UPDATE: Whirlpool Petitions US For Trade Probe Of Samsung, LG
31 March 2011 - 4:58AM
Dow Jones News
Whirlpool Corp. (WHR) is accusing South Korean rivals Samsung
Electronics Co. (SSNHY, 005930.SE) and LG Electronics Inc.
(066570.SE) of violating trade laws in their marketing of
foreign-built refrigerators in the U.S.
Whirlpool, the world's largest manufacturer of household
appliances, has asked the U.S. Commerce Department to investigate
the two companies, which have been grabbing market share from
Whirlpool and Electrolux AB (ELUXY, ELUX-B.SK) by offering lower
prices on appliances. Whirlpool alleges that the companies are
"dumping" refrigerators in the U.S. from South Korea and Mexico, a
practice that involves selling appliances in the U.S. for much less
than their cost in the overseas markets where they were
manufactured.
"Dumping is an unfair trade practice used to drive out
competitors, which means consumers end up with fewer choices," said
Marc Bitzer, Whirlpool's president for North American operations,
in a written statement.
Whirlpool's complaint specifically cites Samsung and LG's
discounting of high-end refrigerators featuring a pull-out freezer
drawer on the bottom of the box. Bottom-mounted refrigerators are
about $3 billion a year business in North America. Whirlpool's
market share in the category was about 35% in 2008, but had fallen
to below 15% in 2010. Meanwhile, imported bottom-mounted boxes, led
by Samsung and LG, accounted for 84% of the North American market
last year, according to Whirlpool's filing. Neither Samsung nor LG
had any presence in the category a decade ago, said Sam Darkatsh,
an analyst for Raymond James.
Whirlpool, which is based in Benton Harbor, Mich., alleges
Samsung and LG also have received "substantial unfair subsidies"
from the South Korean government that allow the companies to offer
big discounts in the U.S. and maintain an advantage over other
appliance makers. Whirlpool wants the U.S. government to assign a
duty on the companies' imported appliances.
"The fact that this petition has come about should not be a
shocker," Darkatsh said. "There's been a lot of industry chatter
about the fact that the Koreans are not focused on profitability
let alone return on capital. They're trying to buy market
share."
Samsung and LG did not immediately respond to requests for
comments on the complaint.
Samsung has said it's targeting world-wide appliance sales of
about $30 billion a year by 2015, up from more than $10 billion
last year.
Aggressive discounting during the U.S. Christmas shopping season
put pressure on Whirlpool's fourth-quarter profits at a time when
the company is facing rising costs for materials, such as steel and
copper. Whirlpool and Electrolux have said they plan to raise U.S.
appliance prices by between 8% and 10% in April.
"It will be interesting to see how sticky those price increases
will be," Darkatsh said. "Pricing has been very soft and very
promotional since the end of 2009 because the demand hasn't been
there."
Whirlpool's stock was recently trading up 2.3% at $83.44 a
share.
-By Bob Tita, Dow Jones Newswires; 312-750-4129;
robert.tita@dowjones.com
--Nathan Becker contributed to this article.
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