Yahoo Finance

Let's take a look at shares of Whirlpool this morning reversing earlier gains down just under the flat line here. The company maintaining its full year outlook and saying it believes it will benefit from tariffs in the long term with 80% of its manufacturing done here in the United States. For more on what's next for the company, we've got Mark Bitzer, Whirlpool corporation chairman and CEO. I'm also joined by Yahoo Finance executive editor Brian Sozzi. Mark, thanks so much for making the time for Yahoo Finance. I've heard you call yourself the canary and the coal mine for the consumer. Tell us what that consumer is seeing today.

Yeah, Madison, first of all, Brian, thanks for having me back on the show. Um, yes, we do have a good sense for what's going on on the consumer side to just to put it in perspective and and also relating back to my prior speaker, Bob, um, he was talking about the bookings a couple of months out. Our order pipeline typically is six to eight days. Um, so we we get a pretty fast sense in terms of what's happening consumer sentiment. And what we saw on the consumer side in Q1, um, is actually even coming out of the election, there was actually quite a bit of a positive spirit out there. Consumer confidence was not bad. Actually, we saw a very strong self-through and discretionary sales. And I think amidst all the uncertainty which we all experienced, kind of starting mid-February and continuing consumer confidence has dropped and the discretionary side of demand has dropped quite a bit. So what we do see is that right now is strong replacement demand that has kept up very strong since Covid, but discretionary side, yeah, it took its toll and and right now we we don't see it even in Q2 so far recovering.

Mark, good to see as always, just hopped off your earnings call that ended a little while ago, listening to it live on Yahoo Finance, very excited about that for the first time. Um, you sound pro-tariff, why?

Well, you know, ultimately it comes down to we US producer. Um, I know there are many companies who now talk about reshoring, onshoring, we never left. Um, and what I mean with that is more than 80% of what we sell in the US is produced in the US. We have 10 large factories in in the US. Um, with a long heritage of producing in the US. Actually, it's only 5% of our um sales actually come from Asia. So we are US producer. So are we faced with some headwinds? Yes, but they're manageable, largely on the component side and and what we referred to in our earnings call, the pre-loading which we have experienced by Asian competitors. But ultimately, as US producer, we will benefit from it and that's why we're yes, we're pro-tariff in terms of, but I want to clarify, we're not asking for an exemption, we're not asking for subsidy or gifts or handouts. There are some loopholes which exists in the tariff landscape today which we just want to be closed and then we're all good.

How do you mitigate the impact of tariffs?

Again, there's there's a manageable amount of tariff headwinds and we enlarge component side and and pre-loading. So the mitigation so far has been we had a number of price increases over the course of the last 12 months, which helped us mitigate the cost impact. The other part is we doubled down on cost takeouts. Um, we kind of, in particular, after general, we started um, we've always been cost discipline, but we kind of really doubled down on our cost takeout efforts on the variable product cost. And yes, there is some what we call rewiring of our supply chain, which occurs right now. It is limited because we US producer, but you know, on some components which we so far source in in China, yeah, we're looking at where else can we source them, they are sometimes limited supply base. And we have a very, very limited amount of finished goods coming out of Asia, which we're also trying to rewire our supply chain. So these are by and large our mitigation actions on the headwinds. But again, I want to point out once once the tariffs fully kick in, um, we do expect some tariff tailwinds, um, benefiting our US production.

I I understand what you're saying that you're not fully exposed to tariffs and therefore you're a bit immune, but historically you have still raised prices even on non-tariffed products. If we take a look at a historic example here, we have the administration's tariffs on washing machines specifically, the first time that the president was in office. And even though that obviously impacted washing machines, we also saw you lifting the prices for dryers at the same time. And as you know, that means consumers did bear the brunt of that policy impact in terms of prices. If we see similar tariff measures imposed this time around, should we expect a repeated dynamic here where you lift prices on some of those goods, even if the tariffs don't require you to?

Yeah, Madison, I'm actually I'm glad you raised this 2018 um, washer tariff story because um, I think honestly, it's time to debunk that myth. Um, and let me explain a little bit. Um, because what that refers to is a research and there are some internet articles um, which came out apart from a database because it largely is API based and in today's world, you only look at online pricing. Um, but here's the story. Um, the story on these articles was, well, the tariffs in 2018 raised prices and consumers paid for it. So here's the real story. Um, once the tariffs came into play, the Asian producers were caught by surprise and finally started putting factories in the US. They didn't do it before, they didn't do it after. So of course there was initially a shortage that rose that drove to an increase of prices for a very short period. Once these factories came online, the prices actually came down to pre-tariff levels. And subsequently, and this is what the studies got completely wrong, the prices raised again. I was obviously, why would the price all of a sudden raise two years after the tariffs came to play? Simple reason, there was a thing called Covid, um, and nobody had supplies. So yes, during Covid, prices raised. Um, now, the more relevant thing, and I think this is getting lost in all this discussion, and I'm really it's important to, you know, set the record here straight. So now we're seven years after these tariffs came into play. So today you have two factories more in the US, um, the competitor factories, but the two factories more, which didn't exist before. Um, and again, after the tariffs, no Asian producer ever opened a factory again. So it was during these times, so two factories more and the prices are down to 2014 level. Now, how many products do you know where the price are back to 2014 levels? I'm honestly, I wish eggs would be on the level of 2014 prices. So so today, from my perspective, consumer pays less than 10 years ago or same, and we have two factories more. So in my view, um, yeah, call me pro-tariff, but in this case, with 201 tariffs, back then worked.

Yeah, good luck with that egg call out, Mark. I don't think they're going back to 2014 levels. But let me ask you this before we uh before we let you go. So you're you make products around the world. Uh, you have 25 locations, if I'm correct, 16 countries, 10 manufacturing plants in North America. Is what's happening on the tariff front? Are you more inclined to tell your board, hey guys, I want to build two more plants in the United States, uh, and if it takes five to seven years, so be it, I need this capital. I mean, are you more inclined to just close those other sites?

Yeah, so so Brian, first of all, from a global footprint, our factories are largely regional for region. So basically, what we sell in North America is produced in North America, what we sell in Latin America is produced in Latin America, same for Asia. So that gives us quite a natural tariff hedge. Right now, and particularly as it comes to North America, honestly, we have capacity. Um, right now, I would say our factories are underutilized. Um, we had to make some difficult decisions in the past. So we have real capacity to fill it and that's, I think in this broader tariff discussion, is a big difference to other industry. This is an industry where you have US production. So um, I understand it's different in other industries where you might not have production. We have production, we have capacity. Now, to be also clear, and this is maybe coming back to some previous comments made. Once you have predictability of tariffs and stability on tariffs, yes, I think we would double down on our investments in in the US. Um, actually we spoke with the administration and we laid out some clear commitments which we would do above and beyond what we have already in the US. Um, and I do see a significant potential surge on production in the US.

Mark, thank you so much for making the time. Whirlpool CEO, Mark Bitzer, and of course, Yahoo Finances Brian Sozzi for bringing us the conversation. Thank you both.