WEBVTT - Whirlpool CEO on State of Manufacturing

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<v Speaker 1>This is Bloomberg Business Week with Carol Messer from Bloomberg Radio.

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<v Speaker 1>Whirlpool reported earnings after the close on Wednesday, the stock

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<v Speaker 1>initially rallying then ending a little bit lower on Thursday,

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<v Speaker 1>but the stock is up as I just mentioned in

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<v Speaker 1>today's session, UM A great company to talk to, especially

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<v Speaker 1>mid the pandemic. Joining us right now is Whirlpool chairman

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<v Speaker 1>and CEO Mark bits Or. He's on the phone invent

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<v Speaker 1>at Harvard Michigan. Mark, delighted to have you here with

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<v Speaker 1>Paul and myself. Welcome, Well, thanks for having me on

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<v Speaker 1>the show. Karen and Paul, Mark, talk to us a

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<v Speaker 1>little bit about First of all, I want to take

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<v Speaker 1>a little bit of a step back and a look back.

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<v Speaker 1>Tell us what your world has been like as a

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<v Speaker 1>leader of a major company going back to March, and

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<v Speaker 1>then we can kind of contrast it with where we

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<v Speaker 1>are today. What was it like back in March, Carol,

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<v Speaker 1>that's an interesting question because it feels like like the

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<v Speaker 1>years away. Fair. I agree the memory. So you know,

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<v Speaker 1>I think we're a little bit in different positions than

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<v Speaker 1>most other domestic companies because we have a pretty big

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<v Speaker 1>time operation which actually happened to be fifty miles away

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<v Speaker 1>from Wuhan, and we have our European headquarters in northern Italy.

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<v Speaker 1>So you remember, you know, when when you first had

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<v Speaker 1>a China message. Initially it felt like China contained and

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<v Speaker 1>we were worried about manufacturing supply for China. But then

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<v Speaker 1>a really decisive element was when um our president of

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<v Speaker 1>a European business, called me over weekend and said, there

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<v Speaker 1>are a couple of cases in the Lombardy. And that's

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<v Speaker 1>that's kind of when you realize business big. Um. So

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<v Speaker 1>again it feels like it really this memory, but I

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<v Speaker 1>think that's what when everything for us changed and we

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<v Speaker 1>were kind of by mid March, you realize everything which

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<v Speaker 1>we thought about twenty twenty will just be upside down

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<v Speaker 1>and we don't know how deep a canyon is to

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<v Speaker 1>which we're looking. Ums. That was a pretty dramatic impact.

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<v Speaker 1>And when you kind of keyboards in mind with unfortunate

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<v Speaker 1>COVID didn't come with an instruction for use for management

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<v Speaker 1>rBook right, nobody had somewhat annoying and when you you know,

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<v Speaker 1>you get all these emails from SOLT to tell you

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<v Speaker 1>how to measure crisis. But problem was all right, but

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<v Speaker 1>always six weeks late. So so it was an interesting

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<v Speaker 1>experience because you we's got to improvise, you gotta pull

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<v Speaker 1>the troops together. And of course the first focus was

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<v Speaker 1>entirely but you know, how do we secure health and safety?

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<v Speaker 1>Because you know, we always talked about economic dimension of

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<v Speaker 1>his crisis, but there's a big human dimension, and you know,

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<v Speaker 1>we're all humans with our fears, UM, and you've got

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<v Speaker 1>to manage a big organization with people who have also fears,

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<v Speaker 1>and so managine with health and safety of our people.

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<v Speaker 1>That obviously was the first one UM. But then of

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<v Speaker 1>course you talk about all the business implications and at

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<v Speaker 1>least as the CEO, I was quote quote a milucky

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<v Speaker 1>situation that even a two week to or nine, I

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<v Speaker 1>was the m US and I wasn't running the company,

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<v Speaker 1>but I called it a front seat to what we

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<v Speaker 1>experienced back then. So you you took take some lessons

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<v Speaker 1>from back then, and UM, of course first focus was

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<v Speaker 1>how do we secure liquidity because we don't know how

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<v Speaker 1>bad this is going to be UM, And then you

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<v Speaker 1>start taking all the decisions UM. So it was pretty

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<v Speaker 1>much a rolling up with leaves event back when in

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<v Speaker 1>March and April. Yeah, so Mark give us a sense

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<v Speaker 1>of kind of where you are now, how is your

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<v Speaker 1>business change? What are the big issues you're focusing on

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<v Speaker 1>right now? You know, Paul, I mean it's first of all,

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<v Speaker 1>I never heard you earlier talking about visibility. Um, you

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<v Speaker 1>know back when in April or March and we had

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<v Speaker 1>visibility for a week. Um. I know it sounds silly,

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<v Speaker 1>but you had a visibility for a week, and you

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<v Speaker 1>just don't know what when as Q two evolved, you

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<v Speaker 1>had a visibility for maybe a couple of weeks or months.

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<v Speaker 1>By now we see three months, maybe four months, which

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<v Speaker 1>is unusual, but at least you see a little bit longer,

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<v Speaker 1>so you see a little bit more from perspective. The

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<v Speaker 1>way I look at it right now, from our business

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<v Speaker 1>and our industry is kind of and and assuming out

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<v Speaker 1>the littit. As you all know, there was a lot

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<v Speaker 1>of talk initially about it is it's going to be

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<v Speaker 1>a U shape recovery of V shape or W shape

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<v Speaker 1>or whatever shape. And by now I think most people

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<v Speaker 1>realize that's increasingly in a real and discussion because what

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<v Speaker 1>matters is in which cycle is your industry? Um? Because

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<v Speaker 1>everything every industry goes for a different cycling, you know,

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<v Speaker 1>Initially it felt like our industry is the Corona loser,

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<v Speaker 1>but now I think it now immediately immediately becomes more

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<v Speaker 1>and more apparent we're a long term maybe Corona winner.

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<v Speaker 1>And what I mean with that is it's a simple fact.

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<v Speaker 1>Our business is in the home. It's about improving life

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<v Speaker 1>at homes. It's about washers, dishwashers, and ovens. People are

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<v Speaker 1>spending time at home and what we see now increasingly,

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<v Speaker 1>that's where were now more and I'm again I'm leaving

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<v Speaker 1>the human side of it a way, which is still

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<v Speaker 1>a big issue, but from business side, we're more and

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<v Speaker 1>more opportunity side of his Corona cycle. And that good news.

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<v Speaker 1>Because people are spending time at home, we're investing in

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<v Speaker 1>the nest as we call it, and very you know,

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<v Speaker 1>just think about yourself. Do you know a single friend

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<v Speaker 1>of a neighbor who didn't paint some room in the

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<v Speaker 1>house or didn't buy something new. Everybody's improving the house

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<v Speaker 1>and it's not it's more than just kind of a

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<v Speaker 1>short term improvement. People are rethinking the purpose of the

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<v Speaker 1>home and that play is in our favor. Yeah, you know,

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<v Speaker 1>when did you realize that that was starting to happen?

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<v Speaker 1>Because you know, it's really fascinating I think, and I

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<v Speaker 1>don't know if Paul you concur with this, but like

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<v Speaker 1>as journalists, because I think initially everybody was afraid to

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<v Speaker 1>talk about the pandemic and the impact and not having visibility.

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<v Speaker 1>And then all of a sudden, we started to see

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<v Speaker 1>different companies. You know, of course, nobody wished the health

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<v Speaker 1>crisis on anybody, but whether it was Netflix or some others,

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<v Speaker 1>you know that we're benefiting because of the crisis. And

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<v Speaker 1>all of a sudden you started to see the numbers

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<v Speaker 1>and you're like, oh, yeah, I thought everybody was going

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<v Speaker 1>to lose in this crisis and that wasn't the case.

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<v Speaker 1>When did you guys start to see that in your numbers? Yeah,

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<v Speaker 1>I mean, and it's tough to pinpoint exactly when we

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<v Speaker 1>got but I think it became apparent pretty much around

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<v Speaker 1>the summer period. First of all, I gotta step back

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<v Speaker 1>a little bit. It's and and we're certainly not the

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<v Speaker 1>health experts and are probably already enough self declared health

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<v Speaker 1>of experts around here, but it's but you know, it

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<v Speaker 1>became pretty apparent in April May. But despite all the talk,

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<v Speaker 1>we have to learn to live with this crisis and

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<v Speaker 1>a coronavirus, and it's not going to go away short term.

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<v Speaker 1>And that's when we also realize that will change for

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<v Speaker 1>consumer behavior and the way we look at it right now,

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<v Speaker 1>you know, it's UM hopefully with corona, christs at one

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<v Speaker 1>point will be behind us. I don't think the consumer

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<v Speaker 1>behavior will go back or normal because think about it,

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<v Speaker 1>you know, most consumers are not most, but many consumers

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<v Speaker 1>will by the time this is over, probably have spent

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<v Speaker 1>more or less a year at home UM. You don't

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<v Speaker 1>erase a year of consumer behavior from my memory. It's

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<v Speaker 1>not a flash memory that will stay. People will invest

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<v Speaker 1>in the home UM and that's becomes it just becomes

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<v Speaker 1>every month more parents and we see as in our

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<v Speaker 1>own business. You know, the initial demand was a lot

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<v Speaker 1>what we call crisis appliances, you know, the freezer, of

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<v Speaker 1>the microwaves or the rest products which just you know,

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<v Speaker 1>broke down because they ever have been used certa intensively.

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<v Speaker 1>But we now see more and more people spending money

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<v Speaker 1>and it goes more and more to big ticket items

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<v Speaker 1>like what you know, I'm you're talking about the higher

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<v Speaker 1>and fridges or you talk about the higher and others.

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<v Speaker 1>People are really investing. It's not just with the rest

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<v Speaker 1>and the crisis. They're investing and they're upgrading UM because

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<v Speaker 1>they all see, Okay, I got to spend a lot

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<v Speaker 1>more time at home going forward. I don't think certain

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<v Speaker 1>behaviors like you know we you know, we have statistic

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<v Speaker 1>fifty of the people even now they've they spend significantly

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<v Speaker 1>more time in the kitchen and cooking men ever before

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<v Speaker 1>that will no go that will not go back to zero.

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<v Speaker 1>It will not UM and I think that again place

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<v Speaker 1>in our favor. Hey, Mark, you initially mentioned something about

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<v Speaker 1>the supply chain and the shock there give us a

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<v Speaker 1>sense of how your supply chain is looking now. UM

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<v Speaker 1>in short Port, we still supply chain constraint. Now, let

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<v Speaker 1>me expand a little bit more on this one. You know,

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<v Speaker 1>we early in miscr issis you know, remember around springtime

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<v Speaker 1>and people expectlating, well is it over by easter and

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<v Speaker 1>a lot of industrial companies shut down the factories. We

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<v Speaker 1>didn't not shut down the factories UM, which was a

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<v Speaker 1>little bit bold decision, but I'm glad we did UM,

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<v Speaker 1>which on the other hand, was very demanding. Now people

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<v Speaker 1>because we asked them to come to work where a

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<v Speaker 1>lot of people very extremely uncertain and nervous. Having said that,

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<v Speaker 1>it gave us a lot of lead time to learn

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<v Speaker 1>how we can reasonably safe produce and have an environment

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<v Speaker 1>in the factories which kind of maximize the health and

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<v Speaker 1>safety of our people. Because in a big industrial factory,

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<v Speaker 1>and keep in mind, if you would go to one

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<v Speaker 1>of our factors, some of them are a mile long.

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<v Speaker 1>These are not kind of more buildings. We are massive,

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<v Speaker 1>big factories where steel comes in and the washer comes

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<v Speaker 1>out in the every side. So you're trying to get

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<v Speaker 1>that in a safe environment, you know. And these again

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<v Speaker 1>these are industrial complex with two or three thousand employees

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<v Speaker 1>in one factory, so you have line distancing, mask wearing, sanitilization,

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<v Speaker 1>temperature check. Um. It's a massive effort. And and the

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<v Speaker 1>fact that we started that early allowed us at least

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<v Speaker 1>to get much faster in producing reasonably safe. Now having

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<v Speaker 1>said that, today fast forward, you know, the fact is

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<v Speaker 1>if you have a if you try to keep a

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<v Speaker 1>factory safe, you will not get it to the same

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<v Speaker 1>yield as pre COVID because you have to reduce the

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<v Speaker 1>paces of speed on the line. Because you have to

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<v Speaker 1>have a social social distancing, you will have disruptions with components,

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<v Speaker 1>you have challenged logistics, so no matter how hard you work,

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<v Speaker 1>you will not get it to the exactly the same

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<v Speaker 1>output as pre COVID. And that's why our supply chain

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<v Speaker 1>today UM is constrained. I mean, if we're not fully

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<v Speaker 1>able to keep up with demand, which I know from

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<v Speaker 1>financial perspective would say that's a good problem to have. True,

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<v Speaker 1>But of course on yourr hand, we're frustrated of letting

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<v Speaker 1>consumers down and having them waited six weeks for a product.

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<v Speaker 1>So Mark, if since you anticipate that, as you said,

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<v Speaker 1>you know you can't erase it your consumer behavior from memory,

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<v Speaker 1>and I agree with you. I think I'm rethinking my

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<v Speaker 1>expenditures going forward, even when things get back to normal.

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<v Speaker 1>You know, it's very easy, especially in a city like

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<v Speaker 1>New York. You can just kind of money just kind

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<v Speaker 1>of falls out of your pockets, you know, But you

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<v Speaker 1>can kind of rethink your focus if you think that

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<v Speaker 1>consumers will continue to focus on their homes and spend

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<v Speaker 1>what kind of capital expenditures do you need to potentially

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<v Speaker 1>do to meet that expected greater demand or can you

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<v Speaker 1>do it under existing facilities? UM Let's obviously under normal circumstances,

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<v Speaker 1>we could do it on the oisting network. But again,

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<v Speaker 1>as long as COVID is around us, and you put

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<v Speaker 1>you give me whatever and did you think it is.

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<v Speaker 1>But you know, as long as it's around us, it

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<v Speaker 1>will be somewhat constraints and you will have on and

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<v Speaker 1>off and you will have to supply who has some

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<v Speaker 1>challenges because they had to shut down the factory whatever else.

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<v Speaker 1>So as long as be around us, we're constrained. Having

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<v Speaker 1>said that, um carol, because we are increasingly confident about

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<v Speaker 1>the long term prospect of what it all means for

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<v Speaker 1>home and house anything home and house related, we are

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<v Speaker 1>starting to actually dial up our capital investments often capacity

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<v Speaker 1>in North America. You are does that mean okay, wait

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<v Speaker 1>wait Paul, and I just perked up because you just

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<v Speaker 1>actually been said, are they moving manufacturing back to the US?

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<v Speaker 1>Are you well, we've never left. Okay. When I sometimes

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<v Speaker 1>hear people apologize, yeah, that's right now. I'm not accusing though.

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<v Speaker 1>I mean it's funny because you know it's we eighty

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<v Speaker 1>two percent of what we sell in the US is

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<v Speaker 1>produced in US, and we're one of a few companies.

0:11:38.800 --> 0:11:40.880
<v Speaker 1>So when I hear people what we bring jobs back,

0:11:40.920 --> 0:11:44.800
<v Speaker 1>but we never left. Yeah, yeah, we we were right

0:11:44.800 --> 0:11:47.160
<v Speaker 1>Now we're hiring because you know, we were running some

0:11:47.200 --> 0:11:50.959
<v Speaker 1>factories free shifts, So we're hiring on the factories now.

0:11:50.960 --> 0:11:54.120
<v Speaker 1>But real to your real point is and and maybe

0:11:54.160 --> 0:11:56.719
<v Speaker 1>we're an early indicator, but you know, we were reluctant

0:11:57.040 --> 0:12:01.079
<v Speaker 1>so far to add capital on capacity city or for

0:12:01.080 --> 0:12:04.920
<v Speaker 1>for capacity. I think we're now increasingly getting closer to

0:12:05.679 --> 0:12:08.920
<v Speaker 1>we will invest to expand capacity in ath America and

0:12:09.040 --> 0:12:18.599
<v Speaker 1>US obviously, so kind will happen soon. Well you know

0:12:18.640 --> 0:12:20.400
<v Speaker 1>what I mean, And it's we're obviously right now. I'm

0:12:20.400 --> 0:12:22.680
<v Speaker 1>planning for twenty one. But you know, you know it's

0:12:22.720 --> 0:12:25.079
<v Speaker 1>not one big decision where like ten small decisions, a

0:12:25.120 --> 0:12:27.680
<v Speaker 1>couple of ones we already took because you know, again

0:12:28.160 --> 0:12:31.120
<v Speaker 1>some demand elements I don't think we'll go away. And

0:12:31.200 --> 0:12:33.280
<v Speaker 1>you know you also have a broader context. Care is

0:12:33.960 --> 0:12:37.480
<v Speaker 1>the US housing. Um you know, we were already bullish

0:12:37.520 --> 0:12:41.520
<v Speaker 1>about US housing pre COVID now because with demographic trends,

0:12:41.520 --> 0:12:45.200
<v Speaker 1>there's a pent up household formation. Housing market has been

0:12:45.240 --> 0:12:48.280
<v Speaker 1>undersupplied for decades. And on top of that, the ether

0:12:48.360 --> 0:12:51.880
<v Speaker 1>side is there is disposable income as human people are

0:12:51.920 --> 0:12:54.360
<v Speaker 1>not spending money on restaurants, and I feel sort for restaurants,

0:12:54.360 --> 0:12:57.199
<v Speaker 1>but we're not spending money on outdoor dining or indoor dining.

0:12:57.400 --> 0:13:00.160
<v Speaker 1>We're not going on travel. There's money available and on

0:13:00.200 --> 0:13:03.360
<v Speaker 1>top of that low financing, so the housing will be

0:13:04.640 --> 0:13:07.800
<v Speaker 1>and all of you very robust for a couple of years. Hey, Mark,

0:13:07.960 --> 0:13:09.559
<v Speaker 1>talk to us about your balance sheet here. We saw

0:13:09.559 --> 0:13:11.880
<v Speaker 1>a lot of companies early on in the pandemic really

0:13:12.400 --> 0:13:14.120
<v Speaker 1>rushed to the market to shore up their balance sheet.

0:13:14.160 --> 0:13:16.600
<v Speaker 1>How's you're just looking right now? Um, actually, right now,

0:13:16.640 --> 0:13:18.960
<v Speaker 1>it's in a very good shape. Now let me expand

0:13:19.000 --> 0:13:22.320
<v Speaker 1>on business Pom. You know, it's it's it's. It's also

0:13:22.320 --> 0:13:24.640
<v Speaker 1>funny because you asked earlier about the outset of his crisis,

0:13:24.640 --> 0:13:27.200
<v Speaker 1>which by now we've all forgotten. You know, people were

0:13:27.200 --> 0:13:29.319
<v Speaker 1>referring to, well, COVID is a black Swan event. We

0:13:29.320 --> 0:13:33.640
<v Speaker 1>couldn't prepare for it. Through having said that, the possibility

0:13:33.679 --> 0:13:36.760
<v Speaker 1>of a downturn or blip or recession, recession was there

0:13:36.800 --> 0:13:38.800
<v Speaker 1>already at the beginning of a year. I mean, people

0:13:38.840 --> 0:13:40.600
<v Speaker 1>knew at the one point there will be a correction.

0:13:41.200 --> 0:13:45.040
<v Speaker 1>So we started bringing our bound sheep in shape. Over

0:13:45.080 --> 0:13:47.960
<v Speaker 1>the last one or two years. Um, we did not already,

0:13:48.000 --> 0:13:51.319
<v Speaker 1>so we entered the crisis already in a pretty good fashion.

0:13:51.920 --> 0:13:54.000
<v Speaker 1>And then what we did on top of that immediately

0:13:54.000 --> 0:13:56.080
<v Speaker 1>when we saw this happening, because we saw what happened

0:13:56.080 --> 0:13:59.280
<v Speaker 1>on commercial paper marketing too, eight, we immediately went out

0:13:59.360 --> 0:14:01.760
<v Speaker 1>for some short, some boring toches to to have a

0:14:01.800 --> 0:14:05.960
<v Speaker 1>buffer for whatever happens. Um. Now fast forward we have

0:14:06.080 --> 0:14:08.000
<v Speaker 1>right now because business is going very well. We have

0:14:08.000 --> 0:14:10.520
<v Speaker 1>a very strong cash flow with three to have build

0:14:10.520 --> 0:14:12.880
<v Speaker 1>in cash on our bounty then September, so we're now

0:14:13.000 --> 0:14:15.560
<v Speaker 1>pinged down the short term debt which we took on

0:14:15.679 --> 0:14:17.959
<v Speaker 1>just as an insurance. Um. So we're a year and

0:14:18.040 --> 0:14:20.040
<v Speaker 1>we will be out of a short term COVID debt

0:14:20.720 --> 0:14:24.040
<v Speaker 1>and we will be in a very strong bounty position.

0:14:24.040 --> 0:14:26.160
<v Speaker 1>And that's a good position to be in. Yeah, totally.

0:14:26.200 --> 0:14:28.600
<v Speaker 1>Hey just saved about forty seconds here, Mark, what's the

0:14:28.600 --> 0:14:31.360
<v Speaker 1>cool next thing? And appliances? And I unfortunately have to

0:14:31.400 --> 0:14:35.200
<v Speaker 1>ask you to be quick, Karl, I need moment, so

0:14:35.320 --> 0:14:37.720
<v Speaker 1>then you'll have to do advertising. You will have to

0:14:37.840 --> 0:14:40.920
<v Speaker 1>come back, You will have to come back. Now there's

0:14:40.920 --> 0:14:43.440
<v Speaker 1>a there's a whole new dishwasher language. We just launched

0:14:43.480 --> 0:14:46.080
<v Speaker 1>there's a new top loader coming out, and of course

0:14:46.200 --> 0:14:49.080
<v Speaker 1>it's Christmas Bible's kitchen instand mixers, all right. I just

0:14:49.080 --> 0:14:51.200
<v Speaker 1>don't know if there's a dishwasher that actually teaches my

0:14:51.240 --> 0:14:55.320
<v Speaker 1>seventeen year old how to actually load it, and say,

0:14:55.360 --> 0:14:58.200
<v Speaker 1>how are you as an engineer. I'm the daughter of

0:14:58.200 --> 0:15:01.160
<v Speaker 1>an engineer that might just work. Mark, what a treat

0:15:01.320 --> 0:15:03.040
<v Speaker 1>um And I do hope you'll come back. Good luck

0:15:03.160 --> 0:15:05.320
<v Speaker 1>and uh, it was just great to check in with

0:15:05.320 --> 0:15:08.000
<v Speaker 1>your Mark. Bits are Chief executive Officer Whirlpool on the

0:15:08.040 --> 0:15:10.520
<v Speaker 1>phone from Benton, Harvard, Michigan. I told you earlier we

0:15:10.560 --> 0:15:12.640
<v Speaker 1>tried to get a stove out of beach house and

0:15:12.680 --> 0:15:14.320
<v Speaker 1>we couldn't get it over the summer. They're like, there

0:15:14.360 --> 0:15:17.880
<v Speaker 1>are no appliances availables. That's just amazing that that's the

0:15:17.880 --> 0:15:21.240
<v Speaker 1>supply chain. That that's exactly that's exactly it. Yeah, totally