Normally a white goods fair is about hardware. The most interesting news came on the third day of IFA Berlin. Companies announced new partnerships. Spanish Fagor and Chinese giant Haier announced their plans to co-operate on a large factory in Poland. Panasonic and Slovenian Gorenje also announced a similar agreement.
Haier claims to be the world’s largest white goods maker with $25 billion in revenue. Although Whirlpool maintains they are the largest. Fagor is market leader in Spain and part of MCC, an industrial conglomerate that is a cooperative and has about 80K workers. Fagor also owns Brandt, France’s largest white goods brand. Fagor has 1.2B € revenue and about 6K staff.
The joint-venture will build a new cooling factory in Poland. Haier has the majority of shares 51% and it plans that half of their European sales will come from this new factory. Cooling products are the most seasonal and unpredictable among all of the white goods. A week of sunshine can drive up refrigerator sales. So the eight-week lead time for orders from China is not acceptable for customers and trade partners. Washer and dishwasher sales are more predictable. Poland is an ideal location. It is right between East and West, has an industry-friendly mentality, and already has a strong industrial base with lots of suppliers. Total investment is around 70M €, and capacity is max 1M units.
Many were surprised by these numbers - there is already overcapacity in Europe. Is there room for another large factory, where Samsung is also adding capacity, also in Poland?
In a press conference at IFA René Coubertin, CEO of Haier Europe, said that these plans demonstrate Haier’s strong ambitions in Europe. “Fagor is a key player in the white goods industry and a leader in industrial expertise. We are delighted to combine our strengths.” Sergio Trevino, CEO of Fagor: “We are delighted to collaborate with a global leader such as Haier to improve our competitive position in both the European market and also in the Asian region.” Fagor has a strong brand reputation in their home markets, but outside they focus on built-in, in the upper-middle part of the market. Haier will help Fagor expand in China: in the countryside you need complex logistics to serve the many small mom-and-pops stores, in which Haier excels. And the trend in China is also towards built-in.
At least personally both managers seem to get on wonderfully and they seem to understand each other’s culture. Coubertin is French as Haier Europe is based in Paris. Chinese culture is different though, and observers noticed that there were no Chinese managers present. The typical cultural differences were mentioned. In Spain lunch can start at 2 pm, last until 6, where the Chinese like to start dinner at 7pm. So some adjustments had to be made.
Both managers clearly stated that the co-operation was industrial: a common platform, common purchasing using the Fagor network, but sales and brands are not affected. But if the co-operation works out well it will be extended to other products.
The co-operation between Panasonic and Gorenje was announced in July. Panasonic will invest 10M € in Gorenje shares and Gorenje already started manufacturing refrigerators for Panasonic. Next, a common washer platform will be developed. Panasonic, a large conglomerate, is not doing well and it took some convincing to agree on this investment. Gorenje is a company which successfully made the switch from the former Communist Yugoslavian society to Western standards. They are located in Slovenia, the most Northern of the former Yugoslavian countries. Thanks to proximity to Austria and long term experience on Western markets they are competitive and flourishing. Panasonic has similar motives as Haier to look for a European partner local experience in white goods production and marketing.
For smaller partners Fagor and Gorenje, it might be a good move to look for partners. The white goods market in Europe is saturated. Sales have plummeted, especially in Southern Europe. Competition is harsh and Samsung is very aggressive. It is no secret that smaller companies who do not have a niche position are in danger. Italy’s Antonio Merloni went under a while ago, and there is a lot of gossip about Italy’s Indesit. They used to be strong in entry level products, but the strongest competition is in that market segment. Indesit cannot compete on the German market. Production in Italy is too expensive, as wages have risen considerably where Germans refrained from wage hikes, and Polish workers still make a lot less than Italians. In Spain, Fagor is hit hard by the Spanish real estate crisis. So where BSH, Electrolux and Miele are doing well, there are a lot of smaller and weaker players.