within 1 percent, while industry shipments of appliance units dropped about 6 percent. Although North America still represents about 60 percent of Whirlpool's global sales, other regions are playing an increasing role. The Benton Harbor, Mich.-based company reported brisk growth in other regions: 12 percent in Europe, 30 percent in Latin American and 26 percent in Asia.

    Electrolux AB also presented ``best ever'' results in Latin America and ``good growth'' in sales and margins in Asia. North America, accounting for about a third of Electrolux's sales, is dragging on the company's performance with the housing crunch. The U.S. dollar's 13 percent slide vs. the euro in 2007 also worked against the Swedish company.

    It would appear, at a glimpse, that the geographic trends rule the appliances industry: They win in growing continents and lose in sluggish markets. But it doesn't work that way.

    Despite the economic clouds in the U.S., Germany's Bosch und Siemens Hausger„te GmbH saw double-digit growth in North America in 2007, a record rate since 2003. Franz J. Bosshard, president and chief executive officer with BSH Home Appliances Corp. North America, attributes the success particularly to 37 new product launches in the past few years. The company offers ``coordinated kitchen suites, depending on the individual consumer's lifestyle and cooking needs.'' The Munich-based company manufactures locally in New Bern, N.C., and La Follette, Tenn.

    Popular products such as front-load washing machines and French-door refrigerators earned white goods maker LG Electronics Inc. of South Korea a 31 percent increase in home appliance sales in 2007.

    A recent announcement of plant closings by General Electric also reinforced the message that companies cannot emphasize too much the importance of the right products. Side-by-side refrigerators made at GE's facility in Bloomington, Ind., are simply losing popularity, the company said.

    It certainly is important to cut costs, streamline operations and level low-cost regions. But those actions alone won't save the market. Ultimately, the secret weapon is the products. Do they fit the latest home styles, save energy and stretch dollars?

    In such mature markets as the U.S., growth primarily will come from replacement demand. Consumers are trading up to newer models, rather than just replacing broken ones, research firm Freedonia Group Inc. of Cleveland said in its recent report ``World Major Household Appliances.''

    Again, it's not just the price tag; it's what is attached to the tag.

    Nina Ying Sun is Plastics News' Akron, Ohio-based staff reporter and Asia specialist.

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