Whirlpool’s CFO on navigating challenges facing the manufacturing industry
Twenty years ago, you may have used a Whirlpool range to cook a meal, and that’s where interaction with the company ended. “We’re beginning to connect many of our products today,” says Whirlpool EVP and CFO Jim Peters, who’s worked at the company for 17 years. The more than 100-year-old appliance giant is “even more focused on innovation,” Peters says.
But as customers connect with Whirlpool through its online products like recipe app Yummly, the company is also navigating challenges facing manufacturing. Supplier issues along with labor and commodity costs going up are impacting the industry, says Peters.
“All those things are occurring at the same time, yet we’re seeing growth in this environment,” he says. The company reported about $19 billion in annual sales in 2020. In the second quarter of 2021, Whirlpool had net sales of $5.32 billion, a 32% increase compared to the same quarter last year, and an ongoing 11.4% EBIT margin, a year over year change of 6.4 points. “What we’re seeing is the continued focus of the consumer on their home,” Peters explains. Increased home buying and building, and the replacement of appliances, are other factors driving growth, he says. “Replacements are about 55% of our business,” Peters says.
But Whirlpool, which has about 78,000 employees and 57 manufacturing and technology research centers, has felt the squeeze of the global semiconductor chip shortage. “Fortunately, we have good relationships with many of the semiconductor companies, but we’re under pressure like a lot of other businesses out there, whether it’s automotive or many of the electronics companies,” Peters says. Being flexible is beneficial, he notes. The company can reallocate the microchips to Whirlpool locations around the world that need them the most to “keep production up and going,” Peters says. Managing the number of back orders is also important, he says. “It’s a week-by-week, day-by-day, hour-by-hour process,” he explains. “It’s a very manual process that our procurement organization is very engaged in.”
In another sign of the times, “inflation has been pretty significant for us,” Peters says. “We’ve talked about $1 billion of raw material cost increases this year alone, which is mainly steel and resins,” he says. “So, across the board, we’re seeing a lot of different cost increases … we’ve been able to offset that via increasing prices,” he explains. Compared to 10 years ago, the company can “quickly understand where those increased costs could be,” Peters says. In regard to the war for talent that’s hitting the manufacturing industry, “we did have to do things such as increase wages along with the market to remain competitive,” Peters explains. “You look at the benefits that you’re giving different employees and make sure that those are competitive [such as] continuing education or opportunities to get reimbursement for education.” Whirlpool is now offering to pay employees a $1,000 incentive to get a COVID-19 vaccination, Bloomberg reported on Monday.
During our conversation, I asked Peters, who became CFO at Whirlpool in 2016 after serving in several financial leadership roles, if he always wanted to be a finance chief. “I don’t know that I always aspired to a career in finance,” he says. In fact, he pondered a career in journalism. However, his dad, a CPA, had some influence on his decision. Looking back, he’s glad he stayed in finance and experienced many opportunities at Whirlpool. “It’s really made me a much more well-rounded individual,” Peters says.
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