Whirlpool Considering New Trade Case Against Rivals' Appliances -- 2nd Update

By Bob Tita 

Whirlpool Corp. said it is considering new offensives against foreign-made household appliances that it maintains are being sold in the U.S. for less than the cost to manufacturer them.

Whirlpool's previous trade complaints have targeted refrigerators and washing machines from Korea and Mexico. But the company said Thursday that unfairly discounted appliances are now flowing into the U.S. market from China, Thailand and possibly other Asian countries.

"The marketplace has changed and gotten worse," Chairman and Chief Executive Jeff Fettig said in an interview. "More countries are involved."

The U.S. Court of International Trade earlier this month upheld some claims in Whirlpool's appeal of a 2012 decision by the U.S. International Trade Commission that said domestic manufacturers of refrigerators with bottom-mounted freezers weren't harmed by imports from Korea's LG Electronics Inc. and Samsung Electronics Co. between 2008 and 2011.

Whirlpool wanted tariffs levied on the refrigerators after alleging that they were sold for less than the cost of making them in Mexico and Korea. The company also accused the Korean government of unfairly subsidizing production.

Rather than pursuing a rehearing of that case, Mr. Fettig said the company may file a new, separate case with expanded evidence. Mr. Fettig declined to provide specifics about the strategy but added, "We believe there are faster vehicles available to us to both monitor and address trade issues that we see in United States."

Jeff Noel, Whirlpool's vice president for public and government affairs, said filing another unfair trade complaint isn't imminent, especially if appliance makers curtail aggressive discounting.

"We'll continue to monitor the markets," he said.

Samsung didn't immediately respond to a request for comment. A spokesman for LG declined to comment on Whirlpool's accusations that appliance dumping continues to occur, but added "the U.S. government ruled correctly in the original case that that domestic [refrigerator] industry was not harmed."

Whirlpool, the world's largest appliance seller whose brands include Maytag, Amana and KitchenAid, prevailed in convincing the U.S. Commerce Department in 2012 that Samsung, LG and Electrolux were selling large residential washing machines in the U.S. at unfairly low prices. But Whirpool's complaints don't appear to have discouraged appliance makers from continuing to offer steep discounts on appliances. Analysts reported that discounts were used extensively throughout the recently concluded holiday shopping season to drive appliance sales.

Whirlpool has focused on margin expansion and the introduction of high-value innovations on appliances, while largely refraining from margin-busting discounts. As a result, some analysts believe Whirlpool is losing share in the U.S. appliance market where it has traditionally dominated.

"We remain concerned about Whirlpool's U.S. market share, given the potential for these industry promotions to persist into 2014," said Raymond James Equity Research analyst Sam Darkatsh in a recent note to investors.

Whirlpool's fourth-quarter unit sales in North America grew by 9.6% from a year earlier. But industrywide unit shipments of major appliances in the U.S. tracked by the Association of Home Appliance Manufacturers grew 11.8% during the fourth quarter, suggesting Whirlpool surrendered some market share. But Whirlpool insisted that it didn't lose share and said the appliance types tracked by the association don't match up with the company's unit volume, which also includes Mexico and Canada along with the U.S.

"You're not comparing apples with apples and even apples with oranges," said Marc Bitzer, the company's president for North America.

Whirlpool's fourth-quarter sales in North America rose 8.8% to $2.72 billion. Operating profit from the region rose 28.6% to $301 million, as its operating margin expanded to 11% from 9.13% a year earlier.

Whirlpool and other appliance makers endured a long slump in appliance demand triggered by the collapse of the U.S. housing market and recession in 2008. But an improving housing industry and pent up demand for appliance replacements resuscitated the market last year. Industry shipments of major appliances such as refrigerators and washing machines rose 9.4% in 2013 from 2012. Whirlpool said it expects industry unit shipments in the U.S. to increase by 5% to 7% this year over 2013.

Strong demand for appliances in Brazil helped Whirlpool offset sluggish market conditions in the U.S. and Europe. But inflation and unfavorable currency exchange rates have damped Whirlpool's sales and profit from Brazil. Whirlpool expects industry shipments of appliances in Latin America to be flat in 2014.

"We expect inflation pressures and currency fluctuations to have a negative impact on consumer demand, especially in the first half," said Mike Todman, president of Whirlpool's international business.

Whirlpool's fourth-quarter sales in Latin America rose 3.8%, while operating income increased 18.7% on better margins.

The Benton Harbor, Mich.-based company's overall operating margin for the quarter rose to 7% from 5.4% a year earlier. Whirlpool's fourth-quarter profit climbed to $181 million, or $2.26 a share, from $122 million, or $1.52 a share, a year earlier. Sales increased 6.2% to $5.09 billion. Excluding one-time charges, earnings rose to $2.97 a share from $2.29 a share. Analysts were expecting earnings of $3.03 per share on $5.02 billion in sales.

For 2014, Whirlpool said it expects adjusted earnings of $12.00 to $12.50 a share, compared with $12.26 forecast by analysts.

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