Fitch issues Whirlpool rating report

A ratings report by Fitch Ratings places a negative outlook on $850 million in new corporate debt being issued by Benton Harbor, Mich.-based Whirlpool Corp.

The negative outlook, according to Fitch, is based on the “extent of the decline in financial results from weak global economies and the ability of the company to downsize its cost structure if revenues decline faster than expectations.” Fitch also cited Whirlpool’s adherence to not lowering prices despite consumer and retailer pressures and the effects a stronger dollar could have on the global appliance maker.

Whirlpool operates a large manufacturing and distribution operation in Fort Smith. Because of the economic pressures cited by Fitch, Whirlpool has reduced employment at its Fort Smith plant from about 4,500 in early 2006 to about 1,400 today.

However, Fitch had several positive comments to make about Whirlpool, including a note that Whirlpool had taken aggressive actions to reduce production and operating costs. Fitch noted Whirlpool’s commitment to reducing capital expenditures by as much as $100 million (10%) and reduce inventories.

Fitch also said Whirlpool’s position as the world’s largest appliance manufacturer allows the company “to continue its industry-leading innovation programs, which should help drive demand when global economies rebound.” Fitch also said Whirlpool will have “sufficient cushion” to operate within its debt covenants.

But the picture is far from rosy.

“Appliance demand has fallen in the U.S. since 2006 and global appliance demand trends are currently weak. In the U.S., declining discretionary consumer spending and rising unemployment compounded by continued weakness in new home construction, ongoing weakness in existing home sales, limited home renovation projects, lessening demand for replacement appliances, and tight credit markets continue to drive demand for appliances sharply lower,” Fitch noted in the report.

Continuing, Fitch noted: “Slowing demand in international markets will remain a drag in 2009 with Europe expected to be weaker than previously envisioned. Whirlpool has indicated it will see slowing demand in Latin America, an area that has contributed significantly to overall results over the past four years.”

Whirlpool reported April 27 that total sales reached 3.56 billion in the January to March period, a 23% decline from the same period in 2008. Net income was $73 million, down 27% from the 2008 period.