Sales of appliances like washers on a washout cycle
With consumers expected to put fewer big-ticket items under their trees this Christmas, the appliance industry is bracing for a gloomy holiday season . Sales of major appliances - including washers and dryers, dishwashers, ranges , refrigerators, and television sets - began declining in September, industry sources say. Merrill Lynch vice-president Charles K. Ryan expects that appliance sales will be down 10 percent in the last three months of the year.
As a result, industry sales for 1981 will be 32.4 million units, ''up only 2 percent from last year,'' he says.
Meanwhile, the outlook for sales in 1982 will not trigger any holiday mirth, either. They will be ''very heavily weighted to the second half of the year,'' says J. B. Hoyt, forecasting and market analysis manager for Whirlpool Corporation.
Whirlpool is forecasting 1982 industry sales up 5 percent over depressed 1981 levels. ''But that could be subject to some (downward adjustment) as the economic environment continues to unfold,'' Mr. Hoyt says. Merrill Lynch is forecasting ''only a 3 percent'' increase in 1982 sales.
In the face of an unpleasant outlook, appliancemakers are cutting production schedules, laying off workers, and offering customers price incentives to stimulate demand.
General Electric Company, Whirlpool Corporation, White Consolidated Industries Inc., and Magic Chef Inc. have all trimmed production schedules and sent workers to the unemployment line. The most recent layoffs came Nov. 12 when Magic Chef's Norge Division announced plans to lay off at least 20 percent of the 1,350 workers at its Herrin, Ill., plant.
''Manufacturers are trying to balance their current production schedule to keep inventories at reasonable levels in relation to demand,'' says Paul Roman, marketing and economics vice-president for the Association of Home Appliance Manufacturers.
Besides cutting production, producers are trying to stimulate sales by offering rebates. Maytag Co., for example, is offering rebates on its middle-of-the-line washing machines. ''If you come in and buy the right model, the dealer will take $25 off the price or give you a check,'' a Maytag spokesman says.
''It is a characteristic of the market to provide promotional allowances,'' adds White Consolidated treasurer Ronald Fountain. ''It is a way of reducing the cost to the consumer.''
The consumer needs the help. Sindlinger & Co. of Media, Pa., says its consumer surveys show the supply of money available to households fell 6.6 percent the last half of October.
In addition to having less money, consumers are also holding off on appliance purchases because they are anxious about the economy. Interest rate gyrations ''have caused a lot of confusion for consumers,'' says Mr. Hoyt at Whirlpool. Adding to the uncertainty, he says, is the ongoing debate over economic policy.
One result of this uncertainty is that only 11.5 percent of the households Sindlinger & Co. surveyed plan to spend more this Christmas than last. Last year , 34.2 percent of the households planned to boost holiday spending.
Consumer reluctance to make major purchases has not affected all appliance manufacturers equally. The hardest hit have been companies specializing in supplying appliances to builders. Analysts estimate that 40 percent of General Electric's home appliance sales come from new home builders. GE will close five of its six Louisville, Ky., appliance plants in December and has put 1,800 workers on indefinite layoff.
By contrast, builders account for an estimated 20 percent of sales at Magic Chef, 10 percent at Whirlpool, and a negligible amount at Maytag.
''So when housing is tumbling, we are not as heavily affected as some of the others,'' a Maytag spokesman says. While some Maytag employees were laid off earlier this year, none are now on furlough. The firm sells premium-priced goods aimed at the replacement market.
Even though Maytag targets a more affluent market, ''I don't want to give the impression we are doing anything spectacular here,'' the Maytag official says.
Despite the recent sales slump, the industry's long-term prospects appear bright. ''There will be a market for some 200 million appliances'' in the next five years, Mr. Ryan at Merrill Lynch says.
Appliance executives cite several reasons for their bullish forecasts. ''First, housing needs are not being met,'' Mr. Fountain, the White executive, says. When more houses are built, they will need appliances, he reasons. Also, the demand for more time-saving appliances will grow with the increasing number of working women.
Finally, the industry stands to benefit as the large number of appliances made in the early 1970s expire. ''They still break and will have to be replaced, notes Mr. Fountain says. With a reduced number of producers in the industry, that means more concentration of business for the remaining companies, he says.