Whirlpool to cut 5,000 jobs to reduce costs
NEW YORK (AP) — Appliance maker Whirlpool Corp. plans to cut 5,000 jobs, about 10 percent of its workforce in North America and Europe, as it faces soft demand and higher costs for materials.
The world's biggest appliance maker also on Friday cut its 2011 earnings outlook drastically and reported third-quarter results that missed expectations, hurt by higher costs and a slowdown in emerging markets. Shares fell over 14 percent Friday.
The company, whose brands include Maytag and KitchenAid, has, like other appliance makers, been squeezed by soft U.S. demand since the recession and rising costs for materials such as steel and copper. Due to its size, Whirlpool's performance provides a window on the economy because it indicates whether consumers are comfortable spending on big-ticket items.
Whirlpool has raised prices to combat higher costs, but demand for items like refrigerators and washing machines remains tight. Whirlpool is also facing discount pressure from competitors.
To offset slowing North American sales, Whirlpool has turned to emerging markets. But the company said Friday that sales have slowed there, too. The company revised its demand forecast globally. It now expects demand to decline 3 percent to 5 percent in North America, in 2011, down from a 1 percent to 2 percent prior decline forecast.
It expects flat demand in Europe, the Middle East and Africa, from prior expectations of a 1 percent to 2 percent rise in demand.
In Latin America, it now expects demand to be flat to up 5 percent, from prior expectations of a 5 percent to 10 percent increase. And in Asia it expects demand to rise 2 percent to 4 percent from earlier expectations of a 4 percent to 6 percent increase.
Steep costs and the dour global economy are affecting the entire appliance industry. Swedish appliance maker Electrolux said Friday that its third-quarter net income fell 39 percent and also cut its forecast for demand in North American and Europe for the year.
Whirlpool jobs to be cut are mostly in North America and Europe. They include 1,200 salaried positions and the closing of the company's Fort Smith, Ark., plant.
The Fort Smith plant shutdown will affect 884 hourly workers and 90 salaried employees. An additional 800 workers were on layoff from the factory and on a recall list.
Whirlpool will also relocate dishwasher production from Neunkirchen, Germany, to Poland in January 2012.
The company expects the moves will save $400 million by the end of 2013. They'll cost $500 million in restructuring costs however, which will be recorded over the next three years, including a $105 million charge in the fourth quarter, $280 million charge in 2012 and $115 million charge in 2013.
Benton Harbor, Mich.-based Whirlpool's third-quarter net income more than doubled to $177 million, or $2.27 per share, from $79 million, or $1.02 per share. Adjusted earnings of $2.35 per share fell short of analyst expectations for $2.73 per share.
Revenue rose 2 percent to $4.63 billion, short of expectations for $4.74 billion.
"Our results were negatively impacted by recessionary demand levels in developed countries, a slowdown in emerging markets and high levels of inflation in material costs," CEO Jeff Fettig said.
Unit shipments fell in all regions except Asia, where they rose 4 percent.
In North America, revenue fell 2 percent to $2.4 billion, and in Latin America, revenue rose 8 percent to $1.2 billion.
The company now expects 2011 net income will be $4.75 to $5.25 per share. Its prior guidance was net income would be at the low end of a range between $7.25 and $8.25 per share.
Separately, Whirlpool has complained to authorities that some companies, including Samsung Electronics and LG Electronics, have been selling appliances at less than fair value in the U.S., a practice known as dumping. Whirlpool said the Commerce Department issued a preliminary determination that the companies are violating international trade laws. The investigation is ongoing.
Whirlpool's stock fell $8.67, or 14.3 percent, to close at $51.80 Friday. The stock has already sunk 42 percent this year.