Speaker 1: This is Bloomberg Business Week with Carol Messer from Bloomberg Radio.
Speaker 1: Whirlpool reported earnings after the close on Wednesday, the stock
Speaker 1: initially rallying then ending a little bit lower on Thursday,
Speaker 1: but the stock is up as I just mentioned in
Speaker 1: today's session, UM A great company to talk to, especially
Speaker 1: mid the pandemic. Joining us right now is Whirlpool chairman
Speaker 1: and CEO Mark bits Or. He's on the phone invent
Speaker 1: at Harvard Michigan. Mark, delighted to have you here with
Speaker 1: Paul and myself. Welcome, Well, thanks for having me on
Speaker 1: the show. Karen and Paul, Mark, talk to us a
Speaker 1: little bit about First of all, I want to take
Speaker 1: a little bit of a step back and a look back.
Speaker 1: Tell us what your world has been like as a
Speaker 1: leader of a major company going back to March, and
Speaker 1: then we can kind of contrast it with where we
Speaker 1: are today. What was it like back in March, Carol,
Speaker 1: that's an interesting question because it feels like like the
Speaker 1: years away. Fair. I agree the memory. So you know,
Speaker 1: I think we're a little bit in different positions than
Speaker 1: most other domestic companies because we have a pretty big
Speaker 1: time operation which actually happened to be fifty miles away
Speaker 1: from Wuhan, and we have our European headquarters in northern Italy.
Speaker 1: So you remember, you know, when when you first had
Speaker 1: a China message. Initially it felt like China contained and
Speaker 1: we were worried about manufacturing supply for China. But then
Speaker 1: a really decisive element was when um our president of
Speaker 1: a European business, called me over weekend and said, there
Speaker 1: are a couple of cases in the Lombardy. And that's
Speaker 1: that's kind of when you realize business big. Um. So
Speaker 1: again it feels like it really this memory, but I
Speaker 1: think that's what when everything for us changed and we
Speaker 1: were kind of by mid March, you realize everything which
Speaker 1: we thought about twenty twenty will just be upside down
Speaker 1: and we don't know how deep a canyon is to
Speaker 1: which we're looking. Ums. That was a pretty dramatic impact.
Speaker 1: And when you kind of keyboards in mind with unfortunate
Speaker 1: COVID didn't come with an instruction for use for management
Speaker 1: rBook right, nobody had somewhat annoying and when you you know,
Speaker 1: you get all these emails from SOLT to tell you
Speaker 1: how to measure crisis. But problem was all right, but
Speaker 1: always six weeks late. So so it was an interesting
Speaker 1: experience because you we's got to improvise, you gotta pull
Speaker 1: the troops together. And of course the first focus was
Speaker 1: entirely but you know, how do we secure health and safety?
Speaker 1: Because you know, we always talked about economic dimension of
Speaker 1: his crisis, but there's a big human dimension, and you know,
Speaker 1: we're all humans with our fears, UM, and you've got
Speaker 1: to manage a big organization with people who have also fears,
Speaker 1: and so managine with health and safety of our people.
Speaker 1: That obviously was the first one UM. But then of
Speaker 1: course you talk about all the business implications and at
Speaker 1: least as the CEO, I was quote quote a milucky
Speaker 1: situation that even a two week to or nine, I
Speaker 1: was the m US and I wasn't running the company,
Speaker 1: but I called it a front seat to what we
Speaker 1: experienced back then. So you you took take some lessons
Speaker 1: from back then, and UM, of course first focus was
Speaker 1: how do we secure liquidity because we don't know how
Speaker 1: bad this is going to be UM, And then you
Speaker 1: start taking all the decisions UM. So it was pretty
Speaker 1: much a rolling up with leaves event back when in
Speaker 1: March and April. Yeah, so Mark give us a sense
Speaker 1: of kind of where you are now, how is your
Speaker 1: business change? What are the big issues you're focusing on
Speaker 1: right now? You know, Paul, I mean it's first of all,
Speaker 1: I never heard you earlier talking about visibility. Um, you
Speaker 1: know back when in April or March and we had
Speaker 1: visibility for a week. Um. I know it sounds silly,
Speaker 1: but you had a visibility for a week, and you
Speaker 1: just don't know what when as Q two evolved, you
Speaker 1: had a visibility for maybe a couple of weeks or months.
Speaker 1: By now we see three months, maybe four months, which
Speaker 1: is unusual, but at least you see a little bit longer,
Speaker 1: so you see a little bit more from perspective. The
Speaker 1: way I look at it right now, from our business
Speaker 1: and our industry is kind of and and assuming out
Speaker 1: the littit. As you all know, there was a lot
Speaker 1: of talk initially about it is it's going to be
Speaker 1: a U shape recovery of V shape or W shape
Speaker 1: or whatever shape. And by now I think most people
Speaker 1: realize that's increasingly in a real and discussion because what
Speaker 1: matters is in which cycle is your industry? Um? Because
Speaker 1: everything every industry goes for a different cycling, you know,
Speaker 1: Initially it felt like our industry is the Corona loser,
Speaker 1: but now I think it now immediately immediately becomes more
Speaker 1: and more apparent we're a long term maybe Corona winner.
Speaker 1: And what I mean with that is it's a simple fact.
Speaker 1: Our business is in the home. It's about improving life
Speaker 1: at homes. It's about washers, dishwashers, and ovens. People are
Speaker 1: spending time at home and what we see now increasingly,
Speaker 1: that's where were now more and I'm again I'm leaving
Speaker 1: the human side of it a way, which is still
Speaker 1: a big issue, but from business side, we're more and
Speaker 1: more opportunity side of his Corona cycle. And that good news.
Speaker 1: Because people are spending time at home, we're investing in
Speaker 1: the nest as we call it, and very you know,
Speaker 1: just think about yourself. Do you know a single friend
Speaker 1: of a neighbor who didn't paint some room in the
Speaker 1: house or didn't buy something new. Everybody's improving the house
Speaker 1: and it's not it's more than just kind of a
Speaker 1: short term improvement. People are rethinking the purpose of the
Speaker 1: home and that play is in our favor. Yeah, you know,
Speaker 1: when did you realize that that was starting to happen?
Speaker 1: Because you know, it's really fascinating I think, and I
Speaker 1: don't know if Paul you concur with this, but like
Speaker 1: as journalists, because I think initially everybody was afraid to
Speaker 1: talk about the pandemic and the impact and not having visibility.
Speaker 1: And then all of a sudden, we started to see
Speaker 1: different companies. You know, of course, nobody wished the health
Speaker 1: crisis on anybody, but whether it was Netflix or some others,
Speaker 1: you know that we're benefiting because of the crisis. And
Speaker 1: all of a sudden you started to see the numbers
Speaker 1: and you're like, oh, yeah, I thought everybody was going
Speaker 1: to lose in this crisis and that wasn't the case.
Speaker 1: When did you guys start to see that in your numbers? Yeah,
Speaker 1: I mean, and it's tough to pinpoint exactly when we
Speaker 1: got but I think it became apparent pretty much around
Speaker 1: the summer period. First of all, I gotta step back
Speaker 1: a little bit. It's and and we're certainly not the
Speaker 1: health experts and are probably already enough self declared health
Speaker 1: of experts around here, but it's but you know, it
Speaker 1: became pretty apparent in April May. But despite all the talk,
Speaker 1: we have to learn to live with this crisis and
Speaker 1: a coronavirus, and it's not going to go away short term.
Speaker 1: And that's when we also realize that will change for
Speaker 1: consumer behavior and the way we look at it right now,
Speaker 1: you know, it's UM hopefully with corona, christs at one
Speaker 1: point will be behind us. I don't think the consumer
Speaker 1: behavior will go back or normal because think about it,
Speaker 1: you know, most consumers are not most, but many consumers
Speaker 1: will by the time this is over, probably have spent
Speaker 1: more or less a year at home UM. You don't
Speaker 1: erase a year of consumer behavior from my memory. It's
Speaker 1: not a flash memory that will stay. People will invest
Speaker 1: in the home UM and that's becomes it just becomes
Speaker 1: every month more parents and we see as in our
Speaker 1: own business. You know, the initial demand was a lot
Speaker 1: what we call crisis appliances, you know, the freezer, of
Speaker 1: the microwaves or the rest products which just you know,
Speaker 1: broke down because they ever have been used certa intensively.
Speaker 1: But we now see more and more people spending money
Speaker 1: and it goes more and more to big ticket items
Speaker 1: like what you know, I'm you're talking about the higher
Speaker 1: and fridges or you talk about the higher and others.
Speaker 1: People are really investing. It's not just with the rest
Speaker 1: and the crisis. They're investing and they're upgrading UM because
Speaker 1: they all see, Okay, I got to spend a lot
Speaker 1: more time at home going forward. I don't think certain
Speaker 1: behaviors like you know we you know, we have statistic
Speaker 1: fifty of the people even now they've they spend significantly
Speaker 1: more time in the kitchen and cooking men ever before
Speaker 1: that will no go that will not go back to zero.
Speaker 1: It will not UM and I think that again place
Speaker 1: in our favor. Hey, Mark, you initially mentioned something about
Speaker 1: the supply chain and the shock there give us a
Speaker 1: sense of how your supply chain is looking now. UM
Speaker 1: in short Port, we still supply chain constraint. Now, let
Speaker 1: me expand a little bit more on this one. You know,
Speaker 1: we early in miscr issis you know, remember around springtime
Speaker 1: and people expectlating, well is it over by easter and
Speaker 1: a lot of industrial companies shut down the factories. We
Speaker 1: didn't not shut down the factories UM, which was a
Speaker 1: little bit bold decision, but I'm glad we did UM,
Speaker 1: which on the other hand, was very demanding. Now people
Speaker 1: because we asked them to come to work where a
Speaker 1: lot of people very extremely uncertain and nervous. Having said that,
Speaker 1: it gave us a lot of lead time to learn
Speaker 1: how we can reasonably safe produce and have an environment
Speaker 1: in the factories which kind of maximize the health and
Speaker 1: safety of our people. Because in a big industrial factory,
Speaker 1: and keep in mind, if you would go to one
Speaker 1: of our factors, some of them are a mile long.
Speaker 1: These are not kind of more buildings. We are massive,
Speaker 1: big factories where steel comes in and the washer comes
Speaker 1: out in the every side. So you're trying to get
Speaker 1: that in a safe environment, you know. And these again
Speaker 1: these are industrial complex with two or three thousand employees
Speaker 1: in one factory, so you have line distancing, mask wearing, sanitilization,
Speaker 1: temperature check. Um. It's a massive effort. And and the
Speaker 1: fact that we started that early allowed us at least
Speaker 1: to get much faster in producing reasonably safe. Now having
Speaker 1: said that, today fast forward, you know, the fact is
Speaker 1: if you have a if you try to keep a
Speaker 1: factory safe, you will not get it to the same
Speaker 1: yield as pre COVID because you have to reduce the
Speaker 1: paces of speed on the line. Because you have to
Speaker 1: have a social social distancing, you will have disruptions with components,
Speaker 1: you have challenged logistics, so no matter how hard you work,
Speaker 1: you will not get it to the exactly the same
Speaker 1: output as pre COVID. And that's why our supply chain
Speaker 1: today UM is constrained. I mean, if we're not fully
Speaker 1: able to keep up with demand, which I know from
Speaker 1: financial perspective would say that's a good problem to have. True,
Speaker 1: But of course on yourr hand, we're frustrated of letting
Speaker 1: consumers down and having them waited six weeks for a product.
Speaker 1: So Mark, if since you anticipate that, as you said,
Speaker 1: you know you can't erase it your consumer behavior from memory,
Speaker 1: and I agree with you. I think I'm rethinking my
Speaker 1: expenditures going forward, even when things get back to normal.
Speaker 1: You know, it's very easy, especially in a city like
Speaker 1: New York. You can just kind of money just kind
Speaker 1: of falls out of your pockets, you know, But you
Speaker 1: can kind of rethink your focus if you think that
Speaker 1: consumers will continue to focus on their homes and spend
Speaker 1: what kind of capital expenditures do you need to potentially
Speaker 1: do to meet that expected greater demand or can you
Speaker 1: do it under existing facilities? UM Let's obviously under normal circumstances,
Speaker 1: we could do it on the oisting network. But again,
Speaker 1: as long as COVID is around us, and you put
Speaker 1: you give me whatever and did you think it is.
Speaker 1: But you know, as long as it's around us, it
Speaker 1: will be somewhat constraints and you will have on and
Speaker 1: off and you will have to supply who has some
Speaker 1: challenges because they had to shut down the factory whatever else.
Speaker 1: So as long as be around us, we're constrained. Having
Speaker 1: said that, um carol, because we are increasingly confident about
Speaker 1: the long term prospect of what it all means for
Speaker 1: home and house anything home and house related, we are
Speaker 1: starting to actually dial up our capital investments often capacity
Speaker 1: in North America. You are does that mean okay, wait
Speaker 1: wait Paul, and I just perked up because you just
Speaker 1: actually been said, are they moving manufacturing back to the US?
Speaker 1: Are you well, we've never left. Okay. When I sometimes
Speaker 1: hear people apologize, yeah, that's right now. I'm not accusing though.
Speaker 1: I mean it's funny because you know it's we eighty
Speaker 1: two percent of what we sell in the US is
Speaker 1: produced in US, and we're one of a few companies.
Speaker 1: So when I hear people what we bring jobs back,
Speaker 1: but we never left. Yeah, yeah, we we were right
Speaker 1: Now we're hiring because you know, we were running some
Speaker 1: factories free shifts, So we're hiring on the factories now.
Speaker 1: But real to your real point is and and maybe
Speaker 1: we're an early indicator, but you know, we were reluctant
Speaker 1: so far to add capital on capacity city or for
Speaker 1: for capacity. I think we're now increasingly getting closer to
Speaker 1: we will invest to expand capacity in ath America and
Speaker 1: US obviously, so kind will happen soon. Well you know
Speaker 1: what I mean, And it's we're obviously right now. I'm
Speaker 1: planning for twenty one. But you know, you know it's
Speaker 1: not one big decision where like ten small decisions, a
Speaker 1: couple of ones we already took because you know, again
Speaker 1: some demand elements I don't think we'll go away. And
Speaker 1: you know you also have a broader context. Care is
Speaker 1: the US housing. Um you know, we were already bullish
Speaker 1: about US housing pre COVID now because with demographic trends,
Speaker 1: there's a pent up household formation. Housing market has been
Speaker 1: undersupplied for decades. And on top of that, the ether
Speaker 1: side is there is disposable income as human people are
Speaker 1: not spending money on restaurants, and I feel sort for restaurants,
Speaker 1: but we're not spending money on outdoor dining or indoor dining.
Speaker 1: We're not going on travel. There's money available and on
Speaker 1: top of that low financing, so the housing will be
Speaker 1: and all of you very robust for a couple of years. Hey, Mark,
Speaker 1: talk to us about your balance sheet here. We saw
Speaker 1: a lot of companies early on in the pandemic really
Speaker 1: rushed to the market to shore up their balance sheet.
Speaker 1: How's you're just looking right now? Um, actually, right now,
Speaker 1: it's in a very good shape. Now let me expand
Speaker 1: on business Pom. You know, it's it's it's. It's also
Speaker 1: funny because you asked earlier about the outset of his crisis,
Speaker 1: which by now we've all forgotten. You know, people were
Speaker 1: referring to, well, COVID is a black Swan event. We
Speaker 1: couldn't prepare for it. Through having said that, the possibility
Speaker 1: of a downturn or blip or recession, recession was there
Speaker 1: already at the beginning of a year. I mean, people
Speaker 1: knew at the one point there will be a correction.
Speaker 1: So we started bringing our bound sheep in shape. Over
Speaker 1: the last one or two years. Um, we did not already,
Speaker 1: so we entered the crisis already in a pretty good fashion.
Speaker 1: And then what we did on top of that immediately
Speaker 1: when we saw this happening, because we saw what happened
Speaker 1: on commercial paper marketing too, eight, we immediately went out
Speaker 1: for some short, some boring toches to to have a
Speaker 1: buffer for whatever happens. Um. Now fast forward we have
Speaker 1: right now because business is going very well. We have
Speaker 1: a very strong cash flow with three to have build
Speaker 1: in cash on our bounty then September, so we're now
Speaker 1: pinged down the short term debt which we took on
Speaker 1: just as an insurance. Um. So we're a year and
Speaker 1: we will be out of a short term COVID debt
Speaker 1: and we will be in a very strong bounty position.
Speaker 1: And that's a good position to be in. Yeah, totally.
Speaker 1: Hey just saved about forty seconds here, Mark, what's the
Speaker 1: cool next thing? And appliances? And I unfortunately have to
Speaker 1: ask you to be quick, Karl, I need moment, so
Speaker 1: then you'll have to do advertising. You will have to
Speaker 1: come back, You will have to come back. Now there's
Speaker 1: a there's a whole new dishwasher language. We just launched
Speaker 1: there's a new top loader coming out, and of course
Speaker 1: it's Christmas Bible's kitchen instand mixers, all right. I just
Speaker 1: don't know if there's a dishwasher that actually teaches my
Speaker 1: seventeen year old how to actually load it, and say,
Speaker 1: how are you as an engineer. I'm the daughter of
Speaker 1: an engineer that might just work. Mark, what a treat
Speaker 1: um And I do hope you'll come back. Good luck
Speaker 1: and uh, it was just great to check in with
Speaker 1: your Mark. Bits are Chief executive Officer Whirlpool on the
Speaker 1: phone from Benton, Harvard, Michigan. I told you earlier we
Speaker 1: tried to get a stove out of beach house and
Speaker 1: we couldn't get it over the summer. They're like, there
Speaker 1: are no appliances availables. That's just amazing that that's the
Speaker 1: supply chain. That that's exactly that's exactly it. Yeah, totally