Bosch and Whirlpool: The Potential Buyout and Its Implications for You

This text was on my phone late last week.

"Bosch is in talks to buy Whirlpool."

How can a smaller European appliance company buy a bigger American one?

It actually makes sense if you know both companies.

This article will explain why and what it means for you. 

Let's get started.

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First Thing

I've read all the finance articles, especially about Whirlpool's recent problems.

However, they don't answer the real questions:

Why this could happen and why Bosch would want to buy Whirlpool in the first place.

Part of the reason is the rise of LG and Samsung.

But Whirlpool's issues run much deeper and have been festering for a long time.

By the way, I want Whirlpool to succeed.

We should all root for American companies to thrive, keeping jobs, infrastructure, and taxes in this country.

Plus, all the account managers I know at Whirlpool are hard-working, dedicated people who deserve better.

If Sub-Zero can be incredibly successful as a family-owned American company, then Whirlpool, with far more resources, can also remain successful independently.

Now, let's take a closer look at the company.

Whirlpool 1911-2024

Whirlpool started like many companies of this era with two people and a good idea. This good idea was the washing machine.

That good idea lured Sears, the most robust retailer of the time.

This partnership was the key to Whirlpool's success for almost 100 years.

Over the years, they bought different companies to become a full-line kitchen manufacturer of stoves, refrigerators, and dishwashers.

When I started at Yale in 1986, Whirlpool bought KitchenAid.

At the time, KitchenAid was hugely innovative, especially in cooking, with the first professional-looking cooktops with gas daisy burners and convection wall ovens. 

KitchenAid Gas Stovetop with Daisy Burners

Most of that innovative product was discontinued after Whirlpool's takeover.

This would be a big part of Whirlpool's future problems. They don't quite understand premium or even trendy products.

In 2006, Whirlpool finally bought its rival, the Maytag company.

Of course, Maytag had done more damage to itself with the failed Neptune front-load launch and several other products that missed the mark. 

The Maytag "wide by the side," the JennAir Acellis oven, and other failed innovative companies were also part of the demise. 

However, the unfixable Maytag Neptune was the main issue for a company priding itself on reliability.

So, in 2006, Whirlpool became the dominant appliance brand with the acquisition of Maytag.

They owned over 50% of the French door refrigerator business and a good portion of the laundry, dishwasher, and cooking businesses.

Their stock would hit a high of $218.5 in 2021 for a 14.2 billion dollar market cap.

It closed at just over 5 billion dollars before the Bosch news.

But in truth, the problems started much sooner.

Major Challenges Facing Whirlpool

Over-Reliance on Sears

At one time, Sears had 3500 stores, accounting for almost 2% of the country's GDP. Think about that.

As dominant as Amazon is, they are not close. Sears, in its day, owned it all. Sears owned all the marketing tie-ins to MLB, NHL, and NBA.

This is way before influencer and brand marketing.

My hockey bedsheets were from Sears.

They had the best marketing, the Sears catalog, sales, service, and support.

Without question, Sears was the most formidable competitor I have ever faced at Yale.

Then they weren't.

In 1964, the marketing people were dismissed in a battle against the store managers. It was a slow decline in the 2000s, accelerated by the merger with KMart.

The company is in the process of liquidation, with only 11 stores left as of April 2024.

Still, when I asked some Whirlpool execs about Sears's health about 15 years ago, they didn't see a problem.

That relationship with Sears hindered growth with the box stores and other major accounts.

Sears's decline is not Whirlpool's fault per se, but they should have seen the problem and acted long before.

Failed Direct-to-Consumer (DTC)

I think brands should have DTC, but they should be mindful of the risks, especially in appliances and other goods that need handling.

For example, I read Nike's DTC problems in last week's Wall Street Journal.

Now, their DTC effort focuses on sending you shoes and apparel through the mail from their website.

But I am sure they didn't help their position with their major accounts like Foot Locker.

DTC is expensive to do between shipping, returns, and customer service.

Now think about sending a refrigerator.

You have shipping, returns, customer service, and warehousing to store all these appliances.

Yale's 220,000 square-foot warehouse serving the Boston area.

But you also have workman's compensation for injuries, general liability for scratched floors, and water damages.

Then you need free warranty service for one year.

Finding good delivery people is hard, and finding installers is even more complicated while finding unicorns is easier than finding good service people.

Unfortunately, as shown in the graph below, you need all three in the appliance business.

When you deliver nationwide, your costs just escalate.

For us, delivery is simple: 17 trucks in a managed area.

We can do same-day delivery in Boston because we are in Boston anyway.

Nationwide, it is much harder and more costly.

If they looked at sales minus promotions and tabulated their costs, they would have a net loss.

However, these two problems are minor compared to the next three.

The Rise of Samsung, GE, and LG

Competitors either make you better or hurt you.

It depends on how proactive and reactive you are in your response.

Samsung, LG, and GE have swiped away most of the French door and laundry from Whirlpool and their associated names.

Now, all the companies are simultaneously improving their cooking in the affordable luxury and luxury markets.

All three have invested in luxury brands.

Through their parent Haier, GE has reinvigorated Monogram, Samsung bought Dacor years ago, and LG may have the best SKS.

All three are hyper-promotional (if you are still reading, buy around holidays), which is a problem for Whirlpool.

But all three innovate quickly, with more new products, much faster than Whirlpool.

Let's face it: the only company that has ever competed successfully against Apple is Samsung.

So, to win, you have to improve continuously. But that will be difficult for Whirlpool because of... bad products.

Mediocre Products

I'm not sure what challenges Michigan-based industrial companies like Whirlpool, the old GM, and Ford are facing.

Their leadership appears to be highly focused on financials and platforming the same product with different brands.

Let me give you an example of how bad this can be.

In 1985, I was in business school, and we were tasked with a marketing campaign for the new Cadillac Cimarron.

Trust me, there is a point to this.

So, I took a test drive with my grandfather, who was a lifetime Cadillac owner.

He was so loyal to Cadillac that, as a kid, he swore if he ever became successful, he would buy a new Cadillac every year (he traded in the old).

So we went on a test drive with the salesman. I asked my grandfather what he thought.

His reply: "I hated it."

The Cimarron was nothing more than a Chevy Cavalier with a leather interior and a Cadillac logo.

At that time, GM thought it would be easier to use the same car rather than invest in a bolder design.

Profits can be maximized, but only in the short term.

People also didn't have the same information with the internet. Now everyone knows.

Years later, my grandfather would buy a Mercedes even though he fled from Germany.

Kind of ironic.

Back to Whirlpool.

Look at these three French-door refrigerators: It's Whirlpool, KitchenAid, and JennAir. 

They are the same refrigerator but at different prices and distributed differently. The design is similar to the old Maytag from almost 20 years ago.

Against this sad refrigerator lineup, you have the new LG Counter Depth MAX refrigerator.  

The Counter Depth Max is 26.5 cubic over 4 cubic more than a more expensive KitchenAid

Samsung markets triple-cooled four-door refrigerator, while Café French door refrigerator features Keurig coffee dispensing.

Same with these three front control ranges:

The Whirlpool, KitchenAid, and JennAir look the same, because they basically are the same.

All-in-One Combination Washers & Dryers: Where Is Whirlpool?

But more startling is the rise of the combination washer-dryers. GE Profile was first, followed by LG and Samsung.

Despite being the first laundry company in the world, Whirlpool currently does not offer a combination washer-dryer model.

How about heat pump dryers?

It is the future of what you will buy in the future.

Whirlpool had an unsuccessful heat pump model.

OK. Start over.

However, LG has a very successful model, including its WashTower.

Whirlpools problem in one graphic

The LG front-load WashTower against the Whirlpool top-load laundry center. Which would you buy for the same price?

As a famous advisor to Bill Clinton once said, "It's the economy, stupid."

For Whirlpool, the focus must be a compelling product.

Sales and accounting work themselves out with remarkable products.

By the way, the same top loads reintroduced with different agitators don't count.

Management

Look at any successful company; you see passionate, competent people.

I have never met Marc Bitzer, CEO of Whirlpool.

Maybe he is hamstrung by a reticent board and a risk-adverse culture.

However, the Patriots fired this guy after 1.5 bad seasons and 5 Super Bowls.

You don't get to keep your job when you manage a slow yet soon-to-be-fast decline.

Sure, the stock was 218.5 during COVID, but that pandemic was a boon to any home improvement company.

Whirlpool needs better marketing, product development, and quicker innovation.

The good news is that you can act decisively when you aren't performing.

However, time is running short with thousands of American jobs on the line, so faster is better.

Bosch

Bosch is an enormous German multinational with revenues of 91 billion dollars.

However, only 23% is from all major and small appliances. So, their kitchen appliance revenues are less than Whirlpool's, at 19 billion.

Let's assume they are way smarter than me (great assumption, by the way).

Why Would They Want Whirlpool?

Good Management

Funny, I never met the head of Bosch, either.

Then again, if you were the head of a 91-billion-dollar company, you would have way better items on your schedule.

But you must credit them for anticipating trends and capitalizing on underperforming companies.

Two examples:

Bosch Dishwashers

In the early 1990s, you bought a GE or Maytag dishwasher for an affordable price and a KitchenAid for a premium one.

But Bosch changed that with quiet, affordable dishwashers. They had metal tubs and were reliable as well.

At the same time, people were removing their living rooms and combining them with kitchens to create one great room.

All that openness called for a quiet dishwasher.

So either the timing was impeccable, or someone in that company did their homework.

Thermador

You are probably considering Thermador appliances if you are planning a luxury kitchen.

However, in the middle 1990s, Thermador was a disaster.

They had massive reliability issues and were the odd, neglected company in the then-owner Masco home-building portfolio.

Their sales manager was furious at me when I told him about the many problems he was having.

Then, his brand new Thermador C series wall oven didn't work in his home.

Bosch changed all that.

They changed every aspect of Thermador, discontinuing unreliable products and then introducing new models in induction and pro-type units.

Now Thermador is one of the most reliable luxury brands due to Bosch's expertise.

I could say the same with the Gaggenau brand, which went from nowhere to perhaps the world's best luxury brand after being retooled by Bosch.

They can fix Whirlpool with that same mentality.

Then again, Whirlpool can fix Whirlpool with that mentality.

Brands

Bosch is likely mindful of the competition from GE, Samsung, and especially LG.

As these companies innovate, they will compete more directly with Bosch and Thermador.

LG has their new LG Studio, and GE has its successful Café line.

Both successfully compete with Bosch for whole kitchens.

If Bosch purchased Whirlpool, they would keep JennAir and KitchenAid and have way more products to market.

They will need more because the lineup is sparse compared to dishwashers.

They had at one time 104 models of dishwashers

Yet, their gas lineup consists of two models. 

Ditto with induction:

SMEG of Italy makes most of their new freestanding lineup, which means they must be desperate.

One last observation:

Whirlpool produces decent appliances. They are not unreliable like Thermador was.

So Bosch will only have to focus on creating better-featured models like a heat pump dryer, an all-in-one washer dryer and some new cooking.

Relationships

Whirlpool is a 113-year-old company.

They have some relationships left, especially on the builder side, but certainly not among most retailers.

But builders are interesting.

You can sell a lot of units in a tower. You can drive a lot of volume in multi-unit where Bosch does not typically compete.

So Bosch Buys Whirlpool. What Does This Mean to You?

Well, it depends on who you are.

For a consumer, Bosch will salvage a few brands, and you will have more good products to consider.

It will be good for the consumer.

Bosch will probably keep most of the manufacturing in the US. Bosch dishwashers, for example, are produced in North Carolina.

So it will be decent for workers and jobs because the company will improve under Bosch.

I would be concerned about the towns of Benton Harbor and St. Joseph, Whirlpool's home.

Many middle-level non-golden parachute jobs will be moved elsewhere or laid off. Legislators will want to keep jobs but be mindful of the company's alarming position.

Will Bosch Buy Whirlpool?

I think it makes sense.

They are good marketers and excellent with product design.

Bosch might be Whirlpool's ultimate salvation.

Of course, Whirlpool's Board can find a better team or empower the existing ones and do it themselves.

However, it is more profitable and easier in the short term to just get bought.

What a shame.

Additional Resources

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