Moody’s Investor Service on Thursday (Jan. 22) downgraded the credit rating of Whirlpool Corp. do Baa3.
The Baa3 rating often is given during times of economic distress, and suggests that problems may arise within the company’s business model. The rating is one step above a speculative, or junk, rating.
In the downgrade note, Moody’s said Whirlpool’s operating performance will come under more pressure in 2009 with the continued “severe contraction” in discretionary consumer spending.
“While Moody’s expects that Whirlpool’s free cash flow will likely improve in 2009 due to working capital benefits, the sustainability of such improvements may come under pressure after 2009 if discretionary consumer spending continues to deteriorate,” said Kevin Cassidy, senior credit officer at Moody’s Investors Service, in the statement.
Citing changes to its manufacturing operations and the downturn in the housing sector, Whirlpool has reduced employment at its Fort Smith plant from about 4,500 in early 2006 to between 1,500-1,000 today. The Whirlpool reduction have resulted in numerous job cuts and plant closures in the region, including the closing of the Jarden Plastics plant in Fort Smith, and the layoff of more than 70 from Fortis Plastics (formerly known as Atlantis Plastics).
“We”re not commenting on actions taken by the rating agencies, except to say that given the current state of the industry, the downgrades are not surprising. We have no new announcements regarding the Fort Smith facility,” Jill Saletta, director of external communications for Whirlpool, noted in an e-mail response to The City Wire.
Moody’s said Whirlpool will “maintain a good liquidity profile over the next year” because the company will take “aggressive actions” to retain cash, including “possibly initiating additional restructuring programs.”
Restructuring programs usually include closing plants and/or moving production. Such action could result in production being moved into the ever-increasing unused space at Whirlpool’s Fort Smith plant. Or, it could result in the remaining production in Fort Smith being moved elsewhere.