Whirlpool’s Fort Smith employees told Sears contract ends in 2010

Third on Whirlpool Corp.’s list of 15 “risks, contingencies and uncertainties” is the company’s ability to “continue its relationship with significant trade customers,” including Sears, which accounted for 11% of Whirlpool’s 2008 consolidated net sales of $18.9 billion.

The relationship with Sears is in doubt based on comments made during three employee meetings held Thursday (Feb. 12) at Whirlpool’s Fort Smith plant.

Whirlpool managers, including plant chief Ken Thompson, told Fort Smith employees that 2009 marks the last year of the refrigerator contract with Sears, according to sources who attended meetings between employees and Whirlpool management.

According to the sources, the contract to provide the Kenmore-branded refrigerator to Sears ends in January 2010. (Although Whirlpool did not begin to make refrigerators until 1955, Whirlpool has had a product relationship with Sears that dates back to 1916.)

The sources said it was clear that the lost Sears contract was with all Whirlpool refrigerators and not just those made in Fort Smith.

However, Jill Saletta, director of external communications for Benton Harbor, Mich.-based Whirlpool, said the contract with Sears is secure.

“I am confirming that Whirlpool Corporation absolutely will continue to produce product for Sears in 2010 and beyond, and Sears will continue to sell our products in their stores,” Saletta noted in a response to The City Wire. “The details of our relationships with all trade customers are confidential, so I am not able to provide any further comment on the subject.”

Whirlpool makes several products for Sears in addition to refrigerators.

The loss of the refrigerator contract would be a blow to Whirlpool, a global appliance manufacturer that saw its North American segment shipments decline by 10% in 2008.

Whirlpool’s North America segment — to which the company’s Fort Smith plant belongs — saw fourth-quarter sales of $2.5 billion, down 18% from the prior year. U.S. industry unit shipments of major appliances declined approximately 10%. Based on current economic conditions, the company expects full-year 2009 U.S. industry unit shipments to decline approximately 10 percent from 2008. The downturn in product sales is noted by the company as a key reason it has reduced employment at its Fort Smith plant from about 4,500 in early 2006 to about 1,340 today.

Whirlpool employees also were told Thursday that the expected production decline related to the loss of the Sears contract will not necessarily result in layoffs. Instead, it is hoped a “normal attrition” rate of 5% to 10% will keep employee levels at the appropriate level for production.

However, to keep pace with lowered demand resulting from the downturn in the national housing sector, the employees were told to expect production cutbacks in April, with no more than 100 layoffs possible.

There was some good news, according to the sources.

Whirlpool employees were told the plant will continue to produce the counter-depth models, including 22-, 25- and 27-cubic foot counter-depth refrigerator that stands alone, and a 22-, 25- and 27-cubic foot counter-depth freezer.

Also, the employees were told that new and innovative refrigerator production will remain in Fort Smith. A provision in the Sears contract required new refrigerator features to first be placed on Kenmore refrigerators, with Whirlpool allowed to use the new features on other branded products six months later. Without the Sears contract, new models can now be fast-tracked through the Whirlpool production, logistics and sales departments.