Going global with Internet to expand business sphere
When it comes to global companies founded in Michigan, it’s hard to get more global than Whirlpool is now. And if the latest performance by the Benton Harbor manufacturer of major home appliances is any reflection of the global economy, then the worldwide recession is definitely easing up.
Marc Bitzer, president of Whirlpool North America, was the keynote speaker at the Economic Club of Grand Rapids luncheon last week, held in honor of World Trade Week.
Bitzer opened his remarks by noting that Whirlpool is about to celebrate its founding 100 years ago by the Upton family in St. Joseph, across the river from Benton Harbor. The Upton Machine Co.’s first order for 100 motor-driven washing machines was a disaster — “they all failed,” said Bitzer. But the Uptons quickly found the problem, designed a new and better part and replaced that first order with new washing machines that did not fail, to the retail customer’s great satisfaction.
By 1916, the Uptons’ washers were being sold by Sears, a relationship that continues today, albeit somewhat strained at times, lately.
The corporation, which changed its name to Whirlpool in 1949, is now a Fortune 200 Company, and much older than most Fortune 200s, according to Bitzer. The company markets Whirlpool, Maytag, KitchenAid, Jenn-Air, Amana, Brastemp, Consul, Bauknecht and other major brands of home appliances to consumers in nearly every country around the world.
“We have a huge refrigeration business in Latin America,” he noted, as one example of the company’s global reach.
Indeed, Whirlpool Latin America just reported record first-quarter net sales of $1.1 billion, an increase of 65 percent from the prior year. Excluding currency translation, sales increased approximately 40 percent. The company currently anticipates Brazilian appliance shipments to increase over 2010 by approximately 10 percent.
Whirlpool business is taking off in Asia, too. First-quarter sales there were $192 million, a 60 percent increase from the prior year. Excluding the impact of currency, sales increased 49 percent. Operating profit during the quarter totaled $11 million, an increase of $6 million from the prior year. The year-over-year increase in operating profit was mainly attributable to higher unit volume and was partially offset by lower price/mix.
According to its website, Whirlpool Corp. had total sales of approximately $17 billion in 2009, with 67,000 employees and 67 manufacturing and technology research centers around the world. Bitzer said 40 of those are manufacturing facilities, and 4,000 of those employees are in Michigan.
Twelve of the company’s factories are in the U.S., with six in Ohio alone. Bitzer said Whirlpool was the only major employer in Ohio that added jobs last year.
He said the global nature of Whirlpool is also reflected in its executive staff, who have lived and worked around the world. Bitzer was educated in Switzerland, having earned both an MBA and a doctorate there from the St. Gallen Graduate School of Business, Economics and Law.
Bitzer, who has been president of North America operations since January, previously served as president of Whirlpool’s U.S. operations through 2009, and prior to that, president of Whirlpool Europe for three years.
Whirlpool has been on a roll lately. The corporation announced in late April that first-quarter net earnings rose 141 percent to $164 million, compared to $68 million during the same period last year. Sales were $4.3 billion, a 20 percent increase from the $3.6 billion reported in the first quarter of 2009. Excluding the impact of foreign exchange differences, the company's first-quarter sales increased approximately 11 percent.
First-quarter operating profit totaled $241 million compared with $166 million in the prior year. The results were driven by cost reduction and productivity initiatives, increased sales volume and favorable foreign currency rates, according to the company. The favorable factors were partially offset by lower price/mix. The adjusted operating profit for the first quarter totaled $287 million, compared to $126 million a year ago.
"We are pleased with the strong operational performance we reported in all of our regions," said Jeff M. Fettig, chairman and chief executive officer of Whirlpool Corp.
First-quarter sales for Whirlpool North America were $2.3 billion, an increase of 7 percent from the prior year. Excluding the impact of foreign exchange, first-quarter sales increased approximately 5 percent. North America unit shipments increased 11 percent. U.S. industry unit shipments of major appliances increased 6 percent during the first quarter.
Based on the current economic outlook, Whirlpool expects shipments of U.S. production to increase between 3 percent and 5 percent in 2010, compared to the previous prediction of a 2 percent to 4 percent increase.
Whirlpool Europe first-quarter sales of $739 million were a 6 percent increase from the prior year. Excluding the effects of currency, sales decreased approximately 2 percent. Shipments in 2010 are expected to be approximately equal to 2009 levels.
The global home appliance industry is worth about $110 billion, according to Bitzer. Brazil and India are where Whirlpool is now growing the fastest, he said, although its greatest growth in profitability is in North America.
Bitzer said during the Econ Club question-and-answer period that Whirlpool management has “a lot of discussions” about new home construction in the U.S., obviously an important driver for the sale of major home appliances. New home starts are “still depressed,” he said, although the level of starts now seems to be holding steady. That situation is expected to be recovering by the end of the year or early next year, he said, but still, it will be “way below normal,” and that will likely continue for two or three more years.
Bitzer hammered away at the theme of what global does not mean.
“Global does not mean headquarters-centric,” he said, which is why Whirlpool products are designed and developed around the world, not just in southwest Michigan.
Other things that global does not mean, he said, include “one size fits all,” or the sacrifice of speed in new product development.
That Whirlpool can pull out all the stops in product development was demonstrated a couple of years ago when Sears took away the top-loader washer business from Whirlpool and gave it to Korean manufacturer LG. That forced Whirlpool to “completely revamp” that product line, a feat that resulted in the new Vantage washer being brought to market in 11 months, instead of the usual two years or more.
Bitzer said Sears is “still a very important customer” to Whirlpool, but that painful experience two years ago apparently reinforced the fact that in the global marketplace, things can change fast and the change can come from any direction.