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Whirlpool warns, sets cuts
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December 13, 2000: 12:38 p.m. ET
Appliance maker says sluggish sales will hurt 4Q profit, sets job cuts
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NEW YORK (CNNfn) - Whirlpool Corp. warned again Wednesday that sluggish sales in North America and Europe would hurt profitability in the fourth quarter and early next year, and said it would cut as many as 6,000 jobs in a bid to lower costs.
The news sent Whirlpool (WHR: Research, Estimates) stock tumbling $4, nearly 10 percent, to $40.19 in trading Wednesday.
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 CNNfn's Greg Clarkin, takes a look at Whirpool's stock. |
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The appliance maker said in a statement that fourth-quarter profit would be about flat with the third quarter, when it reported operating earnings of 98 cents a share. Wall Street has been expecting profits of $1.42 a share, according to First Call, which tracks analysts' forecasts.
This is the Benton Harbor, Mich.-based company's second fourth-quarter warning. On Aug. 30, Whirlpool said it would miss forecasts for the third and fourth quarters mainly because electronics retailer Circuit City exited the appliance business. The company said then it expected fourth-quarter earnings of $1.45-to-$1.55 a share compared with analysts' forecasts of $1.68 a share at the time, according to First Call.
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 PROFIT WASHED AWAY
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Slowing demand in North America and Europe has washed away profit at the world's largest appliance maker. The company plans to cut up to 6,000 jobs and will miss fourth-quarter profit targets.
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Spokesman Christopher Wyes told CNNfn the company would cut up to 10 percent of its work force of about 60,000.
Justin Maurer, an analyst with Merrill Lynch, said Whirlpool's announcement is not a surprise, but that he is worried General Electric (GE: Research, Estimates), one of Whirlpool's chief rivals, will drag industry prices down by selling more cheaper, low-end appliances through discount retail chains.
"The bigger picture issue for me is the industry is undergoing so much change now, the beneficiary is the consumer," said Maurer, who lowered his rating on the company to "neutral" from "accumulate" Wednesday. "It's becoming more and more commoditized and the question is how do you get away from that? The bottom line is they have GE who is willing to sell as much product as they can to non value-added retailers."
Wyes said Whirlpool did announce some price reductions Wednesday in response to industry pressure from lower pricing, but said the company plans to remain focused on bringing innovative new products to the market.
"We are not interested in seeing this industry enter into a commodity status," Wyes said. "Clearly we are focused on bringing innovative new products and services to the consumer. "We are very much focused on enhancing the purchase experience."
Whirlpool also said Wednesday that it would take up to $350 million in charges for a restructuring and forecast a tough first half of 2001.
 The restructuring effort is expected to save the company $225 million-to-$250 million a year.
"Despite our aggressive actions during the last several months, we continue to face industry and economic conditions that have led to intensified price competition, rising material costs and slowing or declining demand," Chief Executive David Whitwam said. "The actions announced today will allow us to drive continuing performance improvement and will better align our brand, products and operations with our markets globally."
Whirlpool said it expects a sluggish North American and European market to continue in the first half of 2001, and also expects full-year 2001 shipments to be flat compared to 2000.
Whitwam said he sees future margin expansion and improved profitability beyond the first half of 2001.
Whirlpool said it is facing an overall decline in the appliance market and that it continues to see competitive pricing pressures, it expects the North American appliance industry to be down 7-to-8 percent in the fourth-quarter compared with a year earlier. That's below the company's earlier predictions of a 2-to-3 percent decline in industry shipments in the quarter. 
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