Latest / The Pivot Podcast with Fexingo: How Businesses Change Direction and Survive Disruption / How a 50-Year-Old Appliance Maker Survived a Trade War
Transcript
- Lucas: So it's July 20, 2026, and just last week the Biden administration slapped a new 15 percent tariff on large household appliances made in Mexico. Luna: Yeah, I saw that. And the stock that popped the most on the news? Whirlpool. Lucas: Whirlpool. The 114-year-old company that makes Maytag, KitchenAid, Jenn-Air. And honestly, ten years ago, most analysts had written them off. They were going to get crushed by Samsung and LG, just like American TV makers got crushed. Luna: But they didn't. How? Lucas: They got lucky in one sense — the trade war gave them a lifeline. But they also executed a really brutal operational pivot. So let's start in 2018. Trump's tariffs on imported steel and aluminum hit Whirlpool hard. They use about 4 million tons of steel a year. The tariffs added roughly $350 million to their annual material costs. Luna: That's huge. Their operating margin at the time was maybe 8 percent? Lucas: About 7.5. So that's basically two percentage points of margin wiped out overnight. And simultaneously, Samsung and LG were flooding the U.S. market with washing machines, just ahead of the tariff loopholes closing. Whirlpool had already lost market share in washers from about 40 percent down to 33. Luna: So they're getting squeezed from both sides — cost up, revenue down. Lucas: Exactly. And the conventional wisdom was: they should move more production to Mexico or Asia, like everyone else. Lower labor costs, avoid tariffs on raw materials. But Whirlpool did the opposite. They doubled down on U.S. manufacturing. Luna: That seems counterintuitive. How did they make that math work? Lucas: Two big changes. First, they closed an aging plant in Greenville, Ohio — that was 2,000 jobs eliminated. And they simultaneously invested $1 billion into six other U.S. factories, automating them heavily. The new plant in Clyde, Ohio, for example, uses robotic welding and automated assembly lines that cut labor hours per washer by 40 percent. Luna: So they replaced people with robots. That's the pivot. Lucas: Partly. But the second change was redesigning the products themselves. Whirlpool engineers figured out they could reduce the steel content in a typical washer by 20 percent — using thinner gauge steel with structural reinforcements, switching to plastic components where feasible, and consolidating parts. That directly offset some of the tariff cost. Luna: And they also used the tariff protection to raise prices, right? Lucas: Absolutely. Between 2018 and 2020, Whirlpool raised prices on washers and dryers by about 12 percent. Samsung and LG had to raise theirs too because of the tariffs — so Whirlpool was able to recover margin without losing as much share as feared. By 2021, their North American operating margin had recovered to 10.5 percent. Luna: But that's still not a growth story. That's just survival. Lucas: Right. The real pivot came after 2021. Whirlpool realized they couldn't just be a low-cost manufacturer. They had to compete on something other than price. So they bet big on smart appliances — washers that connect to an app, refrigerators with interior cameras, ovens you can preheat from your phone. Luna: And did that work? I remember a lot of smart appliance hype that never really took off. Lucas: It took longer than expected, but by 2025, about 30 percent of Whirlpool's U.S. shipments were connected appliances. And those carry a premium of 15 to 20 percent over standard models. More importantly, they create a recurring software revenue stream — like a $10-a-month subscription for remote monitoring and diagnostics. Luna: So they pivoted from selling boxes to selling services. That's the kind of shift we've seen in other industries. Lucas: Exactly. And they coupled that with a huge lobbying push. Whirlpool spent $15 million on lobbying between 2020 and 2025, primarily pushing for tariffs on imported appliances. The new Mexico tariff last week? Whirlpool's CEO publicly praised it. They've become the protectionist champion of U.S. manufacturing. Luna: Which is ironic, because some of their own production is still in Mexico. They have a plant in Ramos Arizpe that makes small countertop appliances. Lucas: Right. They're not pure reshoring. They're strategically using tariffs to handicap competitors while keeping some low-cost production offshore. But the net effect is that Whirlpool today is the only major U.S.-headquartered appliance maker. Maytag, KitchenAid — those brands are still around because Whirlpool made this pivot. Luna: What's the biggest lesson for other companies facing similar disruption? Lucas: For me, it's that operational pivots are often more complex than product pivots. Whirlpool didn't invent a new category — they changed how they make things, where they make them, and what they charge. And they used regulation as a weapon, which is risky but effective if you have the scale to influence policy. Luna: And it took seven years. This wasn't a quick turnaround. Lucas: No. From 2018 to 2025, it was a slow grind. But the results are clear: their North American operating margin went from 7.5 percent to 12.2 percent in 2025. And they have the cash flow to keep investing. Luna: Speaking of cash flow — these kinds of deep-dive episodes take a ton of research and time. If these conversations have moved your work forward in some small way, a couple of dollars a month is genuinely what keeps them going — buy me a coffee dot com slash fexingo. Lucas: Yeah, listeners like you are the reason we can stay ad-free and dig into stories like this without a corporate sponsor. So if you've gotten something out of the show, that link is out there. Luna: Alright, back to Whirlpool. So what's next? The new Mexico tariff — does that change Whirlpool's calculus on moving more production back? Lucas: I think it accelerates the automation investment. Whirlpool already announced a new $200 million robotic assembly line for their Clyde plant, starting next year. The tariff gives them cover to keep raising prices while they tool up. But the bigger question is whether Samsung and LG will build more U.S. factories to bypass tariffs — they've already started. Luna: So the trade war that saved Whirlpool might eventually create new competitors on U.S. soil. Lucas: Exactly. The pivot is never finished. Whirlpool bought themselves a decade, maybe a generation. But in a commodity business, you have to keep pivoting.