# Review ofTools
ClothesWasherWorkshop

.,., 

### Clothes Washer Manufacturer ImpactAnalysis (MIA) Workshop Presentation July22, 1999Clothes Washer Manufacturer ImpactAnalysis Status 

### Arthur D. Littl.e willfinalize the ClothesWasher 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 manufacturersub-group cash flow analysis by using GRIM with a set ofassumptions more representative ofthe small firms' business operations. 1-tJ ADL is currently in the process ofworking 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 2Clothes Washer Manufacturer Impact Analysis

July 12, 1999 3Clothes Washer GRIM Modifications to GRIM 

### The version ofthe GRIM distributedwith the Preliminary TSO and the ANOPR

### was modified to accountforthe newshipments 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 forV-axis efficiency levels in the Standard Case (levels 1to 5), an.H-axis washer represents a clothes washer 35% more efficientthan the baseline

## (~ AHAM prov!ded a breakdown of incremental fixed costs into two categories: capital conversion costs which comprise oftooling and equipment, and design conversion costs which comprise ofdesign and marketing expenses.

## ~ The modified GRIM allows users to specify what proportion ofoverhead is variable in the period that shipments adjustfrom their pre-standard to post-standard levels (this assumption is applicable to one year before and three years afterthe Standard Year).

July 12, 1999 4Clothes Washer GRIM AHAMData Submittal 

### AHAM provided AOL with a breakdown offixed costs into tooling 

### & investment costs, and design 

### & marketing expenses.

Fixed Costs Tota ercent Tooling+ Design& Fixed Improvement Investment Marketfug Costs (o) Costs Costs ($perUnit) ($perUnit) ($perUnit)

July 12, 1999 5Ciothes Vvasher GRIM 

### Shipmentforecasts 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
4.50co 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-efflevel 6 -efflevel7 -efflevel8 --o-efflevel 9

July 12, 1999 6Clothes Washer GRIM Export Sales 

### The clothes washershipmentsforecastwas adjusted to include export sales. 

# J Export sales accounted for approximately 

### 12.5°/o ofthe 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 7Clothes Washer GRIM Baseline Costs andPrice 

### The baseline cost ofan H-axis washerwas characterized using the incremental cost data atthe 

### 35o/o efficiency improvement level (i.e., the first H-axis level) as submitted 

### byAHAM.

The baseline H-axis price was estimated using the baseline H-axis costs and applying the markup needed to arrive at a profit before taxvalue of 

### 1Oo/o.
July 12, 1999 8Clothes Washer GRIM Base Case Results 

### A Base Case NPV of$1317 million was calculated forthe 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 presentvalue (NPV) ofthe 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 9Clothes Washer Manufacturer Impact Analysis

July 12, 1999 10Clothes Dryer GRIM · Introduction 

### Manufacturer intervieyvs highlighted the pull-through effectofclothes 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 ofwashers are sold as pairs with dryers. 

### Ci/J Any decline in washer sales would also reduce the sales ofdryers, and hence**reduc~** the NPV ofthe dryer business - A separate GRIM was developed to model the financial impact ofthese

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 incurfixed conversion costs to retool their dryer manufacturing operations.

- The Dryer GRIM does not consider any conversion costs thatthe industry might incur atthe more stringent standard levels, and hence the Dryer GRIM results will understate the negative impact on the manufacturers.

July 12, 1999 11Clothes Dryer GRIM Assumptions 

### Industry-averagevalues ofmanufacturer prices, shipments, manufacturing costs and financial information were used to perform the dryercash flowanalysis.

## (~ Baseline dryer manufacturer price of$220.40 was obtained from the Current Industrial Reports.

### l~ Dryershipments 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 ofthe appliance industry

- These inputs are similarto the ones used for developing the clothes

washer GRIM.



### Based onthese inputs, a Base Case NPV of$636.3 millionwas calculated forthe**~.S.** 

### clothes dryer industry.

July 12, 1999 12Clothes Dryer GRIM Results 

### The Dryer GRIM**resul~s** 

### indicate a

### 2o/o to 

### 10°/o negative impact on the dryer business atthe more stringentstandard levels.

1¢1ency ,<."**Imp,~oy~Jllent**·.·..

July 12, 1999 13