Economy

Italian industry: the crisis of “white”

199 washing machine” as they call it the bête noire of the European household appliance industry. A device that is offered at the price of only 199 euros and which symbolizes the low-cost pressure of Asian producers on an important sector, the pride of the Old Continent, but exhausted by years of plummeting demand and increasingly non-EU competition. fierce. The household appliances industry is yet another continental industry that risks decline, evidenced by a series of closure announcements.

Beko, the Turkish group that replaced Whirlpool in Europe, plans to eliminate almost two thousand jobs in Italy. Swedish Electrolux has announced a cut of 4 thousand employees worldwide. Chinese Haier is threatening 113 layoffs at Candy and has already sent 400 workers home in Romania. The wave of cuts does not even spare the Germans, those of the most beautiful and expensive washing machines and dishwashers: Miele expects 2,700 redundancies, the Bosch group 3,500. Here’s what Miele management said: «Unlike previous market slowdowns, this is particularly evident in the premium segment. What we are experiencing is not a temporary decline in the economy, but a lasting change in the general conditions that affect us, to which we must adapt.”

The cause of the “white goods” crisis, as the sector that produces washing machines, refrigerators, dishwashers and cookers is defined, is a combination of cyclical and structural factors. Normally the European market is quite stable, fueled by the replacement of old appliances with new ones. But the two years of Covid have shuffled the cards, causing a boom in demand followed by a slowdown. The European market for household appliances, including white goods, soared from 116.8 million units sold in ’20 to 126 million in ’21, and then slipped to 113 million in ’22 and 107.8 in ’23. A fall of over 14 percent in the space of two years. All in all, a predictable decrease, but amplified by the unexpected collapse of sales in France and Germany. And since the outlet for these products is mainly the Old Continent, the sudden fall of two such important markets was devastating. Added to this phenomenon is the increasingly strong competition from non-EU groups, which use the weapon of low prices to gain market shares.

In ten years, from ’13 to ’23, the share of large household appliances imported from Asia into Europe rose from 27 to 35 percent. The case of refrigerators is significant, with a share of Asian products increasing over the decade from 35 to 41 percent. Fewer sales and more competition: a double grip that puts pressure on companies present in Europe. And we are talking about a sector that is based on 3,214 companies and which employs, directly and indirectly, over 983 thousand people. This situation has a heavy impact on Italy, which for many years was the main continental manufacturer of household appliances, followed by Germany and Poland: in 2003 we managed to churn out 30 million pieces, a record.

Then the country moved to higher-end production while still maintaining second position in the Union in terms of trade balance in the sector. But this has not protected our factories from the current decline in demand. In the third quarter of ’24, production in Italy fell by 14.5 percent compared to a year earlier. We have been experiencing double-digit decreases for three years: minus 16.4 percent in ’23, minus 18 in ’22. Extreme stress for an industry with a turnover of 114 billion euros which employs 45 thousand direct workers plus 100 thousand in related industries.

The Italian white sector has a fascinating history that begins in the 1950s. Thanks to a handful of visionary entrepreneurs, such as Giovanni Borghi of Ignis, Eden Fumagalli of Candy, the Zoppas brothers, Antonio and Lino Zanussi, made in Italy products spread throughout Europe, defeating the French and American competition. Remember Paola Guidi, specialized journalist in the sector and author of the book From the electric house to the electronic house: «We were the world champions of white goods, in 1975 we manufactured over five million refrigerators, one million more than in the United States. But this success, based on ingenuity and lower prices compared to German and French products, began to creak for various reasons: managerial mismanagement, saturation, price war. The transition from entrepreneurs to multinationals occurred very early, starting in the 1970s when Philips bought Ignis from Borghi, a brilliant entrepreneur, however incapable of keeping his accounts in order, who plundered the company.” It was the end of an extraordinary generation that caused the decline of the national industry. «Companies began to invest less» continues Guidi «and found it difficult to deal with the saturation of the markets of the Nineties, aggravated by the advent of large chains such as Mediaworld and the resulting price war. The crisis of Italian companies became more serious and opened the way for large foreign groups. Starting with Electrolux, which entered the capital of Zanussi in 1984 and then took it all and became the largest producer in Italy.”

Now we have entered a third phase, which sees large Western multinationals entering a crisis. «It’s the fault of financialisation, of the loss of managers attentive to the industry replaced by those who moved production to China and focused more on dividends to shareholders than on investments» is the expert’s thesis. And new players have appeared on the market and have taken over European factories. Like the Chinese, with Haier with its 39 billion euro turnover (possible buyer of Electrolux) and with Midea, 48 billion turnover. Or like the Turkish Beko, which is part of the Arçelik group, present in a hundred countries and with five former Whirlpool factories in Italy.

But there is a new threat on the horizon, namely the transfer of the production of these giants from Europe to Romania, Egypt and other developing nations. Meanwhile, China is facing growing pressure from rising labor costs and suffers from a threatening glut of production. How to get out of it? Applia, the European association of household appliance manufacturers, is trying to convince the EU that it is necessary to defend the sector, given its economic and social weight, and is leveraging “green” issues: in its “Manifesto for a fair and sustainable 2024-2029”, Applia argues that “to reduce and optimize energy consumption by reducing carbon emissions, Europe must ensure a general diffusion of advanced sustainable technologies for all citizens, including those who cannot afford them. Rewards and incentives must be put in place to make highly energy efficient products accessible to all.”

The association points out that around 55 percent of European families cannot afford to buy a dishwasher. In Italy the government has opened a crisis table at the Ministry of Business and Made in Italy and has introduced with the latest Budget a 50 million fund which provides incentives of 100 to 200 euros for the replacement of old models with more efficient ones. efficient, as long as they are produced in Europe. A measure welcomed by businesses. «We are satisfied with the approval of the amendment to the budget law, supported by our association» says Marco Learnato, general director of Applia Italia. «Even if this measure alone cannot solve all the problems, we believe that the establishment of a fund for the renewal of devices represents a far-sighted measure. This is a strategic intervention to support families in difficulty, particularly affected by high bills, and to strengthen the entire Italian household appliances supply chain, with a view to energy efficiency.” The problem is that the provision, although important, will not be able to bridge the competitiveness gap that Italian and European productions face compared to non-EU groups. Our factories represent a wealth of skills, we are still a protagonist in the sector thanks to the supply chain of components manufacturers. And let’s not forget that in the cooking segment we export 90 percent of our production. But it’s not enough. Europe needs to decide what it wants to do with this industry: does it want to preserve it or not? Brussels, give it a shot.