When Whirlpool married Maytag on April 1, without a whirlwind courtship, big builders were sure the consolidation would have little impact on their ability to secure the best prices for home appliances. Now, many builders are certain that it will be business as usual.
The $2.6 billion merger of the two giant appliance companies—household brands for generations—means that there are fewer suppliers in the market for everyone, and quite possibly less of a chance to strike the best deal in buying everything from refrigerators to washing machines and dryers.
“The concern is that we are losing a competitor, and are we going to have price inflation because of a lack of competition,” says Scott Heaty, vice president of regional purchasing at Standard Pacific.
But there is another side of that coin, says Heaty. “I personally think it helps Standard Pacific and the amount of usage with Whirlpool. We have negotiated prices for a fairly lengthy amount of time.”
Smith says he likes the idea of being in a better position to negotiate prices. “I like it because we use a lot of Jenn-Air (a Maytag subsidiary) and a little bit of Maytag. It gives us true competition when we recompete an entire deal.”
Not only that, Smith says, it will make G.E. drop some of its prices and increase rebate offers. “They will be more responsive when we have delivery issues,” says Smith who purchased GE appliances for Toll's 7,500 new homes last year.
When the U.S. Justice Department put its stamp of approval on the merger on March 29, it said the consolidation is not likely to reduce competition significantly for consumers. But the Justice Department's antitrust division focused its investigation on residential clothes washers and dryers, not the potential impact the merger might have on bulk sales driven by big builders. “Despite the two companies' relatively high share of laundry product sales in the United States, any attempt to raise prices likely would be unsuccessful,” the Justice Department said.
Whirlpool and Maytag represent two well-known brands in the industry, but competitors such as Kenmore, General Electric, and Frigadaire also are well established, not to mention that some foreign manufacturers, including LG (a Korean company) and Samsung (a Japanese company) could increase their imports into the United States, according to the Justice Department.
But at least one analyst disagrees. “Anytime you get consolidation among your vendors, it makes it more difficult to negotiate a price,” says housing analyst Greg Gieber of St. Louis-based AG Edwards. “If you start finding stuff creeping up faster than you want, you are going to start looking for new vendors. And how will consumers start reacting to an LG product, not a Whirlpool one?” he adds.