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Observers link vac deal to firms global aims

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Sources close to Whirlpool Corp. say its joint venture in vaccum cleaner manufacturing with Matsushita Electric Industrial Co., Ltd. may be part of a mutual strategy of "cooperation" that will enable each to increase its presence in the worldwide major appliance business.

"We've had a buy/sell relationship with (Matsushita) for many years," said William Marohn, executive vice president of Whirlpool Corp. "There are other areas of cooperation that we are studying."

Industry sources speculate that the venture may be an early move in Whirlpool's quest to enter Far Eastern markets in major appliance, as well as a way for Matsushista to increase its presence in the U.S. in the major appliance industry as well as floor care.

"This is all part of Matsushita's philosophy, which says that products should be produced in the countries where they are sold," said M.J. Guiheen, vice president and general manager of the home appliance group for the Panasonic Company.

Matsushita, which has been a supplier to Whirlpool of rotary compressors for refrigerators and air conditioners, is said to have been looking for many years to get into the U.S. as a player in the major appliance and floor care industries. Matshushita's preferred strategy, sources say, would start with the acquisition of a weak player in its business. The company would then aggressively develop the company into a dominant player.

"This is a good illustration of the way a foreign company enters the U.S.," said one analyst. "Distribution and marketing are critical."

The two conglomerates came to an agreement that may lead to Matsushita fully owning the Whirlpool floor care business and its Danville, Ky., plant after three years, according to Whirlpool. In the interim, Matsushita has the larger share of a new, yet-to-be-named, company that will make canisters, uprights and central vac systems, primarily for Sears Roebuck & Co. under its Kenmore brand name.

HFD has learned that Matsushita will take immediate advantage of its new U.S. distribution site by moving production of the Panasonic vacuum cleaner line from Japan to the Danville, Ky. facility, which will serve as the headquarters of the new joint-venture company. Panasonic, based in Secaucus, N.J., is a subsidiary of Matsushita.

Despite the fact that major appliances and floor care products have traditionally been distributed through different retail channels, two of the world's largest major appliance companies, Maytag and AB Electrolux, have acquired the two top floor care companies - Hoover and Eureka, respectively - within the past six years.

With the Whirlpool joint venture, Matsushita has gained a foothold in the U.S. as a supplier of floor care products, something it has been looking to do for years.

Panasonic is currently the only Matsushita subsidiary that sells a complete line of brand-name vacuum cleaners in the U.S. That line has found mixed success here, as strong consumer loyalty to American brands, most notably Hoover and Eureka, has kept virtually all foreign brands from making any significant dent in the mass market, where those two manufacturers have shown great strength.

Guiheen indicated that Panasonic's floor care line - which includes a full array of uprights, canisters, sticks and a handheld model - might be opened up for wider distribution in the United States, as well as increased production.

Panasonic - which includes floor care in virtually every display it sets up at trade shows - will increase distribution capability in Danville.

Industry sources say they expect Matsushita will attempt to develop its relationship with Sears, while slowly moving tooling and components for the Panasonic line to the Danville facility.

Before Matsushita can increase production of the Kenmore line, which Whirlpool has stated will happen, officials at Sears say they must be satisfied that the manufacturer is up to the task.

Sears has emerged as the major factor in Whirlpool's committing itself to a joint venture with Matsushita. Sources say that Sears wanted Whirlpool to work closely with Matsushita during the transition, and Whirlpool has confirmed reports that Matsushita has an option to buy the entire joint venture after three years.

"We're in the deal for three years," said Marohn. "Although it has yet to be determined, Whirlpool could choose to get out of the business or it could continue with the venture."