By Timothy Aeppel
Clyde, Ohio(Reuters) - In the middle of Whirlpool Corp's bustling washer factory in northern Ohio there is an empty patch of concrete floor - a reminder of a $60 million expansion plan the appliance maker says fell victim to unfair foreign competition.
“We cleared that out to hold more plastic molding machines,” says Daniel O’Brien, the factory’s vice president of operations. Whirlpool <WHR.N> halted the upgrade two years ago blaming South Korea's LG Electronics Inc <066570.KS> and Samsung Electronics Co Ltd <005930.KS> for the setback. In a string of trade cases the Benton Harbor, Michigan-based manufacturer has argued the Koreans have undercut its U.S. business by exporting washers at unfairly low prices.
Since the Nov. 8 presidential election, Whirlpool has been fighting with renewed vigor, seeking more protection. President Donald Trump's administration is the first one in decades that openly says it is searching for ways to hit back at foreign producers it finds are hurting domestic manufacturers.
But the washer case has a twist.
Since the election, both Korean producers have announced plans for big U.S. factories and that confronts the administration with a dilemma: how do you weigh interests of a U.S. manufacturer against investment plans of foreign competitors and which jobs are more important?
Whirlpool's sprawling complex in Clyde - stretching nearly a mile from corner to corner - employs 3,200 well-paid union workers.
Now, LG is spending $250 million to build a 600-worker factory in Tennessee, while Samsung is investing $380 million to renovate an old Caterpillar Inc. factory in South Carolina that will employ 950. Both states are dominated by Republicans.
The investment in Tennessee has attracted support from local, state and federal officials, many of whom attended a groundbreaking ceremony in August, LG spokesman John Taylor said. “We got terrific feedback from Commerce Secretary (Wilbur) Ross when he was at the groundbreaking.”
Both LG and Samsung said their investments followed years of preparations, though Taylor said the timing of the announcement was "opportune" given Trump's focus on manufacturing jobs.
Whirlpool remains the leader in the $7.5 billion U.S. washer market, but the rivals are closing in. The company’s brands, which include Maytag and Amana, account for just under 35 percent of domestic sales, down from over 38 percent in 2013, according to Stevenson Co’s TraQline, a market research company. Over the same period, Samsung’s share doubled to just under 20 percent, while LG's held steady around 16 percent.
The Korean producers argue innovation and more choice for the consumers rather than prices have driven their growth and say Whirlpool's five straight years of record results weaken its case. Both companies deny they have violated U.S. trade laws.
"Whirlpool’s stock price more than tripled from 2012 to 2015. It is hard to see how such an industry is suffering material injury,” LG lead outside counsel Daniel Porter told the International Trade Commission, a federal agency that investigates trade issues, in a meeting earlier this year.
The Commerce Department declined to comment for this story because of the pending ITC case brought by Whirlpool.
Nevertheless, the Korean manufacturers are nervous. At the groundbreaking for the LG plant in August, the company pulled forward the date for completion by six months to the first quarter of 2019 — an extremely fast construction window for such a factory.
Whirlpool, which won two anti-dumping cases against the Korean firms in the past four years, took its fight one step further and filed a "safeguard petition" in May, seeking broader protection than anti-dumping measures provide.
A safeguard targets imports from any country and the petitioner does not need to prove that the goods are being sold at unfairly low prices—just that the influx of products is disrupting the U.S. market and causing "serious injury" to domestic producers.
The ITC is due to vote on Thursday whether washing machine imports cause harm to U.S. producers. If it rules in Whirlpool's favor, the commission will recommend remedies, such tariffs, import quotas or other measures, to Trump in early December.
U.S. producers have seldom sought such protections, in part because they are often challenged at the World Trade Organization. The last case was in 2002, when President George W. Bush imposed tariffs of up to 30 percent on certain imported steel products.
Clark Packard, a policy analyst at the R Street Institute, a libertarian think tank, says the safeguards should be reserved for rare instances of unforeseen surges in imports, but that the “atmosphere is ripe in Washington” for these cases.
Whirlpool says it is seeking broader protection because the Korean producers were able to avoid anti-dumping tariffs by moving production from country to country. After the ITC imposed anti-dumping tariffs against South Korean washers made in South Korea and Mexico in 2013, the production moved to China and when the ITC slapped tariffs on those washers, LG and Samsung began making them in Vietnam and Thailand.
“The only plausible explanation for these moves was to dodge the U.S. anti-dumping orders and avoid duties,” said Whirlpool Chairman Jeff Fettig, in testimony before the ITC in September.
As part of the safeguard petition, Whirlpool also wants curbs on the import of large washing machine components, arguing otherwise the Korean companies could merely set up assembly plants running primarily on foreign parts.
While the case has worked its way through the system, the mood in Clyde has darkened as investment plans were scaled back.
Leading the way up to a cluster of idle machines, O’Brien, the plant vice president, says: “This is $3 million worth of machinery — and it only runs two or three hours a day.”
The equipment was installed in 2015 before the other investments were put on hold, he notes. Elsewhere in the plant, a giant poster, painted by a worker, shows an anthropomorphic Whirlpool washing machine, pushing past stumbling washers labeled LG and Samsung - a far more upbeat take on the rivalry than the mood on the factory floor.
“Everyone here feels the frustration,” says Lori Frasure, a 30-year-old factory worker, “it’s a frustration that we’re not all playing by the same rules.”
The only other large domestic manufacturer of washing machines is GE Appliances, now owned by China’s Haier Group <1169.HK>. Earl Jones, the company’s senior counsel, says GE is not party in the Whirlpool case, but it has also cut investments and reassigned workers inside their appliance manufacturing complex in Louisville, Kentucky.
"We’re on the record of supporting their petition.”
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(Reporting by Timothy Aeppel; Editing by Tomasz Janowski)