Whirlpool's Swift Faces Uphill Slog With Maytag Integration

BENTON HARBOR, MICH. — Perhaps Whirlpool should have been careful what it wished for.

After doggedly pursuing its $2.6 billion merger with Maytag last year, the world's largest majap manufacturer has found the integration more daunting than first envisioned. An added monkey wrench was the spiraling cost of raw materials and components, and the dramatic downturn in the U.S. housing market which whipsawed white goods demand.

As a result, Whirlpool's fourth-quarter operating profit fell 35 percent to $2.6 billion in North America as integration costs, lower production, markdowns and Maytag's pre-acquisition momentum ate into earnings. Nevertheless, David Swift, president of Whirlpool's $14 billion North America division, believes the good times will start to roll again this year as the housing market stabilizes and heavy investment in the Maytag portfolio will begin to bear fruit.

TWICE recently spoke with Swift on the occasion of the surprisingly upbeat International Builders' Show. Here's what he had to say.

TWICE: How did Maytag lose its way?

Swift: Maytag's challenge was that it wasn't introducing enough innovation into the marketplace. Its brands had great pull with consumers and still resonate and rank high with them. We're making a significant investment in the brands and the products.

TWICE: Now that you've essentially doubled your brand portfolio, how do you juggle all those nameplates?

Swift: We need a very clear differentiation strategy for all of our brands, and we have enough innovation to support that. The key is to very succinctly describe the target customer for each brand and have the right product for them.

Jenn-Air, for example, appeals to what we call the "proud gourmet." The emphasis is design elegance and a contemporary esthetic. By contrast, KitchenAid appeals more to the home cooking enthusiast. They're much more focused on a timeless look that's less contemporary, and they prefer their appliances to have heft and durability.

TWICE: How are you organized?

Swift: Within the U.S., we manage the business by an axis of brand, channel and product.

Brand is where we make the important strategic decisions. Each brand has to be managed separately, with a separate design studio — otherwise they can morph together and pollute the linkage to each customer segment.

The distinctions also carry over to production. The plants are organized by product type, but we try to optimize and balance engineering and manufacturing in order to maximize differentiation for each brand.

In terms of channel, we're organized by key account management. We have a Lowe's team, a Best Buy team and a Home Depot team, and we have separate teams for the buying groups and the large regional independents. They go between the trade and us, and work with each brand group back at headquarters to insure terrific innovation and to balance all the channels. We do that better than anyone in the industry. We're very open with our trade partners — we want them to get excited about our offering.

TWICE: Is there still a place for the independent dealer?

Swift: The independents play a hugely important role in the industry. They have a competitive advantage in that their assisted sales floors are the place where consumers can receive the best support.

But the big boxes are improving, and they're growing at a rapid pace, adding new stores every day. They've also created a new space, acting as the go-between for new home construction.

TWICE: Which segments are holding up best?

Swift: The premium segment is doing well and robust innovation is selling. Our Cabrio top-load washer is incredibly quiet and energy efficient, but it carries a very high price point and it is doing exceptionally well. In fact, the average annual income for households with our Duet laundry products is $40,000, which many people would find surprising. But if you demonstrate enough benefit, you can change behavior. Innovation is key, even in a down environment.