Whirlpool Corporation Business Information, Profile, and History

Company Perspectives:

At Whirlpool, we believe that innovative thinking comes from anyone and anywhere within our company. That's why, in 1999, we launched a worldwide effort to instill innovation as a core competency throughout our organization. Since then, Whirlpool people worldwide have participated in and contributed to innovation-related activities that have resulted in new ideas, products and services that deliver real value to our consumers in ways never before seen in either our company or our industry.

Innovation is Whirlpool Corporation's differentiating strategy, one we believe provides us with a significant competitive advantage. Innovation also brings us closer to our consumers and enables us to meet their unmet needs.

History of Whirlpool Corporation

From its beginning as a manufacturer of electrically powered clothes washers, Whirlpool Corporation has become the world's leading producer of major household appliances. Its main products include home laundry equipment, dishwashers, refrigerators, freezers, ovens, ranges, room air conditioners, and mixers and other small household appliances. The company's appliances are sold in more than 170 countries worldwide under such brand names as Whirlpool, KitchenAid, Roper, Estate, Bauknecht, Ignis, Laden, Polar, Brastemp, Consul, and Eslabon de Lujo. Whirlpool is a major supplier of appliances to Sears, Roebuck and Co., which accounts for about one-fifth of Whirlpool's net sales; these include Whirlpool-made products marketed under Sears' Kenmore brand, as well as Whirlpool and KitchenAid brand products. The corporation has 47 manufacturing locations, ten of which are in the United States; the remainder are in Canada, Mexico, France, Germany, Italy, Poland, Slovakia, South Africa, Sweden, Brazil, China, and India. Two-thirds of sales are generated in North America, 20 percent in Europe, and 11 percent in Latin America.

Washing Machine Beginnings

The company that preceded Whirlpool was founded in 1911 by Lou Upton and his uncle, Emory Upton, who lent their family name to the machine shop they opened in St. Joseph, Michigan. Lou Upton, a life insurance salesman, had recently lost his investment in a small appliance dealership that had failed. In an attempt to compensate Upton for his loss, the dealer gave him the patent for a manually operated clothes washer. Emory Upton was able to outfit the machine with an electric motor, and--with a $5,000 stake from L.C. Bassford, a Chicago retailing executive--the Upton Machine Company began producing electric wringer washers. The company soon snared its first customer, the Federal Electric division of Chicago-based Commonwealth Edison.

The relationship lasted three years, until Federal Electric began manufacturing its own washers. Although losing this customer was a major blow, the company stayed afloat by manufacturing toys, camping equipment, and automobile accessories until it rebounded in 1916 with an agreement to produce two types of wringer washers for Sears, Roebuck and Co., which at that time operated exclusively through mail order. Sales of Upton's washers through the Sears catalog (under the Allen trade name) grew rapidly during and after World War I. In order to avoid total dependence on the Sears account, however, Upton also launched a washer under its own brand name in the early 1920s.

During the 1920s, Sears's expansion into retailing and its selection of Upton as its sole supplier of washing machines forced the company to find a way to increase its manufacturing capacity and distribution efficiency. This was accomplished through a merger, in 1929, with the Nineteen Hundred Washer Company of Binghamton, New York. The post-merger company, known as the Nineteen Hundred Corporation, survived the Great Depression without any lasting damage and even expanded and modernized its production facilities during this time to handle increasing sales volume.

During World War II the company manufactured weapons parts and related products needed for the war effort. The company also focused on the development of an automatic, spinner-type washer during the 1940s. This machine, nicknamed the "Jeep," was introduced by Sears in 1947 under that company's Kenmore brand name, and then under Nineteen Hundred's own newly introduced Whirlpool brand one year later.

In 1949 Elisha "Bud" Gray II succeeded retiring Lou Upton as president and led the company through the postwar period, which was characterized by heavy consumer demand for convenience products. The Nineteen Hundred Corporation aggressively launched a complete line of Whirlpool home laundry appliances, including wringer and automatic clothes washers, electric and automatic clothes dryers, and irons. In 1950 the company changed its name to Whirlpool Corporation.

Diversifying the Product Line: 1950s-60s

Although sales continued to climb, it became clear by the mid-1950s that the company's emphasis on laundry equipment made it vulnerable to increasing competition from more diversified manufacturers. In 1955 Whirlpool merged with the Seeger Refrigerator Company and added a line of refrigerators. The company also began to make air conditioners and cooking-range products in 1955. The two lines had formerly been produced by Radio Corporation of America (RCA), and were marketed under the RCA-Whirlpool name. The company itself operated under the name of Whirlpool-Seeger Corporation until 1957. Between 1955 and 1957 the company introduced its first full line of home appliances under the RCA-Whirlpool brand. The line consisted of 12 types of machines and 150 models. The 1957 merger with Chicago's Birtman Electric Company brought a vacuum cleaner line under Whirlpool's expanding product umbrella.

As its product line grew, Whirlpool's network of independent dealers and distributors assumed an increasingly important role in the company's marketing and sales efforts. A subsidiary called Appliance Buyers Credit Corporation was formed in 1957 to provide financing to these distributors and to help strengthen Whirlpool's position as an industry leader. In 1958 the company broadened its reach beyond the United States by initiating the first of several acquisitions of major Brazilian appliance manufacturers, taking a stake in Brasmotor S.A.

Intensifying consumerism in the 1960s created growing pressure on appliance manufacturers to offer better quality and service. As a result, Whirlpool launched new support services, as well as a continuing stream of new products, such as the home trash compactor. Its toll-free Cool Line service enabled Whirlpool appliance owners to obtain immediate information on such subjects as installation and repair. At the same time, however, price reductions, caused by the softening demand for appliances, and growing competition led the company to institute a series of measures designed to streamline production and decrease manufacturing costs. Because the Whirlpool name itself had gained wide acceptance, the company also reached a friendly agreement with RCA during the mid-1960s to drop RCA's brand name from the company's products.

Further attempts to diversify yielded mixed results. The company's purchase of Heil-Quaker Corporation in 1964 enlarged Whirlpool's scope beyond consumer appliances to central heating and cooling equipment. But this subsidiary was sold to Inter-City Gas Corporation of Canada in 1986 as Whirlpool refocused its attention on home appliances. Its 1966 entry into the consumer electronics market with the acquisition of Warwick Electronics ended in failure ten years later, at which time the business was sold to Sanyo Electric Company. To close out the decade, the company penetrated the Canadian market for the first time with its 1969 purchase of a 33 percent stake in John Inglis Co. Ltd., a home appliance manufacturer. This company was renamed Inglis Limited in 1973, and Whirlpool increased its ownership interest to majority status in 1985; Inglis served as Whirlpool's Canadian arm.

Negotiating the Economic Uncertainties of the 1970s

Continued emphasis on consumerism combined with the 1973 energy crisis, a slump in the housing industry, and an economic recession increased pressure on the appliance industry to produce more energy-efficient products and to improve manufacturing efficiency. Faced with sluggish retail sales, Whirlpool dealers and Sears, still the company's largest customer, liquidated their inventories, a move that forced Whirlpool to lay off over one-third of its workforce. A 1974 strike at its Evansville, Indiana, plant, which produced refrigeration and air conditioning equipment, further tested the company's ability to weather the downturn in the appliance market. Although the strike ended after four months, the plant's compressor facilities closed permanently in 1983 as part of a companywide initiative to reduce manufacturing costs. These developments stood in marked contrast to the period between 1967 and 1973, when manufacturers had built, delivered, and sold one appliance every 3.2 seconds.

By 1977 the market cycled upward, and Whirlpool and its competitors were again experiencing strong demand for labor-saving devices from first-time buyers of the postwar generation, from households replacing existing appliances, and from the military post exchanges with which the company had established a buying arrangement in 1967. As Whirlpool grew, however, traditional appliance retailers struggled against the increasing sales strength of mass merchandisers.

Whirlpool's progress during the 1970s was guided by Chairman John H. Platts, who had started his career with the company in 1941 on the assembly line and was hand-picked to succeed Elisha Gray II in 1971. Improvement of products for residential use remained an important priority for Whirlpool during this period. In 1977 it introduced the first automatic clothes washer with solid-state electronic controls and a line of microwave ovens. The company had originally entered the microwave market in the late 1950s and quickly withdrew because of limited potential.

A move toward vertical integration was also initiated in 1977, when the company started producing its own appliance motors to reduce its dependence on outside suppliers. One of Whirlpool's few failures during the decade involved the launch of a commercial ice-making system for use in hotels and motels and by food purveyors. The product never met sales goals and the business was sold in 1982.

1980s: Adding the KitchenAid and Roper Brands, Penetrating Europe

In 1980 Whirlpool was found guilty of discrimination in a suit brought by the Department of Labor, alleging that Whirlpool had taken inappropriate disciplinary action against two employees who had refused to perform what they considered to be hazardous work in the company's Marion, Ohio, plant. After several years of litigation, the U.S. Supreme Court ruled in the employees' favor, stating that the act of placing letters of reprimand in their personnel files was discriminatory.

Upon Platts's retirement in November 1982, Vice-Chairman Jack D. Sparks became chairman and CEO, and set about broadening the company's focus. Sparks's sales and marketing experience was felt important as Whirlpool faced an environment of increasing foreign competition in the United States, industry consolidation, and changing consumer preferences. Under Sparks's leadership, Whirlpool embarked upon a major capital spending program to increase manufacturing productivity and instituted a five-year plan to address industry trends.

One result of this planning process was the expansion of the company's product line beyond appliances and into related consumer durable goods. In 1985 Whirlpool entered the lucrative kitchen-cabinet market by acquiring Mastercraft Industries Corporation, followed by the purchase of another cabinet manufacturer, St. Charles Manufacturing Company, the next year. The cabinet business did not produce the hoped for results--Whirlpool was unable to capture a satisfactory share of the residential-construction market--and the cabinet operation was sold in 1989.

Sparks also oversaw the acquisition of the KitchenAid division of Hobart Corporation, which added a popular line of higher-priced dishwashers, ovens, and other kitchen appliances to the Whirlpool product line. Initiated in 1985, the transaction's completion was delayed for a year as White Consolidated Industries alleged antitrust violations. White's suit eventually proved unsuccessful and the acquisition was finalized in 1986.

Sparks also emphasized growth in the company's international markets and formed Whirlpool Trading Company in 1984, to explore overseas opportunities. Two years later the company attempted to forge a joint venture with Dutch company N.V. Philips to manufacture and market household appliances overseas. The project fell through because of unstable currency and market conditions.

In 1987 David R. Whitwam, succeeding Jack Sparks as president and CEO, took over the direction and implementation of the company's five-year global strategy. The company continued to focus on increasing manufacturing productivity and reducing costs, while applying new technology to appliance production. Whirlpool contracted with McDonnell Douglas Astronautics Company to develop prototypes of appliances for use in U.S. space stations. Also in 1987 Whirlpool and Sundaram-Clayton Limited of Madras, India, formed a joint venture called TVS Whirlpool Limited to make compact washing machines for the Indian market. One year later, Whirlpool entered the Mexican appliance market through the formation of Vitromatic, S.A. de C.V., a joint venture with Vitro S.A., a glass manufacturer based in Monterrey.

Until 1988 the company operated under a centralized structure, with decision-making concentrated at the senior management level. In 1988 Whirlpool reorganized its activities into seven units in order to maximize efficiency and market responsiveness. These units were: the Kenmore, KitchenAid, and Whirlpool appliance groups; Whirlpool International; Inglis Limited; Whirlpool Finance Corporation; and the company's export group.

Shortly thereafter, the company attempted to acquire Roper Corporation, another major manufacturer and supplier of appliances to Sears. This move was made to strengthen Whirlpool's cooking-appliance product line with electric and gas ranges and open new opportunities in the outdoor-equipment market Roper served with its lawn mowers and garden tractors. The Roper purchase was stymied, however, by General Electric Company (GE), which alleged that Roper had not solicited competitive bids upon receiving the Whirlpool offer as it was required to do by the Securities and Exchange Commission. As the controversy intensified, Whirlpool withdrew its tender offer and reached a settlement with GE in 1989 in which GE would acquire Roper's manufacturing facilities while Whirlpool would obtain the rights to the Roper name. The rivals also forged a two-year agreement under which GE would supply Whirlpool with appliance motors and gas and electric ranges. Meantime, the addition of Roper provided the company with a three-tier brand structure in North America consisting of the high-end KitchenAid, the popular-priced Whirlpool, and the value-priced Roper.

In 1989 the company successfully revived its proposed joint venture with N.V. Philips. This effort was spurred primarily by Whirlpool's desire to participate in the post-1992 European market for home appliances. The ensuing agreement cleared the way for Whirlpool to market a full line of major home appliances in Europe through a joint venture called Whirlpool Europe B.V. Philips's appliances were more appropriately designed for European customers than Whirlpool's models. The Whirlpool name was added to the Philips product line to strengthen recognition in the European market. By the end of the 1980s, Whirlpool's initiatives at home and abroad had paid off in the form of revenues in excess of $6 billion, more than tripling the 1978 total of $2 billion.

Global Ambitions in the 1990s

Whirlpool's initiatives in Europe reflected the company's aggressive international strategy, which earned it a reputation as one of the most globally diversified companies in the world during the early 1990s. Indeed, during this period Whirlpool expanded its overseas operations at a steady pace and lengthened its lead as the largest producer of appliances in the world. By late 1994, Whirlpool was manufacturing in 11 countries and marketing its products under ten brand names in 120 nations. The company enjoyed hefty sales gains in its giant European market in the early and mid-1990s, particularly following Whirlpool's mid-1991 buyout of its European joint venture partner in a $600 million deal. Further European growth came via an expansion into the newly opened markets of central and eastern Europe, with the first ventures centering on Hungary and Slovakia; later in the decade, the firm moved into Poland, the Czech Republic, Romania, Bulgaria, and Russia. Whirlpool, however, was pinning its hopes for greatest growth on Asia, to which it shipped 700,000 units in 1994. Similarly, sales in Latin America leapt 40 percent in 1994.

Besides surging global sales, Whirlpool worked to improve its operations in the flattening North American appliance market by restructuring. In 1994 it announced plans to cut about 9 percent of its global workforce, primarily through plant closures in Canada and the United States. A $250 million restructuring charge cut 1994 profits by 32 percent, to about $158 million. During the same year, though, Whirlpool's total revenues jumped more than 8 percent.

During the mid-1990s Whirlpool made a big push into Asia, forming several joint ventures in China and India. In 1994 the company had gained control of Kelvinator of India, Ltd., which it merged two years later with another majority-owned Indian firm, Whirlpool Washing Machines Limited, to form Whirlpool of India. Asia nonetheless accounted for only 6 percent of the 1996 revenues of $8.5 billion, and the ventures in this region were yet to be profitable. The firm lost $70 million in Asia that year. Late in 1997, as part of a global restructuring effort, Whirlpool announced that it was pulling out of two money-losing joint ventures in China. The company's European push had also been less than fully successful. It had proved very difficult to establish the Whirlpool brand on that continent, where there was stiff competition from entrenched players and where appliance manufacturers had to cater to specific demands of customers from a wide variety of cultures--a key contrast to the largely homogenous U.S. market. This was a lesson that Maytag Corporation, one of Whirlpool's main U.S. rivals, had already learned, having abandoned the European market in 1995 after encountering its own problems there. Although Whirlpool stayed the course in Europe, its operations there were thoroughly overhauled as part of the restructuring launched in late 1997. This restructuring involved the elimination of about 4,700 positions (about 10 percent of the payroll), mainly in Europe and Asia, the shuttering of various manufacturing and service facilities, and a $350 million charge that led to a net loss for the year of $15 million. Whirlpool also announced that it would sell its consumer-financing unit, Whirlpool Finance Corporation, to Transamerica Corporation for $1.35 billion.

By the late 1990s the European operations had been successfully turned around and returned to profitability. Leading the effort as head of Whirlpool Europe was Jeff M. Fettig, who was rewarded for his efforts by being named president and chief operating officer of Whirlpool Corporation in June 1999. Whitwam, who had been named chairman in 1992, remained CEO. Whirlpool ended the decade with record 1999 revenues of $10.51 billion and record net earnings of $347 million. More than 40 percent of the revenues and 30 percent of the profits originated outside of North America.

Developments in the Early 2000s

Whirlpool continued its international expansion efforts in the early 2000s. In January 2000 the firm spent $283 million to increase its equity interests in its two key Brazilian subsidiaries, Brasmotor S.A. and Multibrás S.A. Eletrodomésticos, to 94 percent. Whirlpool gained full ownership of the Mexican venture Vitromatic in a July 2002 transaction involving $151 million in cash and the assumption of $143 million in debt. Vitromatic was subsequently renamed Whirlpool Mexico, S.A. de C.V. Over in Europe, a 95 percent interest in Polar S.A., a leading maker of home appliances in Poland, was acquired for $48 million in cash and assumed debt. In August 2003 Whirlpool entered into a global strategic alliance with Fisher & Paykel Appliances, a major New Zealand-based home appliance maker. The alliance was set up to market existing appliances as well as develop new ones.

The global economic downturn of this period had a significant negative impact on the major appliance industry, prompting Whirlpool to begin another major global restructuring in late 2000. Much of the restructuring involved the corporation's European operations, which remained less profitable than those in North America. Over the next two years, Whirlpool eliminated more than 7,000 positions, paring the workforce by more than 10 percent. It aimed to achieve annual savings of $200 million by boosting cost-effectiveness worldwide. Restructuring charges totaled $273 million in 2001 and 2002. Whirlpool incurred additional extraordinary expenses from two recalls. Certain dishwasher models were recalled in 2000 because some had been catching fire. Then in October 2001 Whirlpool issued the largest recall in its history. Some 1.8 million microwave ovens were recalled because they could catch fire. Whirlpool set aside $300 million to handle the problem. The company barely eked out a profit of $21 million in 2001, before posting a net loss of $394 million in 2002 on record revenues of $11.02 billion. The 2002 loss, however, resulted from implementation of a change in accounting principles relating to goodwill impairment. Whirlpool took an aftertax charge of $613 million in implementing this change.

As it moved through the difficult times that the new century brought, Whirlpool worked aggressively to develop successful new products. During 2002 the Whirlpool Duet washer and dryer were introduced, with the washer featuring 60 percent more capacity than standard front-load washers. Also introduced that year were the KitchenAid Briva in-sink dishwasher and the Whirlpool Polara refrigerated range, which was the first range to combine both cooking and refrigeration functions. But Whirlpool was also moving beyond the kitchen and the laundry room. New products in 2002 also included the company's first line of jetted baths as well as the Gladiator GarageWorks line of organizing products for the garage. Whirlpool's core, however, remained its lines of major home appliances, and its continued innovation in that area promised to keep the company in the lead of the global appliance market.

Principal Subsidiaries: Empreso Brasileira de Compressores S.A. (Brazil; 94%); Multibrás S.A. Eletrodomésticos (Brazil; 94%); Whirlpool Canada Inc.; Whirlpool do Brasil Ltda. (Brazil); Whirlpool Europe B.V. (Netherlands); Whirlpool Financial Corporation; Whirlpool Mexico, S.A. de C.V.; Whirlpool Patents Company; Whirlpool Properties, Inc.

Principal Operating Units: Whirlpool North America; Whirlpool Europe; Whirlpool Latin America; Whirlpool Asia.

Principal Competitors: GE Consumer Products; Maytag Corporation; AB Electrolux; BSH Bosch und Siemens Hausgeräte GmbH; Merloni Elettrodomestici S.p.A.; El.Fi Elettrofinanziaria S.p.A.

Chronology

• Key Dates:
• 1911: Lou Upton and his uncle, Emory Upton, found Upton Machine Company in St. Joseph, Michigan, to begin producing electric wringer washers.
• 1916: Upton begins making washers for Sears, Roebuck and Co., which markets them under the Allen trade name.
• 1929: Manufacturing capacity is increased through a merger with the Nineteen Hundred Washer Company of Binghamton, New York, forming Nineteen Hundred Corporation.
• 1947: Company introduces the first automatic, spinner-type washer under Sears' Kenmore brand.
• 1948: Sale of Whirlpool brand washers begins.
• 1950: Company adds automatic dryers to its product line and changes its name to Whirlpool Corporation.
• 1955: Whirlpool gains line of refrigerators via merger with Seeger Refrigerator Company and changes its name to Whirlpool-Seeger Corporation; company acquires air conditioner and cooking range lines of Radio Corporation of America (RCA), which are marketed under the RCA-Whirlpool name until the mid-1960s.
• 1957: Company changes its name back to Whirlpool Corporation.
• 1958: In its first move outside the United States, Whirlpool buys a stake in Brasmotor S.A., a major Brazilian appliance maker.
• 1969: Whirlpool takes a 33 percent stake in John Inglis Co. Ltd., entering the Canadian home appliance market.
• 1986: Company acquires the KitchenAid division of Hobart Corporation.
• 1989: Whirlpool secures the rights to the Roper brand name; it joins with the Dutch company N.V. Philips to establish Whirlpool Europe B.V., a joint venture through which Whirlpool will market a full line of major home appliances in Europe.
• 1991: Whirlpool buys out its European partner, taking full control of Whirlpool Europe.
• 1997: Company launches a global restructuring involving the elimination of 4,700 jobs, the closure of plants and other facilities, and a charge of $350 million.
• 2000: Another major restructuring is launched that includes more than 7,000 job cuts and $373 million in charges over the following two years.