Whirlpool Corp.–caught in a market so competitive it can’t boost profits by raising prices–is boldly accelerating its cost-cutting and consolidation strategy, lopping 4,700 jobs from its worldwide work force.
The world’s No. 1 home-appliance maker is also reducing losses in China, bolstering its presence in South America and selling its financial unit to a Rolling Meadows-based concern.
The moves will eliminate about 10 percent of Whirlpool’s global payroll of 46,000. About 800 of those jobs will be in North America, including 400 in Benton Harbor-St. Joseph, Mich., where the company has 3,000 employees. Whirlpool’s corporate, world and North American headquarters, as well as research and development operations and a small manufacturing unit, are in the twin cities.
The most significant move for North America is the sale of the assets of its financing arm, Whirlpool Financial Corp., to Rolling Meadows-based Transamerica Distribution Finance Corp. for $1.35 billion.
The company said it will take a third-quarter charge of $350 million, or about $3.38 a share, related to the restructuring. But by 2000, Whirlpool said it expects the changes to save $180 million annually.
Wall Street gave the moves an ovation, sending Whirlpool shares up $8.06–or 13 percent–to close Thursday at $67.87.
Whirlpool said the job cuts won’t necessarily mean immediate layoffs.
“The reductions globally will happen over the next three years,” said Whirlpool spokesman Christopher Wyse. “We expect normal attrition, normal retirements will minimize the impact.”
That doesn’t mean the news doesn’t hit hard. St. Joseph has enjoyed a rebounding economy along with the rest of the nation, but Benton Harbor has not. The city remains poor, and any job losses at all will be painful. The area was stunned a decade ago when Whirlpool, the major employer there, shut down almost all of its local manufacturing operations, eliminating more than 1,000 jobs.
Wyse said half of the $350 million charge is attributable to European operations, a third to Asia and the remainder to North America. The company did not break down where operations will be shut down or consolidated, or say how many jobs will be cut where.
The Whirlpool finance unit being sold has 500 employees. It was not clear Thursday whether Transamerica would physically merge the two companies and what impact the deal would have on jobs.
But the deal calls for Transamerica to provide financial services to Whirlpool dealers and retail customers for 10 years. To that end, Transamerica “intends to maintain a significant presence here in the St. Joe area,” Wyse said.
The Transamerica deal will result in a gain of 35 cents a share when it is completed, Whirlpool said.
In Europe, Whirlpool aims to save about $180 million a year by shutting down some operations and consolidating products.
The European market is highly competitive, keeping prices of goods like household appliances down, said analyst Albert Turner with Duff & Phelps Credit Rating.
In Asia, meantime, the company said it plans to explore “strategic alliances” for two of its operations, one of which makes refrigerators and the other air conditioners. That is typically code words for inviting buyers.
Whirlpool said it will focus on two Chinese joint ventures, Whirlpool Shanghai Narcissus, which makes laundry appliances, and Whirlpool Shunde SMC, which makes microwave ovens.
China has proven a difficult market for a wide variety of businesses that have learned that the population, while huge, cannot afford many Western-style consumer products.
Whirlpool will bolster its interest in Brasmotor SA of Brazil from 33 to 66 percent. Brasmotor owns Multibras SA Eletrodomesticos, which has the largest share of the home-appliance market in Latin America.
Wyse said Whirlpool has been affiliated with Brasmotor for about 40 years. The increased stake in the company is a recognition not just of Brasmotor’s strong position, but of the strengthening market for consumer goods in South America.
