Whirlpool, a Tariff Supporter, Now a Tariff Victim: Dear Whirlpool

Whirlpool reports an unexpected quarterly loss and also lowers guidance. A housing slowdown and tariffs are in play.

Washing-machine maker Whirlpool reports a quarterly loss, a 3.9% decline in revenue, and its shares slid 8% after hours.

That's not all: The Wall Street Journal reports Whirpool Cut Its Profit Outlook for the Year.

Whirlpool Corp trimmed its full-year profit outlook as it booked a large charge on its European operations and said it wouldn’t be able to offset the effect of steel tariffs with higher prices for consumers.

The company said Monday it now expects to pay about $350 million more this year from rising raw-material costs as it faces “a very challenging cost environment.”

A sales drop of 2.2% in North America came as Whirlpool and rivals such as Electrolux AB pushed through price increases to offset the steel tariffs and held back from big discounts during holiday sales, according to analysts. Retail prices of washers and dryers are up 20% in the latest quarter from a year earlier.

Whirlpool supported import tariffs on appliances produced overseas but much of the benefit was countered by the effect of levies on steel imports introduced earlier this year.

Dear Whirlpool

Dear Whirlpool, the next time you support tariffs think about what you ask. Moreover, think about something the WSJ failed to mention: Tapped out consumers and a slumping housing market.

Houses are already insanely unaffordable and you supported tariffs to protect your uncompetitiveness.

Care to try again?

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Mike "Mish" Shedlock

Comments (27)
No. 1-27
Carl_R
Carl_R

With the tariffs on raw materials, the only way Whirlpool can keep their raw materials costs under control is to move manufacturing overseas.

Snow_Dog
Snow_Dog

...or source materials locally and have their purchases support local labor whilst those laborers work more to someday become home buyers who can buy Whirlpool products, etc.

2banana
2banana

The housing bubble has popped. The long hard road down is coming.

Why are washer and dryer prices up 20%? Is that all from tariffs on imported steel? I highly doubt it. The steel used could be made anywhere. Pension costs? Poor management? Insane unions?

Sounds like a convenient excuse.

BornInZion
BornInZion

"Houses are already insanely affordable" // Perhaps you meant "unaffordable"?

Mike Mish Shedlock
Mike Mish Shedlock

Editor

Yes, unaffordable - thanks - corrected

Stuki
Stuki

Just out of curiosity: If a US steel producer who is barely, if even, scraping by at current prices; and their competition is suddenly forced, at gunpoint, to raise their prices 25%; do you reckon the US producer will somehow not raise their own price as much as they can get away with, given their now more favorable competitive environment?

Sechel
Sechel

what a mess. Trump shields them from lower prices by blocking foreign imports and then raises their prices back up by increasing the cost of steel. Oh the irony. And the end result is consumers are less able to afford the product now and probably forced to repair an older unit they might have otherwise replaced.

ironically whirlpool's problem is not foreign pricing but their own designs. while reliable the designs stink. i bought a wine frig a few years ago that has shelves too small for most bottles of wine. my own fault i should have checked the amazon reviews and the reviews on whirlpool's own site. the frig i own from them has a top shelf that won't fit anything because they stuck a control unit in the middle of the top wall that limits space, something you don't see in other makes.

Sechel
Sechel

I'm not arguing that Whirlpool products are designed to fail or not be reliable. Only that they are poorly designed from a functional standpoint. I thought my two examples made that clear. There are other appliance companies in the U.S. that cater to the high end that do a good job. Just conglomerates like G.E. and Whirlpool never really took their business seriously. They sometimes appeared more interested in financial engineering than product engineering

Realist
Realist

”Winning” is the new ”Losing” when it comes to trade. Tariffs are a self-inflicted wound as Trump expands his Trade war. Expect more of these examples.

Blacklisted
Blacklisted

The other side of "free" trade, which of course, is not free.

The solution is developing the productive capacity of our people through education and the trades, which requires govt getting out of education, and most everything else, especially the God business, where they believe they can manipulate the business cycle.

Sechel
Sechel

Down over $20 this a.m.

Carl_R
Carl_R

If you put a 25% tariff on imported steel, the price on domestic steel rises 25%, or perhaps just a little less, say 20%. However, if Whirlpool makes the exact same washer overseas, they can save 20-25% on the steel. When you tax manufacturing inputs, domestic manufacturers get crushed. They typically start with a small cost disadvantage with imports, and post-tariff, they have a large cost disadvantage. That's what hit Whirlpool. Now they have three choices: 1. Lose money on every unit they sell, 2. Raise prices, while foreign manufacturer' prices do not go up, or 3. Move production overseas.

You suggest that they should take option 1, but option 3 is the best choice if they want to survive as a company.

KidHorn
KidHorn

whirlpool/maytag products stink. If you get one of their washing machines and do laundry every day, expect to replace it in roughly 3 years. The reason they can't compete has nothing to do with LG and Samsung dumping and everything to do with inferior products. If jobs stay in the US, great. But I'm completely against supporting a poorly run business simply because they're headquartered in the US.

Snow_Dog
Snow_Dog

“ as much as they can get away with,”

That’s the key.

Yes, there will be domestic suppliers inclined to raise price in the wake of tariff induced relief in competition. Will not the invisible hand also stoke new local competition ( i.e. job producers) to meet demand at prices slightly under the new gouging rate? Others, even more aggressive, to harvest even a slight gain over the untariffed pricing?

Of course they will! Voila, we’ll have ourselves a marketplace afterall It will be made up of everyone meeting the same environmental regs, tax rates, etc and drawing from the same labor pool. Transparency achieved.

The last thing a bureaucrat needs in his life is transparency.

RonJ
RonJ

A few stories back, i see that Trump offered Europe a ZERO tariff deal.

Carl_R
Carl_R

The prices on domestic steel rise, not because of gouging, but because domestic producers can't make enough steel to meet demand. They raise prices to limit demand, and perhaps to pay the costs to re-open closed mills. As they raise prices, domestic manufacturers reduce their manufacturing, until demand and supply for domestic steel come back in balance. That's how the free market works, and how it's supposed to work. When the government disrupts the free market, it adapts to a new equilibrium. In the case of tariffs on imported steel, the new equilibrium will be more steel production in the US, and less manufacturing in the US.

Unfortunately, since there are about 100 jobs in the US that manufacture things from steel for every job in the making of steel, the new equilibrium will be less overall jobs in the US.

Sechel
Sechel

I had a Maytag stackable washing machine. Whirlpool shut the line down after they purchased the company. But the Maytag machine was 27 inches while the Whirlpool unit 24 inches deep. When my unit breaks which i've had for 16 years I will not be buying Whirlpool.

Carl_R
Carl_R

I had the misfortune of buying a late-Production Maytag Neptune washer. When Whirlpool bought the company, the local store had a clearance of the old Neptunes. Since I was using it in a commercial setting, the warranty was void. Within weeks parts were falling off. By 6 months, the machine was no longer operable. I replaced it with a Whirlpool Duet, and it was fine. European companies like Ipso, Electrolux, and Girbau do make better machines, however.

hmk
hmk

I bought a Maytag washer and dryer for my wife in the mid eighties when first married. It lasted 25 years. It was painfully expensive back then about $1500. My wife after some research decided against getting another high end washer and dryer as she has heard nothing but complaints about all of them especially the foreign made ones. They have so many bells and whistles that breakdown and diminish reliabiity. Also appliance repairmen who did some work on the Maytags once or twice also reiterated that. She bought your basic model washer, american made and because its inexpensive will use it until it breaks and then rinse wash repeat. Cheaper that way. Yes current product quality sucks but its that way for foreign made products also. We have had the same experience replacing a dishwasher, bought the expensive German one and it lasted about as long as the cheap ones we buy now. One good thing about the price increases is that its bringing back inflation. Thats GREAT just what the fed wants. I know I am also euphoric about the $9000 average increase in costs for a new home construction after the Trump lumbar tariffs. WTF I hope this crap gets straightened out soon.

ML1
ML1

Houses are insanely unaffordable because 1) wages have stagnated due to offshoring of factories and through importing millions of illegal immigrants to lower wages 2) due to banks again lending like they were doing 2003-2007 without worry which raises prices when one can get more and more debt 3)huge property taxes to fund the increases in school costs caused by increased numbers of kids needing more help from those millions of illegal immigrants and also teachers unions blackmailing higher wages while protecting incompetent teachers. 4) due to low rate policies by the fed since people buy houses based on the monthly payment they can afford. 5) due to increased demand for houses brought by the millions of illegal immigrants 6) due to other costs like healthcare and college taking such huge parts of people's budgets. . But hey at least chinese imported crap is cheap at Walmart and one can get a deal on landscaping work from illegal immigrants so no worries.

Stuki
Stuki

"Will not the invisible hand also stoke new local competition ( i.e. job producers) to meet demand at prices slightly under the new gouging rate?"

But, given that this "new, local competition" needed tariffs to be made viable, not at pre tariff prices.... Meaning, Whirlpool still will be stuck buying more expensive steel than their competitors. Leading to higher costs, higher prices, lower sales, less manufacturing employment at Whirlpool. Ditto for all industries where steel is used as an input. And, since all those industries add up to much more workers than steel mills ever will, hence sum total less demand for manufacturing labor. Hence lower manufacturing wages.

It's entirely general, and logically inevitable, that if you put in place barriers that reduce the efficiency at which labor is transformed into economic value (as in, increase any other input cost than local labor itself), each unit of work will create less value. Hence those providing said units of work, will be able to command less of a wage for their work.

Dicking around with government setting, or heavily influencing, relative prices may, at least in the short run, be able to create small groups of "winners." Say, by transferring wages from Whirlpool employees to steel mill employees. But unless your scheme somehow succeeds in making the US, as a whole, more efficient; total wages will decrease. Of course, committed dittoheads have been buying into their favorite Dear Leader's ability to beat a free market at ferreting out efficiency, for as long as there have been Dear Leaders and dittoheads....

Metronome
Metronome

Mish, haven't you been talking about demographics shift for over a decade now? Kids can't afford housing. No demand for housing - no demand for appliances.

I think tariffs barely make a dent in this baked in terminal decline.