SIC 3633
HOUSEHOLD LAUNDRY EQUIPMENT



This classification covers establishments primarily engaged in manufacturing laundry equipment, such as washing machines, dryers, and ironers, for household use, including coin-operated equipment. Establishments primarily engaged in manufacturing commercial laundry equipment are classified in SIC 3582: Commercial Laundry, Dry cleaning, and Pressing Machines, while those manufacturing portable electric irons are classified in SIC 3634: Electric Housewares and Fans.

NAICS Code(s)

335224 (Household Laundry Equipment Manufacturing)

Industry Snapshot

Although mechanical washing contraptions existed before the start of the twentieth century, only since the 1950s has gas and electric-powered laundry equipment achieved widespread use. By the early 1990s, over 70 percent of all U.S. homes had both a washer and a dryer. In the late 1990s, 17 establishments operated in this industry. Whirlpool Corporation, General Electric Appliances, and Maytag Corporation led the industry in 2000.

In 2000, the value of industry shipments totaled $4.25 billion, compared to $3.8 billion in 1997. Laundry equipment was the second largest home appliance market, following refrigeration.

Organization and Structure

Household laundry equipment represented about 17 percent of the overall U.S. household appliance industry in the 1990s. Although ironers and mangles, or pressing machines, account for a small portion of industry sales, washers and dryers made up the lion's share of production.

Nearly 80 percent of all household laundry equipment is purchased by individuals for home use. An additional 6 percent of industry output is consumed by laundromats, dry cleaners, and other services that use domestic laundry equipment. The remainder of the U.S. market is comprised of state, local, and federal government institutions, such as the armed forces and prisons.

The market for first-time purchasers of washers and dryers is relatively saturated. As a result, the industry is highly dependent upon sales of replacement appliances. Most laundry equipment has a life span of 10 to 12 years. However, several factors may influence the replacement rate of washers and dryers. An increase in sales of existing homes, for example, boosts replacements because new occupants are more likely to buy new appliances. Likewise, heightened remodeling activity also spurs replacements.

Changes in home trends may also spawn premature replacements. For instance, as laundry equipment was increasingly moved out of basements and closer to living areas in the 1980s, the need for quieter and more attractive washers and dryers caused an influx of consumers to upgrade. Increases in repair costs in relation to price of new units can also shorten replacement cycles. Finally, because appliances are discretionary purchases that can be postponed, industry revenues are closely tied to the health of the overall economy.

Types of Products. The three major household laundry product categories were electric washing machines, electric dryers, and gas dryers. Washers are of two types: top-load and front-load. Top-load washers have an agitator in the center of the wash tub that thrashes the water and the fabric. Front-load, or tumble-type, washers lift and drop the laundry into the wash water as the tub spins. Both washer types wring out excess water by spinning.

Although many top-loading machines are easier to access, tumble-type washers require less water and detergent to clean a load of laundry. Both types of washers are differentiated primarily by their features, which include washing actions, capacity, water temperature combinations, water levels, and noise levels. Most top-load washers range in price from $400 to $550, while front-load machines usually cost an additional $100.

Dryers are basically revolving drums which tumble clothes through heated air. Different features and product quality result in a price range of $400 to $800. More expensive dryers offer as many as three different heating cycles, extended tumble cycles, wrinkle-remove features, and sturdier construction, such as porcelain coated drums and tops. Although gas dryers are typically more expensive to purchase initially, they are often significantly cheaper to operate.

Background and Development

Numerous washer and dryer devices, ranging from washboards to hand-cranked wringers, were used to clean laundry prior to the twentieth century. The first electric washing machine was introduced in 1907 by the Maytag Company. But not until after World War II, during the post-war U.S. economic expansion, did electric washing machines, and later dryers, realize mainstream acceptance. As the demand for all types of appliances proliferated during the 1950s, 1960s, and 1970s, the laundry equipment industry grew rapidly. The introduction of fully automatic washers and dryers in the mid-1960s rocketed the industry to prominence during the following decade, as washers and dryers became standard household amenities.

By the early 1980s the laundry equipment industry was shipping over $2 billion worth of goods annually and employing over 16,000 workers. Well over 50 percent of U.S. households had both a washer and a dryer. Strong home construction and appliance replacement markets, moreover, allowed producers to enjoy solid gains throughout the 1980s. Indeed, industry revenues grew at an average annual rate of over five percent between 1982 and 1990, despite an economic slowdown in the late 1980s. Sales surged past $3.2 billion in 1990, stagnated in 1991, and grew about 3 percent in 1992.

An important dynamic which characterized the laundry equipment industry during the 1980s was consolidation. As the vigorous growth of the late 1960s, 1970s, and early 1980s waned, producers tried to achieve economies of scale though merger and acquisition. By the end of the 1980s only 16 competitors remained, compared to over 25 at the start of the decade. In fact, the top two companies controlled nearly 70 percent of the market, and the top four manufacturers accounted for about 80 percent of sales. Antitrust laws enacted during the 1980s succeeded in slowing the rate of consolidation by the early 1990s.

Positive demographic trends and healthy housing starts helped boost household laundry equipment sales by more than 50 percent between 1980 and 1990. Although industry participants suffered the effects of recessed construction markets and economic malaise in the early 1990s, sales were rebounding going into the mid-1990s and analysts predicted that shipments would continue to grow at a rate of 1 percent to 3 percent through the end of the decade. By 1997, shipments were valued at $3.7 billion.

To boost sales and profits in 1994, washer and dryer manufacturers were striving to develop new and better appliances which would spur replacement sales, while also scrambling to comply with new federal environmental regulations. In addition, most were seeking growth outside the United States in regions such as Asia and Mexico.

Manufacturers were able to boost unit shipments faster than revenues and retain profit growth through productivity gains. Indeed, hefty capital investments in automation and information systems during the 1980s helped the appliance industry become one of the most efficient businesses in the United States. As the value of washer and dryer shipments grew 50 percent during the 1980s, unit prices remained stable in real dollars and unit volume soared. Despite a huge surge in real output, industry employment actually declined slightly during the decade. Efficiency gains contributed to the industry's dominance of the domestic market, of which it controlled a whopping 85 percent.

In addition to short term economic factors and production efficiencies, laundry equipment manufacturers in the mid-1990s also benefited from long-term demographic factors and buying patterns. Importantly, the baby boom generation, aged 35 to 54 years, was becoming wealthier and was investing a greater share of its income in home-related goods. Because this important market segment was also spending an increasing amount of time working and having children, analysts expected boomers to begin spending a greater proportion of their income on conveniences, such as washers and dryers.

Augmenting renewed sales were new distribution and customer service programs, which manufacturers were initiating. Many producers, for example, were strengthening their support for retailers with training and service programs. Likewise, customer relationship initiatives were helping manufacturers cultivate consumer loyalty. Whirlpool, for example, announced early in 1994 that it was going to replace its system of independent distributors with factory-direct distribution.

Laundry industry sales grew about 2 percent per year from 1990 to 1997. Unit volume grew annually at a steady 2 to 3 percent. Increased sales were largely the result of an increase in housing starts and escalating consumer expenditures following the recession. The replacement market for washers and dryers was a constant; for example, in 1996, 3.4 million washing machines were replaced.

Federal Regulation. New U.S. Department of Energy Standards (DOE) initiatives, which took effect in May of 1994, required machine makers to lower rinse-water temperatures, reduce water consumption, and install energy-efficient motors and insulation. In a 1996 study conducted by a Maytag R&D team, it was discovered that a high-efficiency washer can save from 3,500 to 6,000 gallons of water per household per year. In the mid-1990s, manufacturers strove to meet the challenge. They started using solid concrete weights in washers to steady the machine during the spin cycle. Previously, energy-intensive iron casts weighted laundry machines. New washers also offered wash programming, to allow the user to program the washing machine to start the wash during nonpeak electric hours. New methods also included recycling the dirty wash water into clean rinse water, increasing the use of enzymatic detergents and reducing foaming detergents, and spray rinse cycles instead of deep rinse.

Manufacturers were also under pressure to increase the recyclability of their machines. Two Congressional bills that failed to pass in 1992 would have mandated product material content, recycling rates, and packaging. In anticipation of new laws, some producers were striving to improve the recyclability of their machines by making them out of components that could be recovered, restored, and reused.

Current Conditions

Besides baby-boom patterns, overall U.S. household formations rose during the 1990s. This resulted in steady growth of first-time appliance buyers. Furthermore, because a large percentage of existing washers and dryers were purchased in the early 1980s, some observers expected replacement sales to increase in the late 1990s as old machines wore out. For these reasons, the value of industry shipments peaked at $4.42 billion 1998. The following year, however, shipments declined to $4.16 billion, and they increased slightly to $4.25 billion in 2000. Employment followed a similar pattern, spiking to 16,740 workers in 1998, before dropping to 15,503 workers in 2000.

Industry Leaders

Whirlpool overtook General Electric in 1993 to become the largest appliance manufacturer, with 1999 revenues of $10 billion and employment of 59,000. Leading edge production techniques and improved product quality helped Whirlpool achieve a record $205 million profit in 1992 from $6.3 billion in sales. After realizing growth of 14 percent annually during the 1980s, Whirlpool was concentrating on global expansion in the 1990s, and was investing heavily in Asian and European markets. General Electric Appliances came in second in the industry, with 1998 sales of $5 billion and 50,000 employees.

Maytag Corporation is credited with giving birth to the industry, and has a proven reputation for supplying high quality washers and dryers. Maytag began by selling farm equipment, but invented electric laundry machines in the early 1900s. In 1966 Maytag introduced fully automatic washers, and in 1976 brought out a complimentary line of dryers. It maintained a focused product line until the 1980s, when it acquired Hardwick Stove in 1981, Jenn-Air in 1982, and Magic Chefin 1986. In an effort to expand its overseas operations, Maytag formed a strategic alliance with Germany's Bosch-Siemens in 1993. Maytag and Siemens shared design and process technologies. Maytag's total sales in 1999 were $4.3 billion, and total employment exceeded 20,000.

Workforce

Although the top four laundry equipment producers expected to increase production, many analysts expected industry employment in the United States to decline. Heightened campaigns for greater productivity, the likely movement of some manufacturing activities to Mexico, and continued management restructuring may diminish opportunities for workers in the industry.

In 2000, 15,503 workers were employed by this industry. Assemblers and fabricator positions, which accounted for about 40 percent of the entire workforce, will plummet by as much as 37 percent between 1990 and 2005, according to the Bureau of Labor Statistics. Other blue-collar jobs in this industry will drop by 15 percent to 50 percent. Management and support opportunities are expected to decline as well. In fact, only jobs for sales and marketing workers were expected to increase. The average wage for production workers in 2000 was $16.82 per hour.

America and the World

U.S. washer and dryer makers supplied about 30 percent of global demand going in the 1990s. Although they exported less than 10 percent of total production, domestic producers were avidly seeking to capture a greater share of the world export market. Overall appliance exports grew, continuing a trend started in the 1980s. The leading foreign markets were Canada, Mexico, Taiwan, Germany, and Saudi Arabia.

In the early 1990s a weak U.S. dollar boosted exports, particularly to Europe and Japan. In addition, exports to Mexico grew a healthy 18 percent, though imports from that country soared an estimated 40 percent as U.S.-Mexican joint ventures proliferated. While U.S. producers were benefiting from cheap Mexican labor, low-cost appliance manufacturers in other emerging regions, especially in Asia, posed a threat to future U.S. export growth.

Whirlpool, which derived about one-third of its revenues from overseas sales, had been the most successful U.S. exporter. It maintained substantial interests in South American countries, such as Brazil and Argentina, and was working hard at penetrating the European market. Maytag also advanced in Europe in the 1990s, and garnered about 15 percent of its revenues from foreign operations. U.S. manufacturers have enjoyed less success in the Asian arena, which was dominated by three major Japanese appliance conglomerates.

Although U.S. washer and dryer makers held a stranglehold on domestic markets, their dominance was expected to wane in the wake of increased imports from Mexico. Passage of the North American Free Trade Agreement (NAFTA) in 1994 was expected to accelerate the movement of production facilities across U.S. borders—a trend which analysts expected would increase corporate earnings and reduce domestic employment and payrolls.

Research and Technology

Due to increased environmental concern, innovation from the late 1990s into the early part of the next century was expected to focus on "greener" products and disposal methods. Designed to cut electricity, water, and gas usage, laundry products were incorporating greater technology in the manufacturing process.

Capital investments during the mid-1990s were used to develop more efficient production and distribution methods and to achieve compliance with environmental regulations and pressures. They were also used to create better and less-expensive products. For example, control software that was being incorporated into machines optimized wash and dry cycles for different types of laundry, adjusted temperature and water levels during a cycle, and allowed machines to talk to users. These microprocessors also made possible many advanced features, such as self-diagnostic systems, delayed-start timers, and touch controls with cycle programming. New features were designed to maximize energy efficiency—an improvement which would expedite replacement sales.

One of the most advanced innovations under development in the 1990s involved the study of washing machines that can use "fuzzy-logic." In 1993 South Korea's Goldstar Co. claimed to have invented the first consumer product that exploited the chaos theory, which holds that there are identifiable tendencies of movement amid the apparent randomness of patterns. Goldstar analyzed the movements of water in a standard washing machine, identified those that produced cleaner and less-tangled clothes, and then designed a washing machine that mimicked the movements. Whirlpool was integrating similar technology into some of its models. In the mid-1990s, machines appeared that could use Dialogic, a new term coined by Merloni Elttrodomestici, an Italian manufacturer. The machine only needs to be loaded, and told what is the most delicate garment in the wash. It then evaluates other wash factors to create the "perfect" wash—lowest possible noise, cleanest rinse, appropriate detergent, and appropriate water usage. "Smart" dryers sense the clothes' dampness, when to shut off, and what temperatures at which to dry. In 1999, laundry appliances were starting to include digital signal processors (DSP) to select wash programs and monitor the machines.

Following the trend toward electronic business, companies like Whirlpool Corporation were looking into so-called e-business in 1999. Whirlpool, which sells to retailers rather than directly to customers, hoped to work more with individual consumers via the Internet.

Further Reading

Ashley, Steven. "Energy-Efficient Appliances." Mechanical Engineering—CIME. March 1998.

"Big Business Meets the E-world." Forbes. November 8,1999.

"Bureau of the Census." Economic Census 1997, 2000. Available from http://www.census.gov .

"Bureau of Labor Statistics." Employment Statistics, 2000. Available from http://www.bls.gov .

Conley, Thomas P. "Combating the Slow Growth Scenario for Housewares." Appliance. January 1997, p. 68.

Darnay, Arsen J., ed. Manufacturing USA. Farmington Hills, MI: Gale Group, 1996.

General Electric Company. 1995 Annual Report. Fairfield, CT, 1996. Available from http://www.ge.com/annual95/ibb6a18.htm .

Hoover's Company Capsules. Hoover's Online, 2000. Available from http://www.hoovers.com .

LaPat, Kimberly L. "Clothes Encounters." Appliance. September 1996.

Le Blanc, Jenny. "1997: Slow Growth Ahead." Appliance. January 1997, 38.

Market Share Reporter. Farmington Hills, MI: Gale Group, 1997.

Murray, Aengus. "DSP Motor Control Boosts Efficiency in Home Appliances." Electronic Design. 25 May 1998.

"Portrait of the U.S. Appliance Industry." Appliance. September 1996.

United States Census Bureau. "Statistics for Industries and Industry Groups: 2000." Annual Survey of Manufacturers. February 2002. Available from http://www.census.gov .

"Whirlpool Earnings Rise 21 Percent." Reuters, 16 April 1997.



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