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Stimulus Bill: ‘Cash For Refrigerators’

From Business Week:

Latest in Stimulus: ‘Cash for Refrigerators’

By Matthew Boyle Mon Aug 24

A $300 million cash-for-clunkers-type federal program to boost sales of energy-efficient home appliances provides a glimmer of hope for beleaguered makers of washing machines and dishwashers, but it’s probably not enough to lift companies such as Whirlpool (NYSE:WHR – News) and Electrolux out of the worst down cycle in the sector’s history.

Beginning late this fall, the program authorizes rebates of $50 to $200 for purchases of high-efficiency household appliances. The money is part of the broader economic stimulus bill passed earlier this year. Program details will vary by state, and the Energy Dept. has set a deadline of Oct. 15 for states to file formal applications. The Energy Dept. expects the bulk of the $300 million to be awarded by the end of November. (Unlike the clunkers auto program, consumers won’t have to trade in their old appliances.)

"These rebates will help families make the transition to more efficient appliances, making purchases that will directly stimulate the economy," Energy Secretary Steven Chu said in a statement announcing the plan. Only appliances covered by the Energy Star seal will qualify. In 2008, about 55% of newly produced major household appliances met those standards, which are set by the Energy Dept. and Environmental Protection Agency.

The money can’t come soon enough for the home appliance industry, which is mired in an unprecedented sales slump that began when the housing market cooled in 2006. Since then that slump has worsened considerably. Shipments of washers, dryers, refrigerators, and ovens dropped 10% in 2008 and are down 15% through July, according to the Association of Home Appliance Manufacturers. "It’s brutal," says Raymond James (NYSE:RJF – News) analyst Sam Darkatsh.

The leading appliance makers have felt the pinch. Whirlpool of Benton Harbor, Mich., which controls about 40% of the U.S. market, has seen its sales drop 20% through the first two quarters of this year. North American shipments for its Stockholm-based rival Electrolux, meanwhile, have dropped for a dozen consecutive quarters. Both companies have laid off hundreds of workers, and General Electric (NYSE:GE – News) mulled shutting down an entire refrigerator plant earlier this year until deciding to keep it open with a reduced workforce.

Not surprisingly, appliance makers cheered the news. Electrolux spokesman Tony Evans calls the federal program a "great opportunity to encourage consumers to replace their old appliances." Lately, cash-strapped consumers have chosen to repair, rather than replace, hobbled dishwashers and other water-intensive appliances, according to industry analysts. Electrolux says it is readying "aggressive" marketing programs that will run parallel with the rebates, and it’s reasonable to expect appliance makers and retailers will devise additional discounts to amplify the rebates’ appeal. "We will be ready to go when the new incentive programs hit the market," Evans said.

Unlike the popular, $3 billion cash-for-clunkers vehicle program, which ends on Aug. 24, there’s no guarantee that hard-hit consumers are prepared to plump for new washers, stoves, and fridges. The federal outlay will piggyback on rebate programs for energy-saving appliances that have existed for years in more than 25 states, but which have largely failed to spur demand. Home improvement retailers like Home Depot (NYSE:HD – News) and Lowe’s (NYSE:LOW – News) have also offered deep discounts on big-ticket appliances lately, with little impact.

"The cash-for-clunkers (program) had a discernible value proposition for the consumer, because he knows how much his (clunker) is worth," says Darkatsh, the Raymond James analyst. "With appliances, there is no trade-in. You can walk into Home Depot and get a great deal on a home appliance any time you want one. Why would it drum up sales now?" Laura Champine, an analyst with Cowen & Co. (NasdaqGS:COWN – News), agrees. "I’m not sure if it will be as powerful as cash for clunkers because there is something compelling about that $4,500 discount," she says. "Also, a new car is more fun than a new dishwasher. So I’m not sure if it will be as much of a driver, but any driver is welcome right now." …

As the article notes, this really not like ‘cash for clunkers,’ since there is no trade in. It is just Mr. Obama trying to induce people into buying "greener" appliances.

And yet it is just as bad for the environment as the cash for clunkers deal was.

For the old appliances will end up in a landfill. And making new appliances will be harder on the environment than using the old ones.

And it isn’t even real stimulus, since it is not creating something we don’t have but need.

Still, maybe someone should tell ‘Cold Cash’ Jefferson.

This article was posted by Steve on Monday, August 24th, 2009. Comments are currently closed.

9 Responses to “Stimulus Bill: ‘Cash For Refrigerators’”

  1. proreason says:

    When will we see the Cash-for-Porno program. Oh you say, there goes proreason again. But contemplate this:

    What % of pornographers voted for Obamy?
    What % of campaign donations from pornographers went to Obamy?
    What % of Obamy supporters do you think are into pornography?

    Well of course, nobody knows. There isn’t any polling on that, and if somebody tried to do it, they would develop spontaneous broken knees very quickly.

    But ole proreason has a hunch what the answers are.

    So don’t be surprised when you see a groundswell for a stimulus package for the “movie” industry real soon.

    • Liberals Demise says:

      Damn pro ………. I’m not sure if I want to shake hands with people since you put it that way!!

      Would stimulus (pun intended) money for the movie industry be called “Dirty” money?

  2. “A rebate?”

    Like those 8 to 12 week wait rebates private companies make their customers jump through hoops for??

    Of course, a gub’mint rebate program would be much better managed since it involves shoveling out tax payer dollars.

    Just ask our grandchildren.

  3. catie says:

    Damn, I just bought a new dishwasher for Mother’s Day. This is ridiculous. What’s next? Cash for school supplies. Oh wait, they did that in NY and the people went out and bought Ipods and flat screen tvs.

  4. Right of the People says:

    Can we have a cash for clunkers for politicians? I’ve got about 535 I’d like to trade in on a newer, saner model.

  5. VMAN says:

    Hey I got a great idea. Why don’t we just give a tax break to the companies that make the appliances and they can give their own rebates. Oh wait that doesn’t fit the O hole’s plans. Yassa massa Obama we be shufflin on down to gets our friginator.

  6. wardmama4 says:

    Pro & LD – come on get with the program – it is already being funded – It Is Art & has value. . .

  7. MinnesotaRush says:

    ‘Cash for Refrigerators’ .. Democratic (former) Congressman from Louisianna, William Jefferson, got caught up in a whole different kind of “cash for refrigerators” program, now didn’t he?!?

    S’pose he was confused at first when he heard about this one. He maybe thought it meant more cash for his freezer.

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