September 13, 2011

Whirlpool Corporation 

 

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Updates on Various Legal Matters 

Brazilian Settlement with Banco Safra 

On June 22

nd

, WHR announced a legal settlement with Brazilian bank Banco Safra. The long-standing 

dispute related to a former employee of Embraco (now part of WHR’s Brazilian operations) who entered the 

Company into an unauthorized loan with Banco Safra in 1989. After 22 years of litigation, management elected 

to settle the matter for approximately $600 million. The payment will be made in two installments over the next 

6 months. WHR recorded an additional charge of $439 million, and will pay the settlement from the Company’s 

existing cash balance. The total after-tax impact for WHR is $290 million, or approximately $3.70 per share. 

Management has updated its financial guidance for 2011 to reflect the financial impact of the settlement.  

Embraco Anti-Trust Investigation 

Beginning in 2009, various competition authorities (Brazil, United States, and Europe) requested 

documents from WHR as part of several anti-trust investigations involving the global compressor industry 

(pertaining to Embraco and its competitors). The Company has reached settlements with government 

authorities in Brazil and the United States, but several investigations remain ongoing (including the European 

Commission). The final value of WHR’s liability is not precisely quantifiable, but management believes it can 

estimate the total costs related to this matter. As of the end of the second quarter, the Company had taken 

$306 million in total charges for this issue.  

Business 

WHR’s strong market share helps to illustrate the Company’s solid competitive position. Within the 

global appliance market, WHR holds the #1 market share position. The Company’s 15% share of the 

worldwide market is 50% larger than its nearest competitor, Electrolux. The Company has the #1 market 

position in North America and Latin America, the #3 position in Europe, and the #2 position in the growing India 

market. As the charts below illustrate, the Company has a relatively diverse sales mix in term of both products 

and regions. During 2010, 31% of WHR’s total revenue was derived from refrigerators and freezers, followed 

by laundry appliances (30%), other (23%), and cooking appliances (16%). Whirlpool has approximately 71,000 

employees, and roughly 60% of WHR employees are unionized. 

 

Whirlpool 2010 Sales by Region 

Whirlpool 2010 Sales by Product 

 

 

 

In terms of geographic exposure, North America (53%) is still WHR’s largest source of sales, followed 

by Latin America (25%), Europe (17%), and Asia (5%). The Company does utilize currency options, swaps and 

forward contracts in order to manage its currency risk. During past periods, WHR has been able to achieve 

ROE and Return on Capital levels in excess of 20%, but recent market conditions have made that  

less attainable. Whirlpool does not break out profitability by product. However, the Company does disclose  

Europe

17%

Asia

5%

North 

America

53%

Latin 

America

25%

Other

23%

Cooking 

Appliances

16%

Laundry 

Appliances

30%

Refrigerators 

& Freezers

31%

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Whirlpool Corporation 

 

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its gross margins by region. The following table depicts each market’s average gross margin for the past 

3 years (2008-2010). 

 

Region 

Gross Margin  

(2008-2010 Average) 

North America 

11.6% 

Latin America 

19.9% 

Europe 12.9% 

Asia 18.2% 

Consolidated 14.0% 

 

Whirlpool’s Foundation for Success 

The Company’s formidable competitive position has been gradually built over many decades. In our 

view, it would be very challenging for industry peers or new entrants to replicate the Company’s strong 

standing within the global appliance marketplace. However, maintaining this competitive position is an ongoing 

challenge that requires significant investment and management execution. The executives at WHR cite scale, 

brands, and distribution as the “foundation” for its competitive position. These factors, combined with several 

meaningful growth opportunities represent management’s key priorities for long-term value creation.  

Whirlpool’s scale is a key aspect of its competitive position. The Company has a global presence in 

terms of both its sales reach and manufacturing capabilities. A combination of both organic growth and 

selective acquisition has enabled the Company to sell its products in over 130 countries worldwide. WHR also 

has 35 manufacturing facilities in 12 countries, allowing for a greater proximity between its production and end 

users. Importantly, the Company’s manufacturing facilities possess leading capabilities and scale relative to the 

facilities of industry peers. In North America for example, management has indicated that its factories are 70% 

larger than the average factory of its competition. It is important to note that WHR has maintained this scale 

position while improving the efficiency of its manufacturing operations. Total global manufacturing centers now 

total 35, down from 45 in 2006. In total, WHR occupies about 70 million total square feet of space for 

manufacturing, service, sales, and administrative purposes (roughly 50/50 split between owned and leased 

space). 

WHR’s well established portfolio of brands is another source of competitive strength. The appliance 

market is a relatively segmented landscape, characterized by numerous customer groups, end markets, and 

price points. In the view of management, having a diverse group of brands enhances WHR’s ability to 

effectively monetize these opportunities (WHR brands reach over 85% of consumers according to company 

data). WHR possesses 10 brands, and 6 of these brands generate at least $1 billion in annual revenue. These 

brands hold relatively high levels of recognition and favorability among most appliance consumers. In addition, 

the value of the brands has been reinforced by various media sources that evaluate the appliance industry and 

products (favorable reports for WHR products from sources such as Consumer Reports in the U.S. and Epoca 

Negocios in Brazil). The following provides a more detailed description of WHR’s brand portfolio, and the 

respective identity and positioning of each brand: 

The Billion Dollar Brands (Annual Sales of at least $1 billion):   



 

Whirlpool: Whirlpool is a well-established brand, present in the North American market since the 

1950s. Whirlpool products are now available on a global basis, and largely consist of laundry and 

kitchen appliances designed for the middle market. According to management, the Whirlpool brand 

has the greatest global reach within its portfolio. 



 

Maytag: The Maytag brand has existed since the early 1900s, and became part of WHR after the 2006 

acquisition. Like Whirlpool, Maytag products largely consist of laundry and kitchen appliances 

designed for the middle market. 



 

KitchenAid: KitchenAid has been a prominent provider of kitchen appliances and products since the 

early 1900s. The company was acquired by WHR in 1986, and provides a diverse range of appliances 

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