Sunday, January 01, 2012

Whirlpool's Latest Anti-Consumer Rent-Seeking Attempt to Use Government Force to Raise Prices

Below is a slightly revised Saturday WSJ article about Whirlpool's latest rent-seeking attempt to use the coercive power of the U.S. government to protect itself from its more efficient foreign rivals (appliance makers) in South Korea.  To paraphrase H.L. Mencken, trade policy is frequently like two foxes (domestic producers like Whirlpool and the U.S. government) and a chicken (consumers) taking a vote on what to eat for lunch. These revisions reflect the voice of the millions of unorganized consumers, whose views are generally disregarded when trade policy is decided. 

"Whirlpool Corp., battered by price competition on home appliances, asked the U.S. government Friday to impose duties on imports of taxes and higher prices on American consumers who purchase residential washing machines made by South Korean rivals Samsung Electronics Co. and LG Electronics Inc.

This marks the second time in 2011 that Whirlpool has sought to use U.S. trade laws engaged in rent-seeking to protect itself from more efficient imports foreign rivals by imposing higher prices on Americans who purchase appliances for their homes. In March, the company asked its government enablers for duties on to impose higher prices on every American who decides to purchase an imported refrigerators.

Whirlpool, based in Benton Harbor, Mich., and the world's biggest maker of appliances, in its latest trade rent-seeking move for trade protection against its foreign rivals accused the two Korean companies of "dumping" selling washers made in Korea and Mexico into the U.S. market at prices below their production costs. Whirlpool also said its rivals benefit from various Korean government subsidies.  Based on their purchasing decisions, American consumers have overwhelming expressed their support for low-cost washers from Korea, and they have benefited collectively by saving millions of dollars.  And to the extent that Korean taxpayers have subsidized washers sold in the U.S., some consumers have expressed their gratitude to the Koreans for the generous foreign aid they have provided to American households during these tough economic times.

Because it’s been unable to compete effectively against lower-cost rivals,
Whirlpool now needs the coercive power of the government to do what it can to defend protect itself from increasingly tough Korean competition amid sluggish U.S. demand, said David MacGregor, an analyst at Longbow Research in Cleveland.

LG and Samsung sold tens of thousands of washers at deep discounts, sometimes as much as 50%, during the recent Black Friday sales period, Whirlpool said. Whirlpool tried to limit its Black Friday promotions this year and ended up losing market share.  Partly because its recent marketing strategy failed, the company decided to seek protectionist trade policies that would coercively increase Whirlpool’s market share for washing machines with government force.
 
In its earlier trade case filed in March, Whirlpool sought import duties on government force to impose a tax on every American who purchases a premium-priced refrigerators with the freezer section at the bottom, made by the same Korean companies in Korea and Mexico. The U.S. Commerce Department in October said in a preliminary finding that duties taxes of as much as about 37% could be applied imposed on Americans who purchase those refrigerators, subject to further government reviews that would not consider the negative effects of higher prices on thousands of U.S. consumers.

Whirlpool makes washers under the Whirlpool, Maytag, Roper, Estate, Admiral, Amana, and Crosley brands in the U.S., and also makes store-brand washers for some retailers. Whirlpool said it believes it accounts for 95% of all large residential washers made in the U.S., but would like to further increase its washer market share towards 100% with government assistance, i.e. crony capitalism."

30 Comments:

At 1/01/2012 10:54 AM, Blogger VangelV said...

Let me give you the Seth/Larry reply.

But don't you know that Whirlpool is trying to protect poor Americans? If all those rich people who buy appliances were made to pay more the company would have to hire more people as it gained market share. Everyone knows that most consumers want to pay higher prices for American goods but would only do it if those that did not care about America and were selfish enough to only care about the lowest price were forced to buy the higher priced goods as well.

Why can't the government go further? It should pass a law that sales cannot include lower prices for foreign made goods. No fliers could go to consumers' homes unless all the sale items were American assembled products. The government should set up an agency to track the raw materials to make sure that they also come from domestic sources. Why send money to Chile if we can open up copper mines (with EPA approval of course) in Arizona and California? Who needs oil from Canada when the banks can be forced to lend money at low interest to shale drillers? Why send money to Costa Rica when Americans can build greenhouses to grow bananas? Imagine the boom as all those drillers, construction workers, miners, and greenhouse operators go to work. The US would be much richer. And all because selfish consumers were made to buy domestic appliances.

 
At 1/01/2012 11:46 AM, Blogger Benjamin said...

We print money and give it to foreigners, in exchange for real goods.

This is a deal.

We get a global supply side and no inflation.

Print more money.

 
At 1/01/2012 2:03 PM, Blogger Hydra said...

This is how we get government regulation. Businesses ask for it.

 
At 1/01/2012 2:50 PM, Blogger Buddy R Pacifico said...

Who controls Samsung and LG?

Chaebols.

Who controls the stores where appliances are sold in S. Korea?

Many are owned by the chaebols that own LG and Samsung.

So, does Whirlpool have any chance of selling appliances in the S. Korea market?

 
At 1/01/2012 3:53 PM, Blogger aldom said...

Why does a company with 95% market share need protection?

 
At 1/01/2012 3:54 PM, Blogger aldom said...

This comment has been removed by the author.

 
At 1/01/2012 5:30 PM, Blogger Ron H. said...

"So, does Whirlpool have any chance of selling appliances in the S. Korea market?"

No. Your point?

 
At 1/01/2012 5:35 PM, Blogger Buddy R Pacifico said...

"So, does Whirlpool have any chance of selling appliances in the S. Korea market?"

"No. Your point?"

Open markets Ron. You do want more markets?

 
At 1/01/2012 5:38 PM, Blogger jorod said...

Don't we have a free trade agreement with South Korea?

 
At 1/01/2012 6:17 PM, Blogger Don Culo said...

"Who controls the stores where appliances are sold in S. Korea?"

**************

We don't want to read ataul facts, we know the foreign companies will give cheap prices and play by fair rules. And we don't care if they use child or slave labor.

 
At 1/01/2012 6:19 PM, Blogger Ron H. said...

Buddy: "Open markets Ron. You do want more markets?"

How would you force a Korean retailer to offer appliances that cost more than ones they currently sell that are made domestically?

Do you want American consumers to pay more for appliances than they have to, or do you want Korean consumers to pay more than they have to, or both?

Wirlpool certainly doesn't want more open markets.

Here's how they describe themselves:

"Whirlpool Corporation today is the world's leading manufacturer and marketer of major home appliances. Whirlpool realizes annual sales of approximately $17 billion in 2009, has 67,000 employees and maintains 67 manufacturing and technology research centers around the world. We market Whirlpool, Maytag, KitchenAid, Jenn-Air, Amana, Brastemp, Consul, Bauknecht and other major brand names to consumers in nearly every country around the world.

Our beginnings, though, were much more humble, based on a business failure and the vision of one family. In 1908...
"

Can anyone seriously believe that a company this large, long-lived, and successful, which has acquired most of it's competitors over the years, now needs protection?

Heres a good example of opening foreign markets.

 
At 1/01/2012 6:38 PM, Blogger mtl_econ said...

And think Mark committed a little interpretation error at the end of this article...
"Whirlpool said it believes it accounts for 95% of all large residential washers made in the U.S., but would like to further increase its washer market share towards 100% with government assistance, i.e. crony capitalism."
the effect of increasing import duties would be two fold, increase whirlpool market share while reducing it's share of appliances 'produced' in the US as foreigners would shift production to the US...
... Essentially it would be a double wammy hit to US consumers

 
At 1/01/2012 7:16 PM, Blogger Craig said...

Open markets Ron. You do want more markets?

I only care that our market is open. We get cheaper goods which leaves us more capital to develop our domestic economy. That is, of course, if our government will let us.

The question we should ask is why Whirlpool can't compete with the South Koreans. Is it our corporate tax rates, our OSHA regulations, our capital gains taxes, our blinkered energy policies, our ridiculous labor laws, or just bad management?

 
At 1/01/2012 7:46 PM, Blogger sethstorm said...

Go Whirlpool. Consumers win when they don't have shoddy products pushing out the good ones.

Is there any way that consumers are not used as a rhetorical device to justify harm? Every time that the word is invoked, they are used as a voracious, divisive, yet unassailably innocent group.

In a similar way, the word competition is used to imply defects that do not really exist with those in the US. It is never used in a way that favors the US, much less a First World country. Surprisingly, this has been a word that has been invoked increasingly since 2008 in the domain of economics to justify attacks against the US and like-minded First World nations.





The question we should ask is why Whirlpool can't [overused canard] with the South Koreans

That claim solely rests on the existence of chaebols. Not anything you described.

If you want ridiculous labor laws, how about one that gives businesses all the secrecy to intimidate, while requiring their opposition to show their hand.

 
At 1/01/2012 7:52 PM, Blogger sethstorm said...


Why does a company with 95% market share need protection?

Insurance.

Their profit-seeking motive requires them to seek any avenue, including economic protection that is similar to the Korean chaebol.

 
At 1/01/2012 7:54 PM, Blogger sethstorm said...


the effect of increasing import duties would be two fold, increase whirlpool market share while reducing it's share of appliances 'produced' in the US as foreigners would shift production to the US...

Then expand the law to count transplants as a foreign entity that is assessed a tariff.

 
At 1/01/2012 9:55 PM, Blogger Buddy R Pacifico said...

Ron H asks:

"How would you force a Korean retailer to offer appliances that cost more than ones they currently sell that are made domestically?

Do you want American consumers to pay more for appliances than they have to, or do you want Korean consumers to pay more than they have to, or both?"


Question #1; the U.S. needs to tell Korea to allow U.S. made appliances a market in LG and Samsung controlled S. Korean stores, or else no reciprocal sales opportunity.

Question #2; No;

Question #3; Mo;

Question #4; No.

 
At 1/01/2012 10:02 PM, Blogger juandos said...

"If you want ridiculous labor laws, how about one that gives businesses all the secrecy to intimidate, while requiring their opposition to show their hand"...

What an inane statement sethstorm!

Ask Boeing how labor laws (crony unionism?) worked out for them regarding South Carolina...

 
At 1/02/2012 1:32 AM, Blogger Ron H. said...

"Is there any way that consumers are not used as a rhetorical device to justify harm? Every time that the word is invoked, they are used as a voracious, divisive, yet unassailably innocent group."

Consumers innocent? Why, consumers are guilty of causing every evil you see in the world around you, especially the prevalence of South Korean appliances everywhere you look. DAMN those consumers!

 
At 1/02/2012 1:47 AM, Blogger Ron H. said...

Buddy: "Question #1; the U.S. needs to tell Korea to allow U.S. made appliances a market in LG and Samsung controlled S. Korean stores, or else no reciprocal sales opportunity."

If Whirlpool appliances were available to Korean* retailers, would Korean consumers buy them if they were higher priced? Would you really forbid US consumers the choice of buying a less expensive appliance?

"Question #2; No;

Question #3; Mo;

Question #4; No.
"

Based on your answer to question #1, your answers to #2-4 must really be yes, as that would be the result.

* I dropped the "South" from my reference to Korea, as I don't think there's any question about which one I mean.

As Craig said, I want MY market to be open. Those who take my IOUs must return them to get paid for the goods thay have sold me, either by buying US goods, services, or assets.

 
At 1/02/2012 7:15 AM, Blogger sethstorm said...


juandos said...

You failed to answer my question.

Why is it that, if it is a concept that is favorable with the public, that unionbusting agencies are afraid of the same disclosure they ask for in unions?

One could even extend the same concept to something like offshoring. Why the secrecy for something that has so much claim to being popular?

Oh, wait. It doesn't.

 
At 1/02/2012 8:27 AM, Blogger juandos said...

"You failed to answer my question"...

Wrong again sethstorm, I answered your question which wasn't a question but a wretched whine where you ignore the facts regarding unions, certain government entities, and the general public mood of the day...

"Why is it that, if it is a concept that is favorable with the public, that unionbusting agencies are afraid of the same disclosure they ask for in unions?"...

Why do you ask a question that has NO basis in reality?

Name me a 'union busting" agency, local, state, or federal...

Are there private entities that seek to break union holds in various areas or industries?

Yes there are but so what?

sethstorm I've been a union person since '76 and I most definitely believe in the soaring rhetoric of what unions claimed they were there for but now, not so much considering what many of them have morphed into over the last thirty or so years...

 
At 1/02/2012 8:33 AM, Blogger VangelV said...

Go Whirlpool. Consumers win when they don't have shoddy products pushing out the good ones.

I think that consumers are more than capable of figuring out if products are 'shoddy.' And for the record, the problem with many appliances today are caused by government regulations that require certain efficiencies, not the 'quality' control systems of the manufacturers. This is why we get dishwashers that don't clean and dry very well and washer/dryer units that don't clean clothes as well as they used to.

Is there any way that consumers are not used as a rhetorical device to justify harm?

You are confused. Is there any consumer harming law that is not used as a rhetorical device to justify protection for corporations regardless of the harm it does to consumers?

Every time that the word is invoked, they are used as a voracious, divisive, yet unassailably innocent group.

It is you who wishes to limit choice and have consumers pay more because you prefer Whirlpool's shareholders to make a higher profit margin. Can you justify why you choose the shareholders instead of the consumers?

In a similar way, the word competition is used to imply defects that do not really exist with those in the US. It is never used in a way that favors the US, much less a First World country. Surprisingly, this has been a word that has been invoked increasingly since 2008 in the domain of economics to justify attacks against the US and like-minded First World nations.

How about the word choice? Can you justify limiting consumer choices just because you want to protect the largest domestic manufacturer? Since when is harming the many for the benefit of the few virtuous or moral?

 
At 1/02/2012 8:34 AM, Blogger VangelV said...

Insurance.

Their profit-seeking motive requires them to seek any avenue, including economic protection that is similar to the Korean chaebol.


But why should we allow their profit-seeking motive to do harm to consumers by limiting choice and increasing prices?

 
At 1/02/2012 1:50 PM, Blogger Ron H. said...

V: "But why should we allow their profit-seeking motive to do harm to consumers by limiting choice and increasing prices?"

Sethstorm has two of his favorite enemies - business and foreigners - at odds with each other here. This is very difficult for him.

 
At 1/02/2012 6:04 PM, Blogger sethstorm said...


Name me a 'union busting" agency, local, state, or federal...

I'm talking about those in the private sector that boast about 96% success rates but clam up about anything else.

Such groups include:

Jackson Lewis.
The Burke Group.
Grigsby & Cohen.

Not exactly people that like to talk about their success short of "96% success rate" announcements.



I've been a union person since '76 and I most definitely believe in the soaring rhetoric of what unions claimed they were there for but now, not so much considering what many of them have morphed into over the last thirty or so years...

I've seen enough of it to stay far away from unions(especially from what I've seen in Ohio during the last election) - but I cannot condone the cloak-and-dagger actions that are used to combat unions.

While I've been fortunate enough to live somewhere that had major employers kill unions with respect and kindness, I also understand their rarity.

It just seems quite odd to drop the might of a team of lawyers in secret when one could have pre-empted it by being better at meeting the reasons of why a union is sought.

 
At 1/02/2012 8:40 PM, Blogger sethstorm said...


Ron H. said...

Corrections:


Businesses are no issue, all things otherwise equal. Profitability is what makes jobs(existing and new) possible.

Businesses that antagonize the US and hold a contempt for the legitimate citizens within the US are a problem.



Foreigners are no issue, all things otherwise equal. Legitimate migration that results in citizenship or is for tourism, yields a net benefit.

When foreigners are used as a way to get around US laws, or are allowed to enter illegally without being challenged on it, there is a problem.



Trade is no issue, all things otherwise equal. It allows a selection of products that are supplemental to those found in the US.

When trade is used in a manner that causes structural and unmitigated harm - whether it is through reduced choices of high-quality US products, the use of it as a job-exporting conduit (with no natural replacement immediately waiting the redundant), or as an economic weapon by a foreign country(e.g. oil), a problem exists.

 
At 1/02/2012 10:53 PM, Blogger VangelV said...

I've been a union person since '76 and I most definitely believe in the soaring rhetoric of what unions claimed they were there for but now, not so much considering what many of them have morphed into over the last thirty or so years...

Over the last 30 years private sector unions have figured out that they have to change or risk killing off the industries on which they have depended.

I've seen enough of it to stay far away from unions(especially from what I've seen in Ohio during the last election) - but I cannot condone the cloak-and-dagger actions that are used to combat unions.

Unions are corrupt. What else do you expect?

 
At 1/02/2012 10:59 PM, Blogger VangelV said...

Businesses are no issue, all things otherwise equal. Profitability is what makes jobs(existing and new) possible.

You are missing the part that you don't see. When an industry convinces government that it needs protection the consumer has to spend more money for the goods and services that the industry provides. That might 'save' a few jobs in some inefficient companies but the lower purchasing power of consumers means that they will have to cut down on other purchases. That decline means that jobs are lost elsewhere in the economy.

Businesses that antagonize the US and hold a contempt for the legitimate citizens within the US are a problem.

No. The problems are businesses that antagonize their customers. Ironically, those are the businesses that you want to protect from competition.

When trade is used in a manner that causes structural and unmitigated harm - whether it is through reduced choices of high-quality US products, the use of it as a job-exporting conduit (with no natural replacement immediately waiting the redundant), or as an economic weapon by a foreign country(e.g. oil), a problem exists.

Free trade does not limit choices. It allows consumers to pick who they want to buy from. If that means that US companies have to improve their quality and productivity so be it. Free trade is never a weapon but a barrier to trade certainly can be.

 
At 1/05/2012 4:29 PM, Blogger Ian Random said...

Gee they are based in Michigan like certain car makers, so they should qualify for government bailouts. I guess we need protect the jobs of Mexican workers.


http://crooksandliars.com/susie-madrak/whirlpool-moving-plant-mexico-while-c

 

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