Whirlpool CEO on State of Manufacturing

Paul and myself. Welcome, Well, thanks for having me on the show. Karen and Paul, Mark, talk to us a little bit about First of all, I want to take a little bit of a step back and a look back. Tell us what your world has been like as a leader of a major company going back to March, and then we can kind of contrast it with where we are today. What was it like back in March, Carol, that's an interesting question because it feels like like the

years away. Fair. I agree the memory. So you know, I think we're a little bit in different positions than most other domestic companies because we have a pretty big time operation which actually happened to be fifty miles away from Wuhan, and we have our European headquarters in northern Italy. So you remember, you know, when when you first had a China message. Initially it felt like China contained and

we were worried about manufacturing supply for China. But then a really decisive element was when um our president of a European business, called me over weekend and said, there are a couple of cases in the Lombardy. And that's

that's kind of when you realize business big. Um. So again it feels like it really this memory, but I think that's what when everything for us changed and we were kind of by mid March, you realize everything which we thought about twenty twenty will just be upside down and we don't know how deep a canyon is to which we're looking. Ums. That was a pretty dramatic impact.

And when you kind of keyboards in mind with unfortunate COVID didn't come with an instruction for use for management rBook right, nobody had somewhat annoying and when you you know, you get all these emails from SOLT to tell you how to measure crisis. But problem was all right, but always six weeks late. So so it was an interesting experience because you we's got to improvise, you gotta pull

the troops together. And of course the first focus was entirely but you know, how do we secure health and safety? Because you know, we always talked about economic dimension of his crisis, but there's a big human dimension, and you know, we're all humans with our fears, UM, and you've got to manage a big organization with people who have also fears, and so managine with health and safety of our people.

That obviously was the first one UM. But then of course you talk about all the business implications and at least as the CEO, I was quote quote a milucky situation that even a two week to or nine, I was the m US and I wasn't running the company, but I called it a front seat to what we experienced back then. So you you took take some lessons from back then, and UM, of course first focus was how do we secure liquidity because we don't know how bad this is going to be UM, And then you

start taking all the decisions UM. So it was pretty much a rolling up with leaves event back when in March and April. Yeah, so Mark give us a sense of kind of where you are now, how is your business change? What are the big issues you're focusing on right now? You know, Paul, I mean it's first of all, I never heard you earlier talking about visibility. Um, you know back when in April or March and we had

visibility for a week. Um. I know it sounds silly, but you had a visibility for a week, and you just don't know what when as Q two evolved, you had a visibility for maybe a couple of weeks or months. By now we see three months, maybe four months, which is unusual, but at least you see a little bit longer, so you see a little bit more from perspective. The way I look at it right now, from our business and our industry is kind of and and assuming out

the littit. As you all know, there was a lot of talk initially about it is it's going to be a U shape recovery of V shape or W shape or whatever shape. And by now I think most people realize that's increasingly in a real and discussion because what

matters is in which cycle is your industry? Um? Because everything every industry goes for a different cycling, you know, Initially it felt like our industry is the Corona loser, but now I think it now immediately immediately becomes more and more apparent we're a long term maybe Corona winner. And what I mean with that is it's a simple fact. Our business is in the home. It's about improving life

at homes. It's about washers, dishwashers, and ovens. People are spending time at home and what we see now increasingly, that's where were now more and I'm again I'm leaving the human side of it a way, which is still a big issue, but from business side, we're more and more opportunity side of his Corona cycle. And that good news. Because people are spending time at home, we're investing in the nest as we call it, and very you know,

just think about yourself. Do you know a single friend of a neighbor who didn't paint some room in the house or didn't buy something new. Everybody's improving the house and it's not it's more than just kind of a short term improvement. People are rethinking the purpose of the home and that play is in our favor. Yeah, you know, when did you realize that that was starting to happen?

Because you know, it's really fascinating I think, and I don't know if Paul you concur with this, but like as journalists, because I think initially everybody was afraid to talk about the pandemic and the impact and not having visibility. And then all of a sudden, we started to see different companies. You know, of course, nobody wished the health crisis on anybody, but whether it was Netflix or some others,

you know that we're benefiting because of the crisis. And all of a sudden you started to see the numbers and you're like, oh, yeah, I thought everybody was going to lose in this crisis and that wasn't the case. When did you guys start to see that in your numbers? Yeah, I mean, and it's tough to pinpoint exactly when we got but I think it became apparent pretty much around the summer period. First of all, I gotta step back

a little bit. It's and and we're certainly not the health experts and are probably already enough self declared health of experts around here, but it's but you know, it became pretty apparent in April May. But despite all the talk, we have to learn to live with this crisis and a coronavirus, and it's not going to go away short term. And that's when we also realize that will change for consumer behavior and the way we look at it right now, you know, it's UM hopefully with corona, christs at one

point will be behind us. I don't think the consumer behavior will go back or normal because think about it, you know, most consumers are not most, but many consumers will by the time this is over, probably have spent more or less a year at home UM. You don't erase a year of consumer behavior from my memory. It's not a flash memory that will stay. People will invest in the home UM and that's becomes it just becomes every month more parents and we see as in our

own business. You know, the initial demand was a lot what we call crisis appliances, you know, the freezer, of the microwaves or the rest products which just you know, broke down because they ever have been used certa intensively. But we now see more and more people spending money and it goes more and more to big ticket items like what you know, I'm you're talking about the higher and fridges or you talk about the higher and others. People are really investing. It's not just with the rest

and the crisis. They're investing and they're upgrading UM because they all see, Okay, I got to spend a lot more time at home going forward. I don't think certain behaviors like you know we you know, we have statistic fifty of the people even now they've they spend significantly more time in the kitchen and cooking men ever before that will no go that will not go back to zero. It will not UM and I think that again place

in our favor. Hey, Mark, you initially mentioned something about the supply chain and the shock there give us a sense of how your supply chain is looking now. UM in short Port, we still supply chain constraint. Now, let me expand a little bit more on this one. You know, we early in miscr issis you know, remember around springtime and people expectlating, well is it over by easter and

a lot of industrial companies shut down the factories. We didn't not shut down the factories UM, which was a little bit bold decision, but I'm glad we did UM, which on the other hand, was very demanding. Now people because we asked them to come to work where a lot of people very extremely uncertain and nervous. Having said that, it gave us a lot of lead time to learn how we can reasonably safe produce and have an environment in the factories which kind of maximize the health and

safety of our people. Because in a big industrial factory, and keep in mind, if you would go to one of our factors, some of them are a mile long. These are not kind of more buildings. We are massive, big factories where steel comes in and the washer comes out in the every side. So you're trying to get that in a safe environment, you know. And these again these are industrial complex with two or three thousand employees in one factory, so you have line distancing, mask wearing, sanitilization,

temperature check. Um. It's a massive effort. And and the fact that we started that early allowed us at least to get much faster in producing reasonably safe. Now having said that, today fast forward, you know, the fact is if you have a if you try to keep a factory safe, you will not get it to the same yield as pre COVID because you have to reduce the

paces of speed on the line. Because you have to have a social social distancing, you will have disruptions with components, you have challenged logistics, so no matter how hard you work, you will not get it to the exactly the same output as pre COVID. And that's why our supply chain today UM is constrained. I mean, if we're not fully able to keep up with demand, which I know from

financial perspective would say that's a good problem to have. True, But of course on yourr hand, we're frustrated of letting consumers down and having them waited six weeks for a product. So Mark, if since you anticipate that, as you said, you know you can't erase it your consumer behavior from memory, and I agree with you. I think I'm rethinking my expenditures going forward, even when things get back to normal. You know, it's very easy, especially in a city like

New York. You can just kind of money just kind of falls out of your pockets, you know, But you can kind of rethink your focus if you think that consumers will continue to focus on their homes and spend what kind of capital expenditures do you need to potentially do to meet that expected greater demand or can you do it under existing facilities? UM Let's obviously under normal circumstances,

we could do it on the oisting network. But again, as long as COVID is around us, and you put you give me whatever and did you think it is. But you know, as long as it's around us, it will be somewhat constraints and you will have on and off and you will have to supply who has some challenges because they had to shut down the factory whatever else.

So as long as be around us, we're constrained. Having said that, um carol, because we are increasingly confident about the long term prospect of what it all means for home and house anything home and house related, we are starting to actually dial up our capital investments often capacity in North America. You are does that mean okay, wait wait Paul, and I just perked up because you just actually been said, are they moving manufacturing back to the US?

Are you well, we've never left. Okay. When I sometimes hear people apologize, yeah, that's right now. I'm not accusing though. I mean it's funny because you know it's we eighty two percent of what we sell in the US is produced in US, and we're one of a few companies. So when I hear people what we bring jobs back, but we never left. Yeah, yeah, we we were right Now we're hiring because you know, we were running some factories free shifts, So we're hiring on the factories now.

But real to your real point is and and maybe we're an early indicator, but you know, we were reluctant so far to add capital on capacity city or for for capacity. I think we're now increasingly getting closer to we will invest to expand capacity in ath America and US obviously, so kind will happen soon. Well you know what I mean, And it's we're obviously right now. I'm

planning for twenty one. But you know, you know it's not one big decision where like ten small decisions, a couple of ones we already took because you know, again some demand elements I don't think we'll go away. And you know you also have a broader context. Care is the US housing. Um you know, we were already bullish about US housing pre COVID now because with demographic trends, there's a pent up household formation. Housing market has been

undersupplied for decades. And on top of that, the ether side is there is disposable income as human people are not spending money on restaurants, and I feel sort for restaurants, but we're not spending money on outdoor dining or indoor dining. We're not going on travel. There's money available and on top of that low financing, so the housing will be and all of you very robust for a couple of years. Hey, Mark,

talk to us about your balance sheet here. We saw a lot of companies early on in the pandemic really rushed to the market to shore up their balance sheet. How's you're just looking right now? Um, actually, right now, it's in a very good shape. Now let me expand on business Pom. You know, it's it's it's. It's also funny because you asked earlier about the outset of his crisis, which by now we've all forgotten. You know, people were referring to, well, COVID is a black Swan event. We

couldn't prepare for it. Through having said that, the possibility of a downturn or blip or recession, recession was there already at the beginning of a year. I mean, people knew at the one point there will be a correction. So we started bringing our bound sheep in shape. Over the last one or two years. Um, we did not already, so we entered the crisis already in a pretty good fashion.

And then what we did on top of that immediately when we saw this happening, because we saw what happened on commercial paper marketing too, eight, we immediately went out for some short, some boring toches to to have a buffer for whatever happens. Um. Now fast forward we have right now because business is going very well. We have a very strong cash flow with three to have build in cash on our bounty then September, so we're now pinged down the short term debt which we took on

just as an insurance. Um. So we're a year and we will be out of a short term COVID debt and we will be in a very strong bounty position. And that's a good position to be in. Yeah, totally. Hey just saved about forty seconds here, Mark, what's the cool next thing? And appliances? And I unfortunately have to ask you to be quick, Karl, I need moment, so then you'll have to do advertising. You will have to come back, You will have to come back. Now there's

a there's a whole new dishwasher language. We just launched there's a new top loader coming out, and of course it's Christmas Bible's kitchen instand mixers, all right. I just don't know if there's a dishwasher that actually teaches my seventeen year old how to actually load it, and say, how are you as an engineer. I'm the daughter of an engineer that might just work. Mark, what a treat um And I do hope you'll come back. Good luck and uh, it was just great to check in with

your Mark. Bits are Chief executive Officer Whirlpool on the phone from Benton, Harvard, Michigan. I told you earlier we tried to get a stove out of beach house and we couldn't get it over the summer. They're like, there are no appliances availables. That's just amazing that that's the supply chain. That that's exactly that's exactly it. Yeah, totally