The North American appliance industry is fighting a sagging market.
As the subprime mortgage crisis and credit crunch continue, the housing market - one barometer of appliance sales - is predicted to sink deeper.
``New construction of single-family houses is likely to continue to decline in the rest of 2008. New multifamily construction may well be unchanged from 2007,'' Mark Obrinsky, vice president of research and chief economist of the Washington-based National Multi Housing Council, said in an April 2 interview.
Joseph McGuire, president of the Washington-based Association of Home Appliance Manufacturers, said the 2008 picture looks quite similar to that of 2007, because ``many of the public policy issues will carry over from 2007.''
In particular, product safety, climate change and federal vs. state domain on appliance regulations are in play in 2008, he said in a written statement.
Mostly importantly, consumers already are showing reluctance with purchases. Peter Goldman, president of research firm NPD Group's home division, said sales of major appliances are more in sync with the drop in consumer confidence, while small appliance and housewares sales generally maintain their seasonal trends.
Electric shavers were least impacted by the economy and wine refrigerators were most impacted among the small appliances, housewares and consumer electronics included in a NPD consumer survey, according to Goldman. He spoke at the International Home & Housewares show in Chicago.
The past year marked a dent on the appliance market in the United States. AHAM's statistics show that shipments of all major home appliances for the U.S. market totaled about 75 million units in 2007, down more than 6 percent from about 80 million units in 2006. AHAM 6 - a category coined by the association and includes washers, dryers, dishwashers, refrigerators, freezers, ranges and ovens - also dropped nearly 6 percent to 44 million units.
The chill is being felt by manufacturers.
The world's largest appliance producer Whirlpool Corp. said the industry is facing a hard time. `` is the first year ever where we've seen a significant decline in demand in the U.S. and significant raw-material inflation,'' Chief Executive Officer Jeff Fettig said in a teleconference.
As the market leader, Whirlpool accounted for 36 percent of the appliances shipped in the United States in 2006.
Whirlpool's strongest contender in the U.S. - Stockholm, Sweden-based Electrolux AB - also is facing an upward battle. ``We expect the operating income for the first quarter will be somewhat negative,'' said Electrolux Chief Executive Officer Hans Straaberg. ``Our estimate is that the market declined by 10 percent in February compared to the same month in 2007, which means that demand was almost 15 percent lower than in February 2006.''
``The appliance industry has been in recession since mid-2006. The market is on its way to the seventh consecutive quarter of negative growth in the U.S.,'' he said April 1.
Besides major home appliances, AHAM also posted declines in the floor-care products market. U.S. shipments of upright, stick and canister vacuum cleaners in the first 11 months of 2007 decreased to 22.9 million units, from 23.8 million for the same period of 2006.
``We see some softening at retail for vacuum demand. We are somewhat concerned but feel that our new products will give is growth in 2008,'' said Chris Gurreri, president of TTI Floor Care, whose brands include Hoover and Dirt Devil.
TTI Floor Care's parent company, Techtronic Industries Co. Ltd. of Hong Kong, bought Hoover from Whirlpool in early 2007. Shortly after the acquisition, TTI closed the plant in North Canton, Ohio, and moved plastic molding to sites in Texas and Mexico.
Gurreri said the company has completed the transition of moving production down to the Southwest operations. The equipment at the North Canton plant was auctioned in December and the liquidation is complete.
``We have also completed the integration of the business including a 59,000-square-foot addition to the old Royal [Appliance Manufacturing Co.] facility to house the new R&D center'' at the firm's North American headquarters in Glenwillow, Ohio, he said.
The company also is trying to cut spending on parts and components sourced in North America. Gurreri said suppliers have been asked to help ``close the cost gap that still exists between production in the Southwest vs. our production in Asia.''
``The message was received well and I believe with their help we can be competitive with our products manufactured in both continents,'' he said.
In the meantime, companies are gearing up for growth in foreign markets to offset the negatives in North America.
Whirlpool's 2007 third-quarter sales dropped 8.4 percent in North America but rose 12 percent in Europe, 23 percent in Latin America and 18 percent in Asia. The company said 66 percent of its 2006 sales came from North America.
Analyst Laura Champine at Morgan Keegan & Co. Inc. believes Whirlpool will continue to bank on brisk overseas sales.
``Whirlpool's biggest challenge in 2008 is a weak U.S. end market, along with their overexposure to Sears,'' Champine said in a phone interview from her New York office. ``The company makes the majority of Kenmore products, and therefore has over 50 percent share, in our opinion, of Sears' appliances. And we believe Sears is losing share.
``Whirlpool's overseas sales will grow at a double-digit pace again in 2008,'' she said, ``and eventually over time, they'll get other continents generating half of the sales.''
Suppliers to the appliances industry also are increasingly dependent on overseas markets to countervail the lack of momentum in the home field.
Lisle, Ill.-based Molex Inc. said the slowdown in North America has been more than offset by increases in Asia, particularly in India and China.
``As a global company, Molex is fortunate to be able to sell into all of these markets,'' said Martin Slark, vice chairman and chief executive officer.