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Whirlpool Brings Production Close to Sales Point

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In an effort to enhance operational efficiencies, Whirlpool Corporation (WHR - Free Report) plans to relocate the production of its commercial front-load washing machines from Monterrey, Mexico to Clyde in Ohio. The production is expected to start from Apr 2014.

However, the company revealed that it will maintain its Mexican plant and will add a new residential washer production line. Furthermore, Whirlpool will maintain the current number of employees at this facility.

The news generated optimism among investors, as was reflected in the company’s share price. The stock price closed at $155.28 on Dec 20, up approximately 1.2% from the earlier day’s closing price of $153.52. During the intraday trading hours, Whirlpool shares rose to $156.57, close to its 52-week high of $156.69.

The recent move reflects the company’s strategy of producing items closer to the location where they are primarily sold. Approximately 90% of Whirlpool’s commercial front-load washing machines are sold in the U.S., while the remaining 10% are exported to Europe, Australia, Latin America and Asia. Moreover, the relocation will facilitate Whirlpool in supplying the products speedily while minimizing logistics costs and the need to ship units across the border.

Whirlpool believes that the latest move will create 80–100 new jobs in the Clyde facility during the next three years. It is also expected to be a step toward boosting its earlier announced commitment of spending $1 billion for expansion of manufacturing facilities in the U.S. from 2010 to 2014.

Whirlpool’s 2.4 million square-foot Clyde facility is the world’s largest washing machine plant and employs nearly 15,000 staff. The plant currently manufactures all of the company’s residential washers for the U.S. market including Whirlpool, Maytag, Amana, Estate, Roper, Crosley, Admiral and Kenmore, as well as Whirlpool’s Canadian brand, Inglis.

Among home appliance manufacturers, Whirlpool is a renowned name in the global market. Though the company might appear to be mostly dependent on the North American region for its revenues, it has been enhancing its presence in the fast growing Latin American and Asian markets as well.

In August, Whirlpool entered into a deal to acquire 51% stake in the leading Chinese home appliances manufacturer, Hefei Rongshida Sanyo Electric Co. Ltd. The deal will help the American multinational manufacturer and marketer of home appliances to expand its footprint in China. The transaction is expected to culminate by the end of 2014 and will become accretive in the initial year of integration.

Further, Whirlpool’s near-term growth prospects appear promising with Moody’s Corporation’s (MCO - Free Report) recent announcement of a positive outlook for the U.S. consumer durable industry. Moody’s declared that consumer durable companies would witness a 5%–6% rise in operating profit in the next 12–18 months owing to recovery in the U.S. economy, signs of stability in the housing market and increased spending by consumers. Apart from Whirlpool, other companies that will likely benefit from these improved trends include Leggett & Platt Incorporated (LEG - Free Report) and Jarden Corporation .

Over the last 101 years, Whirlpool has emerged the leading manufacturer and supplier of major home appliances. It is considered the largest home appliance manufacturer in the world, ahead of Electrolux AB, LG, Samsung, General Electric Co. and Haier Electronics Group Company Ltd. Moreover, the company is placed among the major home appliance makers in India and Europe.

Currently, Whirlpool has a Zacks Rank #3 (Hold).

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