By Michael Rudnick
NEW YORK-As the dollar hit a new low against the euro earlier this month of nearly $1.43 to 1 euro, home vendors that source components and finished goods from Europe and other regions have begun to re-evaluate their supply-chain models.
U.S. vendors that operate plants and source overseas may be experiencing tightened margins as the cost of international production, especially European, is climbing as the value of the U.S. dollar sinks.
Viking Range Corp., one of the few major appliance makers that still has a large part of its production in the United States, is somewhat insulated from the dollar-value decline, yet does source select products from Europe such as its Swiss-produced steam oven line, said Sue Bailey, Viking's manager of product development for major appliances. "[The dollar value decline] is affecting how much we choose to import," she said, adding that the issue has forced the company to ask the question, "is it just something we can do here ourselves?"
The premium white goods maker has so far resisted raising prices based on fluctuating currency values, Bailey said. "Our margin ends up eroding, but we are not going to change our prices to distributors every time the euro changes," she said. The company has already been forced to boost pricing due to raw material price increases, she said, adding that Viking took on a 5 percent increase in January.
German vacuum maker Robert Thomas LP, which this year stepped into the U.S. market with its Rotho Twin tt multisurface wet/dry vacuum, is somewhat protected from the dollar value fluctuation as its higher-end line provides significant profit margin room, said Thomas Slusarek, product marketing manager at Robert Thomas. He noted that those operating in the opening-price and midprice market that are sourcing from Europe are more sensitive to currency swings as they have less margin to spare. He said that Robert Thomas does not plan on raising the price of its roughly $1,200 vacuums to compensate for the falling dollar as "that would confuse the consumer," adding that price instability can lead to a loss of credibility with the consumer.
European manufacturers such as Robert Thomas tend to sell higher-end goods, which can serve them well in this time of tight margins, said Michael Stanley, managing director of factoring firm Rosenthal & Rosenthal. "Europe is typically higher-end goods, so there is more of a built-in margin to withstand some of that currency fluctuation," he said.
Robert Thomas further insulates itself from the dollar-value drop due to its international sales model. "If you sell in different markets that cover losses that can help," Slusarek said. "You need a certain balance."
Jim Krzeminski, executive vice president of sales, marketing and product development with Bissell Homecare, agreed that diversification via international sales can help to somewhat heal the pain associated with the dollar decline. "If you can get international business going, you can balance your portfolio," he said. "It is a good time to be selling elsewhere in the world," he added. Bissell, which operates factories in the North America and Asia, also sells its vacuums in such regions as the Middle East, the United Kingdom and Australia, he said.
Stanley said that the dollar slide has helped to drive an increase in U.S. exports of about 15 percent in the past year.
Haier, with production roots in China, is beginning to "feel the dollar" impact, said Warren Mann, vice president of sales for the independent dealer channel at Haier America. "There is no doubt that it has had an impact on our laundry business, which is made in China," he said. This impact is in part offset by Haier's refrigeration business of which a large percentage is produced in South Carolina, he added. "It is a little cheaper to use American workers now, because of the value of the dollar," he added.
Because Haier is a relatively new player in a very competitive U.S. white goods arena, the company doesn't raise prices based on currency fluctuations. Instead, it boosts price points with new features--"new electronics and flashier looks," Mann said.