Whirlpool Corporation - Company Profile, Information, Business Description, History, Background Information on Whirlpool Corporation

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History of Whirlpool Corporation

From its beginning as a manufacturer of electrically powered clothes washers, Whirlpool Corporation has become a leading producer of a complete line of household appliances. The company is the number-one source of home laundry equipment in the United States, and also markets appliances such as dishwashers, refrigerators, ovens, ranges, and air conditioners worldwide under the Whirlpool, KitchenAid, and Roper brand names.

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 Saint 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 Company, which at that time operated exclusively through mail order. Sales of Upton's washers through the Sears catalog 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.

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. Also in 1957, the company broadened its reach beyond the United States by initiating the first of several acquisitions of major Brazilian appliance manufacturers.

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 subjects like 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. Since 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 Inglis, a home appliance manufacturer. Inglis has since served as Whirlpool's Canadian arm.

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 which 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 due to 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.

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 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 due to unstable currency and market conditions.

In 1987 David R. Whitman, 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.

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 hoped 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 so by the Securities and Exchange Commission. As the controversy intensified, Whirlpool withdrew its tender offer and reached a settlement with GE 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.

In 1988 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. Philips's appliances were more appropriately designed for European customers than Whirlpool's models. The following year, the Whirlpool name was added to the Philips product line to strengthen recognition in the European market.

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. But it was pinning its hopes for greatest growth on Asia. Whirlpool shipped 700,000 units in Asia in 1994, was hoping to sell three million in that region in 1995, and expected similar growth to continue through at least the late 1990s. 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 nine percent of its global work force, primarily through plant closures in Canada and the United States. Similar restructuring during the early 1990s resulted in a restructuring charge that cut 1994 profits by 32 percent, to about $158 million. During the same year, though, Whirlpool's total revenues jumped more than eight percent and profits were growing at record levels in 1995. Massive untapped global markets, combined with Whirlpool's combative global tactics under Whitman's command, suggested healthy long-term performance for the appliance maker.

Principal Subsidiaries: KitchenAid, Inc.; North American Appliance Group; Whirlpool Financial Corporation; Whirlpool Asia; Whirlpool Europe.

Additional Details

Further Reference

Heinrich, Erik, "Ontario Jobs Lost in Whirlpool Shakeup," Financial Post, November 16, 1994, p. 8.Maurer, Mitch, "Whirlpool Cuts 3,200; Tulsa Plans Unchanged," Tulsa World, November 16, 1994, p. B1.------, "Whirlpool Income Rises," Tulsa World, October 14, 1994, p. B2.Reid, T. R., "Whirlpool Enters China with Joint Ventures in Microwave Ovens and Refrigerators," Business Wire, December 7, 1994.------, "Whirlpool's Full-year 1994 Operating Results are Best Ever," Business Wire, January 26, 1995.Whirlpool Corporation 1911-1986: Progressing Toward the 21st Century, Benton Harbor, Mich.: Whirlpool Corporation, 1986.

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