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Whirlpool Wins Backing for Import Protection From Key Government Panel -- Update

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10/05/2017 | 06:27pm CET
By Jacob M. Schlesinger and Andrew Tangel 

WASHINGTON -- Whirlpool Corp. won crucial backing from a government panel in its bid to limit competition from foreign washing machine makers, giving the Trump administration another opportunity to invoke little-used powers to ramp up trade enforcement.

The U.S. International Trade Commission voted 4-0 Thursday to approve the petition from the Benton Harbor, Mich.-based manufacturer seeking protection in the American market from South Korean rivals Samsung Electronics Co. and LG Electronics Inc. The vote came under a trade law that allows U.S. companies to win broad protection if they can show they suffered "serious injury" from a surge of imports.

The provision -- Section 201 of Trade Act of 1974 -- was last used in 2002 by the Bush administration to impose steel tariffs.

The Section 201 "safeguard" law was designed to offer U.S. industries broader protection than anti-dumping laws.

The members of the ITC -- a bipartisan, independent panel -- will next consider what specific policies they believe should be implemented. The deadline for the panel to send recommendations to the White House is Dec. 4. The Trump administration would then be required to make a decision by early next year on whether to impose import limits.

The Trump administration hasn't yet commented on this specific ITC case. But officials have said they would consider invoking the rarely used "safeguard" law more frequently in their bid to take a more aggressive stance on trade enforcement.

One of Mr. Trump's trade advisers, Peter Navarro, has spoken sympathetically on the issue. In a speech earlier this year, he blasted Samsung and LG for "precisely the kind of trade cheating that must be stopped."

Mr. Navarro was referring to the fact that Whirlpool had previously won protection against trade cases imposing duties on Samsung and LG machines made in South Korea and Mexico under a different, narrower trade law designed to shield U.S. companies from goods that are allegedly "dumped," or sold unfairly below cost. But the Korean makers got around those limits by shifting production to China. When they would have faced subsequent tariffs aimed at that country, they moved production to Vietnam and Thailand.

Under Section 201, an American company seeking relief doesn't need to prove wrongdoing by a foreign competitor -- only that it is suffering "serious injury" from a sudden import surge. And unlike dumping protections, which generally apply only to products from a specific country, Section 201 curbs can be applied broadly to imports from all over the world.

Whirlpool didn't immediately respond to a request for comment after the trade commission's vote.

LG said it would seek a "fair application of U.S. trade laws."

"This is Whirlpool's third effort to use government trade actions to restrain competition," LG said. "Imposing restrictions on imported washers will only hurt consumers by raising prices and decreasing choices, while jeopardizing U.S. investment and job growth."

Samsung said it was disappointed with the trade commission's vote.

"We believe that safeguard remedies should not discriminate in favor of one group of U.S.-based workers over another and should not negatively impact a fair appliance marketplace for consumers," Samsung said.

But the potential curb could likely run afoul of global trading rules. The 2002 Bush steel tariffs were removed a year later after the World Trade Organization deemed them improper, and the law hasn't been used since.

But the Trump administration has signaled a greater willingness than its predecessors to dust off dormant trade powers, like Section 201, and that has encouraged industries to seek such relief.

The Whirlpool petition was the second such case to reach the ITC this year after the long hiatus. The agency weighed a similar request on Sept. 22 from the solar-panel industry seeking safeguard protection from imports. The ITC voted 4-0 in favor of that petition too, and is now considering specific remedies to propose to the White House.

Whirlpool, once the dominant washing machine brand in the U.S., has faced rising competition from South Korean rivals and others. Samsung and LG combined now make up roughly a third of the market, about the same as Whirlpool's share. Whirlpool has faced a tripling of imports of large residential washing machines over the past six years, according to Panjiva, a trade analysis firm.

The South Korean firms say they have gained share through innovation, not unfair trade practices.

"Consumer preferences shifted to design and style. Whirlpool didn't keep pace," said John Herrington, a Samsung senior vice president, during a September commission hearing. "How and where consumers shopped for appliances changed. Whirlpool didn't adjust."

Whirlpool attorney Jack Levy dismissed the claim as a "tired argument," adding: "Whirlpool has made tremendous innovations in its washer lineup over the years."

Even if the Trump administration does approve strict import limits, Whirlpool is still likely to face intensifying competition from Samsung and LG, which are both planning to start production in the U.S.

LG is building its first-ever major U.S. factory, a $250 million washing-machine plant near Clarksville, Tenn. Samsung announced plans earlier this year to take over a former Caterpillar Inc. plant in South Carolina, and estimated the project could lead to nearly 1,000 new jobs by 2020.

Write to Jacob M. Schlesinger at [email protected] and Andrew Tangel at [email protected]

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Financials ($)
Sales 2018 22 116 M
EBIT 2018 1 640 M
Net income 2018 968 M
Debt 2018 3 705 M
Yield 2018 2,97%
P/E ratio 2018 11,53
P/E ratio 2019 9,77
EV / Sales 2018 0,68x
EV / Sales 2019 0,66x
Capitalization 11 354 M
Duration : Period :
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Mean consensus HOLD
Number of Analysts 11
Average target price 197 $
Spread / Average Target 24%
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