The impasse over higher pricing, shorter terms and reduced programs that ended Whirlpool’s branded presence on Sears’ sales floors only partially ends the companies’ 101-year partnership.
Both were fledgling businesses in 1916, when Sears, Roebuck & Co. ordered its first motor-driven wringer washers from Whirlpool forerunner the Upton Machine Co. Building upon that relationship, and a booming post-World War II economy, the two became appliance powerhouses that were synonymous with America’s soaring standard of living.
But now, after a reimagined retail landscape and questionable management decisions have left Sears on the ropes, Whirlpool felt compelled to revisit the sweetheart legacy agreements that were forged in a different time, sources tell TWICE. Unable to come to terms after months of negotiations, the partners could only agree upon ending Whirlpool’s multi-brand reign at Sears.
“Whirlpool has sought to use its dominant position in the marketplace to make demands that would have prohibited us from offering Whirlpool products to our members at a reasonable price,” an internal Sears memo read. The missive also instructed stores to work down their remaining Whirlpool, Maytag, KitchenAid and Jenn-Air inventory, and focus instead on its private-label Kenmore badge, and a remaining brand roster that includes LG, Samsung, GE, Frigidaire, Electrolux and Bosch.
But the two have not entirely parted ways: Whirlpool remains an important, if less dominant, OEM partner that will continue to contribute to the retailer’s Kenmore and Kenmore Elite majap lines, Whirlpool Corp. spokeswoman Kristine Sherman confirmed for TWICE.
The rift between the longtime partners is likely to take a greater toll on Sears. The retailer, like all domestic majap dealers, is facing a Whirlpool-dominant laundry market as the U.S. International Trade Commission (USITC) considers punitive sanctions against imported Samsung and LG washers, and Electrolux remains hampered by tariff s on Mexican-made machines.
For Whirlpool, parting company will have a minimal impact. On an earnings call, CEO Marc Bitzer said the vendor’s total business with Sears “has declined over time,” and now stands at about 3 percent of global factory sales — with the branded portion representing only a “small fraction” of that.
“Relative to our North American business volume, these are volumes which are not a major issue,” he told analysts.
Whirlpool’s pricing impasse with Sears was likely related to a series of global price hikes planned for Q4 and the first quarter of 2018. On the call, Bitzer said the increases are designed to offset $600 million in higher steel, zinc and other raw materials cost this year and next, and will be implemented in the U.S., Brazil, Europe and China.
What’s more, the manufacturer’s request for shorter payment terms followed stricter deals struck by LG and Samsung, which demanded, and are receiving, cash upfront for merchandise, sources told TWICE.
The arrangement was echoed in an Oct. 31 Wall Street Journal article recounting Sears’ financial decline and its current struggles to keep anxious vendors onboard. Sears responded to the piece with a corporate blog calling the newspaper’s assertions inaccurate, and citing the retailer’s “strong relationships with over 50,000 vendors and suppliers,” including LG.
“We have a long-term relationship with LG and continue to do significant volumes of business under mutually agreed terms,” the post read. “It is common for vendors to offer incentives to retailers for earlier payments. Though unreported, LG specifically told the Wall Street Journal reporter ‘LG greatly values our relationship with Sears, and is absolutely committed to our strategic partnership long into the future.’ This is a sentiment we share.”
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