Review of Tools 

Clothes Washer Workshop 

., 
., 

Clothes Washer Manufacturer 

Impact Analysis (MIA) 

Workshop Presentation 

July 22, 1999 
Clothes Washer Manufacturer Impact Analysis Status 

Arthur D. Littl.e will finalize the Clothes Washer Manufacturer Impact 

Analysis report once the test procedure concerns have been · 

resolved. 

~ ADL conducted detailed interviews with clothes washer manufacturers .. 

~ ADL developed the cash flow and employment impacts. 

- The GRIM spreadsheet was used to develop the cash flow impacts at 

the industry level. 

- ADL also developed a small manufacturer sub-group cash flow analysis 

by using GRIM with a set of assumptions more representative of the 

small firms' business operations. 

1-tJ ADL is currently in the process of working with manufacturers to identify 

any confidentiality related issues, before the report is made public. 

[~ The analysis will be revised, as needed, to reflect new information. 

July 12, 1999 

2 
Clothes Washer Manufacturer Impact Analysis 

July 12, 1999 

3 
Clothes Washer GRIM Modifications to GRIM 

The version of the GRIM distributed with the Preliminary TSO and the 

ANOPR was modified to account for the new shipments forecast. 

~ The modified GRIM considers the V-axis and the H-axis product 

categories separately in the Base Case and the Standard Case 

In the Base Case and for V-axis efficiency levels in the Standard 

Case (levels 1 to 5), an.H-axis washer represents a clothes washer 

35% more efficient than the baseline 

(~ AHAM prov!ded a breakdown of incremental fixed costs into two 

categories: capital conversion costs which comprise of tooling and 

equipment, and design conversion costs which comprise of design and 

marketing expenses. 

~ The modified GRIM allows users to specify what proportion of overhead 

is variable in the period that shipments adjust from their pre-standard to 

post-standard levels (this assumption is applicable to one year before 

and three years after the Standard Year). 

July 12, 1999 

4 
Clothes Washer GRIM AHAM Data Submittal 

AHAM provided AOL with a breakdown of fixed costs into tooling & 

investment costs, and design & marketing expenses. 

Fixed Costs Tota 

ercent Tooling+ Design& Fixed 

Improvement Investment Marketfug Costs (o) 

Costs Costs ($per Unit) 

($per Unit) ($per Unit) 

July 12, 1999 

5 
Ciothes Vvasher GRIM 

Shipment forecasts developed by DOE were used in conducting the 

GRIM cash flow analysis. 

8.50 

8.00 

7.50 

Ci 7.00 c 

~ 

:§. 

6.50 J!l 

c 

QI 

E 

Q. 

:c 6.00 II) 

5.50 

5.00 

4.50 

co Ol 0 ...... N ('I) ;g I() c.o "' co Ol Ol Ol 0 0 0 0 0 0 0 0 0 Ol Ol 0 0 0 0 0 0 0 0 0 0 ...... N N N N N N N N N N 

Shipments by Standard Level 

0 N ('I) '<I' I() c.o "' co Ol 0 ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... N 0 0 0 0 0 0 0 0 0 0 0 N N N N N N N N N N N 

Year 

...... ~ ('I) 

~ I() c.o "' N N N N 0 0 0 0 0 0 ~ N N N N N N N 

co Ol 0 N N ('I) 

0 0 0 N N N 

-+-base 

-ct-efflevel 1 

eff level 2 

'""'"", eff level 3 

-+-eff level 4 

---eff level 5 

-t-eff level 6 

-efflevel7 

-efflevel8 

--o-eff level 9 

July 12, 1999 

6 
Clothes Washer GRIM Export Sales 

The clothes washer shipments forecast was adjusted to include 

export sales. 

J Export sales accounted for approximately 12.5°/o of the industry unit 

shipments in the year 1996. 

Source: AHAM Fact Book, 1997 

'V Manufacturers stated that a DOE standard would negatively impact 

washer production for both domestic and export sales. 

i/1 AOL adjusted the shipments forecast to include export sales in the GRIM 

cash flow analysis. 

July 12, 1999 

7 
Clothes Washer GRIM Baseline Costs and Price 

The baseline cost of an H-axis washer was characterized using the 

incremental cost data at the 35o/o efficiency improvement level (i.e., 

the first H-axis level) as submitted by AHAM. 

The baseline H-axis price was estimated using the baseline H-axis costs 

and applying the markup needed to arrive at a profit before tax value of 

1 Oo/o. 

July 12, 1999 

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Clothes Washer GRIM Base Case Results 

A Base Case NPV of $1317 million was calculated for the U.S. clothes 

washer industry. 

J The baseline V-axis and the H-axis washer costs and prices were used 

to develop cash flow estimates and the net present value (NPV) of the Vaxis and H-axis washer segments. 

V-axis 1040.7 

H-axis 276.3 

Total 1317.0 

J Additional Base Case scenarios will be developed to characterize 

uncertainty. 

July 12, 1999 

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Clothes Washer Manufacturer Impact Analysis 

July 12, 1999 

10 
Clothes Dryer GRIM · Introduction 

Manufacturer intervieyvs highlighted the pull-through effect of clothes 

washers on the clothes dryer market. 

ri/J Dryer sales are highly correlated to washer sales as people frequently 

buy these appliances as a set 

- Approximately 40°/o to 60°/o of washers are sold as pairs with dryers. 

Ci/J Any decline in washer sales would also reduce the sales of dryers, and 

hence reduc~ the NPV of the dryer business 

- A separate GRIM was developed to model the financial impact of these 

considerations on the dryer business ... 

riJ Additionally, changes in washer platforms resulting from a DOE standard 

could dictate a change to the dryer platform as well. As a result, 

manufacturers would have to incur fixed conversion costs to retool their 

dryer manufacturing operations. 

- The Dryer GRIM does not consider any conversion costs that the 

industry might incur at the more stringent standard levels, and hence 

the Dryer GRIM results will understate the negative impact on the 

manufacturers. 

July 12, 1999 

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Clothes Dryer GRIM Assumptions 

Industry-average values of manufacturer prices, shipments, 

manufacturing costs and financial information were used to perform 

the dryer cash flow analysis. 

(~ Baseline dryer manufacturer price of $220.40 was obtained from the 

Current Industrial Reports. 

l~ Dryer shipments were obtained from the AHAM Fact Book 

li/J Disaggregated manufacturing costs (labor, material and overhead) and 

financial information (e.g., tax rate, working capital, depreciation, cost of 

capital, etc.) were obtained from a top-down analysis of the appliance 

industry 

- These inputs are similar to the ones used for developing the clothes 

washer GRIM. 

Based on these inputs, a Base Case NPV of $636.3 million was calculated 

for the ~.S. clothes dryer industry. 

July 12, 1999 

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Clothes Dryer GRIM Results 

The Dryer GRIM resul~s indicate a 2o/o to 10°/o negative impact on the 

dryer business at the more stringent standard levels. 

1¢1ency ,<." 

Imp,~oy~Jllent ·.· .. 

July 12, 1999 

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