The AP (2/3, Chapman) reports, “Whirlpool Corp.’s fourth-quarter earningsrose 80 percent, mostly because its costs fell and it enjoyed a tax benefit, but the world’s biggest appliancemaker said it is now raising prices to help deal with higher raw material costs.” Similar sentiments came fromElectrolux AB, which yesterday “reported that its fourth-quarter net income rose 2 percent.” The AP notes, “Likemany businesses, Whirlpool – which makes many brands of appliances, including its namesake, Maytag and KitchenAid- has been concerned about rising material costs for a while. The company said cost cuts, improved productivity,higher unit sales and lower incentive compensation all were offset in the fourth quarter by both higher materialscosts and lower selling prices.”
Bloomberg News (2/3, Kinnander) reports, “Electrolux AB, the world’s second- biggest appliance maker, forecast modest growth in North America and Europe this year, hindering the Swedish appliance maker’s prospects for raising prices to claw back higher costs.” The company “needs to push through price increases to customers to counter the extra expense of steel, copper and resins. While the company has expanded globally, it still derives about one-third of sales from North America. Raw-material inflation and lower prices deflated earnings in that markets in the fourth quarter, it said today.”
The Wall Street Journal (2/3, Hagerty, Grundberg, subscription required) reports that both Whirlpool and Electrolux may lose ground to Korean white goods manufactsurers, such as LG and Samsung. “The Korean manufacturers aren’t going along” with the higher prices, one analyst said. Meanwhile, “the costs for our most important raw materials continue to increase,” Electrolux CEO Keith McLoughlin is quoted as saying. “In addition to increased costs for steel, we also see considerable increases in resins and base metals. We have signed contracts for a significant part of this year’s raw material requirements.”
Higher Commodity Costs Could Squeeze Company Profits
Under the headline “Rising Costs Threaten Corporate Profits,”Reuters (1/26)reports increasing commodity costs are pushing on the margins for many big US companies that haveotherwise been making a comeback from the economic crisis. While commodity costs have not made animpact yet, analysts say that may change over the course of this year. “There’s no question thatcosts are going to rise; The question is whether or not they’ll be able to pass it through,” saidCLSA analyst Mark Connelly.
Analysis: Automakers race to trim weight, keep trucks brawny
(Reuters) – Major automakers are scrambling to strip hundreds of poundsoff future pickup trucks in an effort to meet new U.S. standards for fuel economy without sacrificing strengthor towing capability.
The new mandates take effect in 2016, giving automakers such as Ford and General Motors just one design cycle to make significant changes that will require costly steel substitutes including aluminum, new steel alloys and magnesium.
Automakers are faced with having to pass on those higher costs to consumers who have come to associate mass with performance.
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