CHAPTER 12. PRELIMINARY MANUFACTURER IMPACT ANALYSIS 

TABLE OF CONTENTS 

12.1 INTRODUCTION ......................................................................................................... 12-1 

12.2 METHODOLOGY ........................................................................................................ 12-1 

12.2.1 Phase I: Industry Profile................................................................................................ 12-2 

12.2.2 Phase II: Industry Cash-Flow Analysis and Interview Guide....................................... 12-2 

12.2.2.1 Industry Cash-Flow Analysis....................................................................... 12-2 

12.2.2.2 Interview Guide ........................................................................................... 12-2 

12.2.3 Phase III: Sub-Group Analysis ..................................................................................... 12-3 

12.2.3.1 Manufacturer Interviews .............................................................................. 12-3 

12.2.3.2 Revised Industry Cash-Flow Analysis......................................................... 12-3 

12.2.3.3 Manufacturer Sub-Group Analysis .............................................................. 12-4 

12.2.3.4 Competitive Impact Assessment.................................................................. 12-4 

12.2.3.5 Manufacturing Capacity Impact .................................................................. 12-4 

12.2.3.6 Employment Impact..................................................................................... 12-4 

12.2.3.7 Cumulative Regulatory Burden ................................................................... 12-5 

12.3 PRELIMINARY MANUFACTURER IMPACT ANALYSIS RESULTS ................... 12-5 

12.3.1 General Interview Structure ........................................................................................... 12-5 

12.3.1.1 Key Issues .................................................................................................... 12-6 

12.3.1.2 Shipment Projections ................................................................................... 12-6 

12.3.1.3 Product Mix ................................................................................................. 12-6 

12.3.1.4 Profitability .................................................................................................. 12-7 

12.3.1.5 Conversion Costs, Manufacturing Capacity and Employment Levels ........ 12-7 

12.3.1.6 Market Shares and Industry Consolidation.................................................. 12-8 

12.3.1.7 Product Utility and Innovation..................................................................... 12-8 

12.3.1.8 Cumulative Burden ...................................................................................... 12-8 

12.3.1.9 State Energy Conservation Standards .......................................................... 12-9 

12.3.1.10 International Energy Conservation Standards ............................................. 12-9 

12.3.1.11 Impact of Cumulative Burden on Small Manufacturers .............................. 12-9 

12.3.2 Dishwasher Preliminary MIA Results ......................................................................... 12-10 

12.3.2.1 Dishwasher Key Issues .............................................................................. 12-10 

12.3.2.2 Dishwasher Product Mix............................................................................12-10 

12.3.2.3 Dishwasher Profitability ............................................................................ 12-11 

12.3.2.4 Dishwasher Conversion Costs ................................................................... 12-11 

12.3.2.5 Dishwasher Manufacturing Capacity and Employment Levels................. 12-12 

12.3.2.6 Dishwasher Market Share and Industry Consolidation ............................. 12-13 

12.3.2.7 Dishwasher Product Utility and Innovation............................................... 12-13 

12.3.2.8 Dishwasher Cumulative Burden ................................................................ 12-13 

12.3.3 Dehumidifier Preliminary MIA Results....................................................................... 12-14 

12.3.3.1 Dehumidifier Key Issues............................................................................ 12-14 

12.3.3.2 Dehumidifier Product Mix ......................................................................... 12-14 

12.3.3.3 Dehumidifier Profitability.......................................................................... 12-15 

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12.3.3.4 Dehumidifier Conversion Costs................................................................. 12-15 

12.3.3.5 Dehumidifier Manufacturing Capacity and Employment Levels .............. 12-17 

12.3.3.6 Dehumidifier Market Share and Industry Consolidation........................... 12-17 

12.3.3.7 Dehumidifier Product Utility and Innovation ............................................ 12-17 

12.3.3.8 Dehumidifier Cumulative Burden.............................................................. 12-18 

12.3.4 Commercial Clothes Washer Preliminary MIA Results.............................................. 12-18 

12.3.4.1 Commercial Clothes Washer Key Issues................................................... 12-18 

12.3.4.2 Commercial Clothes Washer Product Mix ................................................ 12-18 

12.3.4.3 Commercial Clothes Washer Customer Mix ............................................. 12-19 

12.3.4.4 Commercial Clothes Washer Profitability ................................................. 12-19 

12.3.4.5 Commercial Clothes Washer Conversion Costs ........................................ 12-19 

12.3.4.6 Commercial Clothes Washer Manufacturing Capacity and 

Employment Levels ................................................................................... 12-20 

12.3.4.7 Commercial Clothes Washer Market Share and Industry Consolidation .. 12-20 

12.3.4.8 Commercial Clothes Washer Product Utility and Innovation ................... 12-21 

12.3.4.9 Commercial Clothes Washer Cumulative Burden..................................... 12-22 

12.3.4.10 Commercial Clothes Washer State Energy Conservation Standards......... 12-22 

12.3.4.11 Commercial Clothes Washer International Energy Conservation 

Standards.................................................................................................... 12-23 

12.3.4.12 Commercial Clothes Washer Impact on Small Manufacturers.................. 12-24 

LIST OF TABLES 

Table 12.3.1 Dishwasher One-Time Costs ........................................................................... 12-12 

Table 12.3.2 AHAM Capital and Product Conversion Cost Data Submittal, 0 – 35.00 

Pints/Day.......................................................................................................... 12-16 

Table 12.3.3 AHAM Capital and Product Conversion Cost Data Submittal, 35.01 – 

45.00 Pints/Day................................................................................................ 12-16 

Table 12.3.4 AHAM Capital and Product Conversion Cost Data Submittal, 54.01 – 

74.99 Pints/Day................................................................................................ 12-16 

Table 12.3.5 State Commercial Clothes Washer Regulations Similar to EPACT 2005....... 12-22 

Table 12.3.6 California State Efficiency Standards for Commercial Clothes Washers ....... 12-22 

Table 12.3.7 California Water Conservation Standards for Residential Clothes Washers... 12-23 

Table 12.3.8 DOE Estimate of LVM Clothes Washer Sales and Unit Shipments in 2006 .. 12-25 

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CHAPTER 12. PRELIMINARY MANUFACTURER IMPACT ANALYSIS 

12.1 INTRODUCTION 

The purpose of the manufacturer impact analysis (MIA) is to identify the likely impacts 

of efficiency standards on manufacturers. The July 15, 1996, Process Rule (Procedures for 

Consideration of New or Revised Energy Conservation Standards for Consumer Products, 61 FR 

36974, 10 CFR Part 430, Subpart C, Appendix A) (Process Rule) provides guidance for 

conducting this analysis with input from manufacturers and other interested parties. The U.S. 

Department of Energy (DOE) will apply this methodology to its evaluation of standards. The 

Process Rule gives guidelines for the consideration of financial impacts, and of a wide range of 

quantitative and qualitative industry impacts that might occur following the adoption of a 

standard. For example, a particular standard level, if adopted by DOE, could require changes to 

dishwasher, dehumidifier, cooking product or commercial clothes washer manufacturing 

practices. DOE will identify and understand these impacts through interviews with 

manufacturers and other stakeholders during the notice of proposed rulemaking (NOPR) stage of 

its analysis. 

Recently, DOE announced changes to the MIA format through a report issued to 

Congress on January 31, 2006 (as required by section 141 of the Energy Policy Act (EPACT) of 

2005), entitled “Energy Conservation Standards Activities.”a Previously, DOE did not report 

any MIA results during the advance notice of proposed rulemaking (ANOPR) phase; however, 

under this new format, DOE has collected, evaluated, and reported preliminary information and 

data in the ANOPR. Such preliminary information includes the anticipated conversion capital 

expenditures by efficiency level and the corresponding anticipated impacts on jobs. DOE 

solicited this information during the ANOPR engineering analysis manufacturer interviews and 

reports the results in the preliminary MIA in section 12.3 of this chapter.. 

12.2 METHODOLOGY 

DOE conducts the MIA in three phases, and further tailors the analytical framework 

based on stakeholder comments. In Phase I, an industry profile is created to characterize the 

industry, and a preliminary MIA is conducted to identify important issues that require 

consideration. Results of the Phase I analysis are presented in the ANOPR technical support 

document (TSD). In Phase II, an industry cash flow model and an interview questionnaire are 

prepared to guide subsequent discussions. In Phase III, manufacturers are interviewed, and the 

impacts of standards are assessed both quantitatively and qualitatively. Industry and sub-group 

cash flow and NPV are assessed through use of the Government Regulatory Impact Model 

(GRIM). Then impacts on competition, manufacturing capacity, employment, and regulatory 

a

 This report is available on the DOE website at: 

http://www.eere.energy.gov/buildings/appliance_standards/2006_schedule_setting.html. 

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burden are assessed based on manufacturer interview feedback and discussions. Results of the 

Phase II and III analyses are presented in the NOPR TSD. 

12.2.1 Phase I: Industry Profile 

In Phase I of the manufacturer impact analysis, DOE collects pertinent qualitative and 

quantitative financial and market information. This includes dishwasher, dehumidifier, cooking 

product and commercial clothes washer manufacturer market shares, corporate operating ratios, 

wages, employment, and production cost ratios. Sources of information include reports 

published by industry groups, trade journals, the U.S. Census Bureau, and copies of Securities 

Exchange Commission (SEC) 10-K filings. In addition, DOE relies on information from its 

market and technology assessment, engineering analysis, life-cycle cost analysis, and analysis of 

markups to determine equipment price to characterize the dishwasher, dehumidifier, cooking 

product and commercial clothes washer manufacturing industries. 

12.2.2 Phase II: Industry Cash-Flow Analysis and Interview Guide 

In Phase II, DOE will perform a preliminary industry cash-flow analysis and prepare 

written guidelines for interviewing manufacturers. 

12.2.2.1 Industry Cash-Flow Analysis 

DOE uses the GRIM to analyze the financial impacts of energy conservation standards on 

the dishwasher, dehumidifier, cooking product and commercial clothes washer industries. 

Standards will likely require additional investment, raise production costs, and affect revenue 

through higher prices and, possibly, lower sales. The GRIM uses a number of factors to 

determine a series of annual cash flows for the year standards becomes effective and continuing 

for several years after implementation. These factors include annual expected revenues, costs of 

sales, selling and general administration costs, taxes, and capital expenditures related to 

depreciation, new standards, and maintenance. Inputs to the GRIM include manufacturing costs, 

shipments forecasts, and price forecasts developed in other analyses. Another input, financial 

information, will be developed based on publicly available data and confidentially submitted 

manufacturer information. The results of the GRIM are compared against baseline projections 

where no standards are in place. The financial impact of new standards is the difference between 

the two sets of discounted annual cash flows. 

12.2.2.2 Interview Guide 

DOE will conduct interviews with manufacturers to gather information on the effects of 

standards on revenues and finances, direct employment, capital assets, and on industry 

competitiveness. These interviews will take place during Phase III of the MIA. Prior to the 

interviews, DOE will distribute an interview guide that will provide a starting point to identify 

relevant issues and help identify the impacts of standards on individual manufacturers or subgroups of manufacturers. It is anticipated that the interview guide will cover current 

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organizational characteristics, industry infrastructure, manufacturer cash-flow analysis, a 

competitive impacts assessment, an employment impacts assessment, and a manufacturing 

capacity impacts assessment. 

12.2.3 Phase III: Sub-Group Analysis 

The Phase III activities will take place after the publication of the ANOPR, and will 

include manufacturer interviews, revision of the industry cash-flow analysis, manufacturer subgroup cash-flow analysis, competitive impact assessment, manufacturing capacity impact, 

employment impact, and cumulative regulatory burden. 

12.2.3.1 Manufacturer Interviews 

The information gathered in Phase I and the cash-flow analysis performed in Phase II will 

be supplemented with information gathered during interviews with manufacturers during Phase 

III. The interview process has a key role in the manufacturer impact analyses, since it provides 

an opportunity for interested parties to express their views privately on important issues, 

allowing confidential or sensitive information to be considered in the rulemaking decision. 

DOE will conduct detailed interviews with as many manufacturers as is necessary to gain 

insight into the range of potential impacts of standards. During the interviews, the Department 

will solicit information on the possible impacts of standards on sales, direct employment, capital 

assets, and industry competitiveness. Both qualitative and quantitative information are valuable. 

Interviews will be scheduled well in advance in order to provide every opportunity for key 

individuals to be available for comment. Although a written response to the questionnaire will 

be acceptable, an interactive interview process is preferred, because it helps clarify responses and 

provides the opportunity for additional issues to be identified. 

Interview participants will be asked to identify all confidential information provided in 

writing or orally. All information transmitted will be considered, as appropriate, in DOE’s 

decision-making process. However, confidential information will not be made available in the 

public record. Participants will also be asked to identify all information they wish included in 

the public record but that they do not want to have associated with their interview. This 

information will be incorporated into the public record but reported without attribution. 

12.2.3.2 Revised Industry Cash-Flow Analysis 

In Phase II of the MIA, DOE prepares a preliminary GRIM. During the interviews, DOE 

will seek comment and suggestions regarding the values selected for the parameters. Upon 

completion of the interviews, DOE will revise its industry cash flow model based on the 

feedback provided through the interviews. 

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12.2.3.3 Manufacturer Sub-Group Analysis 

Using average cost assumptions to develop an industry cash flow estimate is not adequate 

for assessing differential impacts among sub-groups of manufacturers. Smaller manufacturers, 

niche players, or manufacturers exhibiting a cost structure that differs largely from the industry 

average could be more negatively affected. Ideally, DOE would consider the impact on every 

firm individually; however, it typically uses the results of the industry characterization to group 

manufacturers exhibiting similar characteristics. During the interview process, DOE will discuss 

the potential sub-groups and sub-group members that have been identified for the analysis. DOE 

will look to the manufacturers and other stakeholders to suggest what sub-groups or 

characteristics are the most appropriate for the analysis. 

12.2.3.4 Competitive Impact Assessment 

Section 342 (6)(B)(i)(V) of the Energy Policy Act of 1992 (EPCA) directs DOE to 

consider any lessening of competition that is likely to result from imposition of standards. It 

further directs the Attorney General to determine the impacts, if any, of any decrease in 

competition. DOE will make a determined effort to gather and report firm-specific financial 

information and impacts. The competitive analysis will focus on assessing the impacts to 

smaller, yet significant, manufacturers. The assessment will be based on manufacturing cost data 

and on information collected from interviews with manufacturers. The manufacturer interviews 

will focus on gathering information that would help in assessing asymmetrical cost increases to 

some manufacturers, the potential increase in business risks from an increased proportion of 

fixed costs, and potential barriers to market entry (e.g., proprietary technologies). 

12.2.3.5 Manufacturing Capacity Impact 

One of the significant outcomes of standards could be the consequential obsolescence of 

existing manufacturing assets, including tooling and investment. The manufacturer interview 

guide will have a series of questions to help identify impacts on manufacturing capacity, 

specifically capacity utilization and plant location decisions in the U.S. and North America with 

and without a standard; the ability of manufacturers to upgrade or remodel existing facilities to 

accommodate the new requirements; the nature and value of stranded assets, if any; and 

estimates for any one-time restructuring and other charges, where applicable. 

12.2.3.6 Employment Impact 

The impact of new energy-efficiency standards on employment is an important 

consideration in the rulemaking process. In order to assess how domestic employment patterns 

might be affected, the interview will explore current employment trends in the relevant 

industries. In addition, the interview will solicit manufacture views on changes in employment 

patterns that may result from increased standard levels. The employment impacts section of the 

interview guide will focus on current employment levels associated with manufacturers at each 

of their production facilities, expected future employment levels with and without a standard, 

and differences in workforce skills and issues related to the retraining of employees. 

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12.2.3.7 Cumulative Regulatory Burden 

DOE recognizes and seeks to mitigate the overlapping effects on manufacturers of 

standards and other regulatory actions affecting the same equipment or companies. Based on its 

own research and discussions with manufacturers, DOE identified several regulations relevant to 

dishwasher, dehumidifier, cooking product, and commercial clothes washer manufacturers, 

including existing or new standards, the phase-out of hydrochlorofluorocarbon (HCFC) 

refrigerants and foam insulation blowing agents, standards for other products made by 

dishwasher, dehumidifier, cooking product, and commercial clothes washer manufacturers, State 

energy conservation standards, and International energy conservation standards. 

12.3 PRELIMINARY MANUFACTURER IMPACT ANALYSIS RESULTS 

During the ANOPR phase, DOE conducted a preliminary evaluation of the impact of 

potential new regulations on manufacturer financial performance, manufacturing capacity and 

employment levels, and product utility and innovation. A primary focus was to identify the 

cumulative burden that industry faces from the overlapping effect of new or recent DOE energy 

conservation standards and/or other regulatory action affecting the same product or industry. 

The primary sources of information for this analysis were telephone interviews with 

manufacturers of cooking products, dishwashers, dehumidifiers, and commercial clothes washers 

carried out during the first quarter of FY 2007. To maintain confidentiality, DOE did not 

identify the individual manufacturers that disclosed information. Instead, the evaluation only 

reports aggregated information and does not disclose sensitive information or identify companyspecific information. 

For the preliminary MIA, DOE conducted interviews with manufacturers primarily in 

order to identify key issues and gain insights into the qualitative impacts of energy conservation 

standards. For each product, DOE used an interview guide to gather responses from multiple 

manufacturers on several issues. All the interview guides covered the same general topic areas 

but were adapted as needed to the needs of each product category. A copy of the interview 

guides for commercial clothes washer, dehumidifier, and dishwasher manufacturers is contained 

in Appendix 5B. 

This chapter provides a summary of the information gathered during the manufacturer 

impact analysis interviews. Section 12.3.1 follows the general interview structure and 

summarizes the issues discussed during the interviews. Sections 12.3.2 – 12.3.4 in turn present a 

summary of the interviews for each product. 

12.3.1 General Interview Structure 

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The manufacturer interviews included questions relating to the following topics. DOE 

received responses to most, if not all, of these topics from the various manufacturers. 

12.3.1.1 Key Issues 

Perhaps the most important aspect of the preliminary MIA is the opportunity it creates for 

DOE to identify key manufacturer issues early in the development of new standards. During the 

interviews DOE engages the manufacturers in a discussion relating to what they perceive to be 

the key issues in the rulemaking from their perspective. Key issues, once identified, are added to 

the list of questions and topics explored during the interviews. For example, key issues in 

previous rulemakings have included concerns over patent protections that might prevent some 

companies from implementing higher-efficiency designs. 

12.3.1.2 Shipment Projections 

Shipment projections can be a significant factor in determining the impacts of new or 

revised efficiency standards. The interviews provide an opportunity for manufacturers to share 

information that can help DOE quantify the magnitude of any changes in shipments resulting 

from new standards. DOE is interested in information relating to the current number of product 

shipments, broken-down by product class (such as capacity rating) and by efficiency level. DOE 

also seeks input on the forecast of future shipments absent new standards. Manufacturers are 

asked how they would expect shipments to change for the industry as a whole as a function of 

standard levels and why they expect these changes might occur. More specific questions aim to 

derive a price elasticity estimate to be used in the National Impact Analysis (NIA) spreadsheet. 

Another aspect of the shipments discussion is targeted more specifically on the company 

being interviewed. Here DOE is seeking to identify firms which may be more (or less) impacted 

by a reduction in shipments. 

12.3.1.3 Product Mix 

DOE requests manufacturers’ views on what they perceive to be the possible impact of 

potential new standards on their future profitability. New energy conservation standards have 

the potential to impact financial performance in several different ways. Several of these impacts 

are captured in previous sections. For instance the capital and product conversion outlays 

needed to upgrade or redesign products and product platforms before they have reached the end 

of their useful life can engender significant conversion costs that otherwise would not be 

expended resulting in reduced cash flow and stranded investments. In addition, higher energy 

efficiency standards can result in higher per-unit costs that may deter some customers from 

purchasing the products thereby reducing shipments, or it may shift some purchases to lower 

efficiency products. 

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12.3.1.4 Profitability 

DOE is interested in understanding if standards might change a manufacturer’s product 

mix and if this change impacts profits. For example; higher energy efficiency standards might 

limit a manufacturer’s ability to market premium products that command higher profit margins. 

Also, given the success of the Energy Star program and its influence on sales, DOE needs to 

understand how a new standard will influence the Energy Star program and how this secondary 

effect might impact manufacturers. 

The interview guide also investigates how new product standards might impact a 

manufacturer’s customer mix and its distribution channels and how in turn this might change 

profitability. 

12.3.1.5 Conversion Costs, Manufacturing Capacity and Employment Levels 

During the interviews, DOE asks manufacturers to quantify and explain both the capital 

and the product conversion costs necessary to raise the energy efficiency of their product lines to 

the proposed standard levels. In some instances, manufactures may be able to meet proposed 

standard levels by modifying existing products. In other cases, the necessary changes may entail 

a complete product-line redesign. In these situations, an increase in efficiency standards will 

cause manufacturers to incur one-time conversion capital-expenditures and product-conversion 

expenses. Conversion capital-expenditures are one-time investments in property, plant and 

equipment. Product-conversion expenses include one-time investments in research, product 

development, testing and marketing. 

One of the significant outcomes of new standards could be the consequential 

obsolescence of existing manufacturing assets, including tooling and other capital investment. 

The interview guide includes questions to identify impacts on manufacturing capacity. These 

questions were developed to understand the impact of potential new standards on: 

• U.S. and North American manufacturing capacity; 

• capacity utilization and plant location decisions in the U.S. and North America both with and 

without standards; 

• the ability of manufacturers to upgrade or remodel existing facilities to accommodate a new 

product mix; and 

• the nature and value of stranded assets, if any. 

The impact of new efficiency standards on employment is an important consideration in 

the rulemaking process. The interviews are used to explore current trends in production 

employment and solicit manufacturer views on changes in employment patterns resulting from 

new energy efficiency standards. Questions regarding employment impacts help to understand: 

• current employment levels associated with manufacturing the subject products at each 

production facility; 

• expected future employment levels both with and without new standards; and 

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• differences in workforce skills, and issues related to retraining of employees. 

12.3.1.6 Market Shares and Industry Consolidation 

New efficiency standards can alter the competitive dynamics of the marketplace. This 

can include prompting companies to enter the market, exit the market, or to merge with other 

companies. The preliminary MIA interview questions ask manufacturers to share their 

perspectives on industry consolidation both in the absence of new standards and assuming new 

standards at various efficiency levels. The interview questions focus on gathering information 

that helps in assessing: 

• disproportionate cost increases to some manufacturers; 

• increased proportion of fixed costs potentially increasing business risks; and 

• potential barriers to market entry (proprietary technologies, etc.). 

The need to conduct an assessment of anti-competitive effects of proposed standards 

comes from the need to protect the interests of the consumer. During the interviews DOE 

solicits information to understand if new standards could result in disproportionate economic or 

performance penalties for particular consumer/user subgroups. 

Manufacturers are also asked if new standards could result in products that will be more 

or less desirable to consumers due to changes in product functionality, utility, or other features. 

12.3.1.7 Product Utility and Innovation 

New efficiency standards can force manufacturer to compromise product utility to 

consumers by eliminating energy consuming features. During the interview DOE requested 

information on the effects of proposed standards on product utility. 

New efficiency standards may require investment in conversion costs, including research 

and development (R&D). This required spending may force a manufacturer to reduce funding 

usually allocated to product innovation. New efficiency standards may also force manufacturers 

to eliminate innovative energy consuming features on their products. During the interview DOE 

requested information on the effect of proposed standard on innovation 

12.3.1.8 Cumulative Burden 

While any one regulation may not impose a significant burden on manufacturers, the 

combined effects of several impending regulations may have serious consequences for some 

manufacturers, groups of manufacturers, or entire industries. Assessing the impact of a single 

regulation may overlook this cumulative regulatory burden. 

Expenditures associated with meeting other regulations are an important aspect of the 

DOE’s consideration of the “cumulative regulatory burden” faced by the industry. The 

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interviews help DOE identify the level and timing of investments manufacturers are expecting to 

incur as a result of these regulations. Manufacturers are also asked under what circumstances 

they might be able to coordinate any expenditures related to these regulations and efficiency 

standards. 

In addition to the efficiency regulations on residential dishwashers and dehumidifiers, 

and commercial clothes washers, several other Federal regulations and pending regulations apply 

to other products made by these manufacturers. For example, some manufacturers in the 

residential dishwasher and dehumidifier, and commercial clothes washer industries are 

subsidiaries to larger parent companies which manufacture other products subject to Federal 

regulations. These manufacturers must address the EPA-mandated phase-out of HCFC 

refrigerants. DOE will investigate these cumulative regulatory burdens in greater detail during 

the NOPR phase of the rulemaking. 

12.3.1.9 State Energy Conservation Standards 

DOE identified and described regulatory programs at the state level in the market and 

technology assessment, Chapter 3, of the TSD for the equipment covered in this rulemaking. 

Multiple States have requirements for products covered under this rulemaking. Accommodating 

multiple State standards in additional to national standards raises costs for manufacturers. 

12.3.1.10 International Energy Conservation Standards 

DOE discussed regulatory programs from certain other countries, such as Canada and 

Australia, in the market and technology assessment, Chapter 3, of the TSD for residential 

dishwashers and dehumidifiers, and commercial clothes washers. Most manufacturers sell a 

portion of their total production to countries outside the United States. In these cases, the 

products must meet the standards for each country. Companies may design some units to meet 

more stringent standards than those imposed by the U.S. in order to minimize the number of 

product variations. 

12.3.1.11 Impact of Cumulative Burden on Small Manufacturers 

DOE considers the possibility of small businesses being impacted by the promulgation of 

energy conservation standards for residential dishwashers and dehumidifiers, and commercial 

clothes washers. At this time, DOE is not aware of any small manufacturers, defined by the 

Small Business Association as having 750 employees or fewer, who would be impacted by a 

minimum efficiency standard. Should any small business manufacturers be identified, DOE will 

study the potential impacts to these small businesses in greater detail during the MIA, which it 

will conduct as a part of the NOPR analysis. 

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12.3.2 Dishwasher Preliminary MIA Results 

During the course of the preliminary MIA for dishwashers, DOE interviewed 

manufacturers representing over 80 percent of domestic dishwasher sales. These same 

interviews were used to review the engineering analysis cost and performance data contained in 

Chapter 5 of the TSD. The MIA interviews shifted the discussion from technology-related topics 

to business-related topics. DOE’s objective was to become familiar with each company’s 

particular market approach and financial structure, and its concerns and issues related to new 

efficiency standards. Most of the information received from these meetings is protected by nondisclosure agreements and resides with DOE’s contractors. Before each interview, DOE 

provided company representatives with an interview guide that included the topics that DOE 

hoped to cover. Additionally DOE often introduced, entertained, and discussed other topics 

during the course of the interviews. The following paragraphs summarize the principle 

manufacturer concerns and issues related to new efficiency standards for dishwashers. 

12.3.2.1 Dishwasher Key Issues 

The concerns expressed by dishwasher manufacturers which in their opinion rise to the 

level of key issues are: the potential elimination of entry-level dishwashers from the market, 

reduced consumer exposure to dishwashers, a possible reduction in dishwasher performance, the 

increased likelihood of consumers hand washing and pre-rinsing dishes, and the potential 

relocation of production facilities overseas. These issues are elaborated in the relevant sections 

which follow. 

12.3.2.2 Dishwasher Product Mix 

Most dishwasher manufacturers believe that efficiency standards would have a significant 

impact on the product mix of dishwashers they produce. For many manufacturers, revised 

standards will push the product mix towards higher cost units and away from low-end products. 

This would result in an overall product mix that is less diverse than what is currently available. 

This loss of product diversity would be most severely felt in the potential elimination of low 

cost, low-end dishwashers from the market. 

Several manufacturers expressed concern that higher prices would discourage first-time 

buyers. Low-cost dishwashers, priced below $300, currently represent 30 percent of the 

industry’s shipments. Some fear that eliminating the ‘entry level’ low-end dishwasher product 

might reduce consumer exposure to dishwashers causing some to never consider purchasing a 

dishwasher. Additionally, large homebuilders who generally purchase low-end dishwashers 

might elect not to provide dishwashers in new homes if prices were increased significantly. 

Another mechanism which could lead to reduced product shipments is an increase in the 

incidence of repair rather than the replacement of broken dishwashers. Faced with the choice of 

repairing an older (and presumably less efficient) dishwasher or replacing it with a higher-priced 

current model, more consumers may decide to prolong the life of their existing washers. 

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12.3.2.3 Dishwasher Profitability 

The Department invited manufacturers to share their views on the potential impacts of 

standards on their profits. Manufacturers highlighted the difficulty they face in trying to recover 

standards-induced costs. 

Recent increases in the price of steel provide an insight into how an across-the-board 

increase in manufacturing costs might affect industry profits. Manufacturers noted that they had 

little ability to set prices and that their profitability depended on how other manufacturers 

increased prices in response to their own higher production costs. Passing-on costs often comes 

at the detriment of decreasing market share so manufacturers have not been able to fully pass on 

steel price increases, for example. Manufacturers fear that this dynamic will be more 

pronounced with new efficiency standards because cost increases will not be the same for all 

manufacturers and those manufactures with a lower cost to comply will dictate prices. 

Some manufacturers noted that a significant proportion of dishwasher sales are to 

housing developers. These developers sign multi-year fixed price contracts to purchase 

dishwashers. If dishwasher prices increase due to higher standards, profits would decrease as 

manufacturers are forced to absorb costs due to these fixed contracts. 

Several manufacturers also noted the important position that home-improvement retailers 

have attained in the industry. Some retailers insist on only carrying Energy Star-rated products, 

setting a de-facto minimum energy efficiency level that is above the federal minimum. This 

market demand was particularly pronounced for dishwashers. In 2005, 82 percent of dishwasher 

unit shipments were Energy Star-rated. As a result, manufacturers had great difficulty 

differentiating their products on the basis of energy efficiency alone. In January 2007, the 

Energy Star energy factor was raised from 0.58 to 0.65, reducing the number of eligible washers 

somewhat. 

Offering a more optimistic view of future profitability, one foreign manufacturer noted 

that high efficiency standards did not reduce manufacturer profitability in Europe. This 

manufacturer believes that new standards in the U.S. will have a similar effect in the U.S. 

particularly since several U.S. manufacturers have experience meeting the European efficiency 

standards. 

12.3.2.4 Dishwasher Conversion Costs 

One of DOE’s major objectives during the manufacturer interviews was to determine the 

level and types of investment the companies expected to incur to comply with a new efficiency 

standard. The Association of Home Appliance Manufacturers (AHAM) provided aggregated 

industry values for the required capital and product conversion outlays for all efficiency levels up 

to an EF value of 0.72. These values are summarized in Table 12.3.1. 

12-11 

EE-2006-STD-0127 COMMENT 39.2
Table 12.3.1 Dishwasher One-Time Costs 

Energy Factor (Cycles / kWh) 0.58 0.62 0.65 0.68 0.72 

One-Time Product Conversion 

Expenses, Million $, Total for all 

Manufacturers 

R&D 1.43 4.43 5.73 18.53 29.23 

Marketing 0.99 1.99 3.29 7.49 13.99 

Conversion Capital Expenditure 

Assumptions, Million $, Total for all 

Manufacturers 

Building Insufficient Data Submitted 

Tooling and 

Equipment 

16.85 19.95 23.25 44.85 98.45 

Capital investments include modifications or additions to plant, property, and equipment 

that increase its useful life. Capacity increases and new tooling are capital expenditures, which 

are amortized over the length of their useful lives. Non-capital expenses, such as marketing and 

R&D, are typically expensed in the year in which they are incurred. During the interviews 

manufacturers were asked to comment on the data submitted by AHAM and provide additional 

information to better explain the trends in costs and the cost drivers at each efficiency level. 

Manufacturers interviewed were all in agreement with the aggregated cost figures 

submitted by AHAM. The cost increments are consistent with the industry practice of designing 

and tooling product lines using common product platforms. In general, manufacturers only 

expected large conversion costs associated with standards that would require the complete 

redesign of a product platform. Manufacturers estimated these conversion costs to range from 

$50 million to $100 million per manufacturer in capital costs for production line conversion 

costs, or in some cases, new factory construction. Manufacturers indicated that significant 

stranded assets could occur at the higher proposed standard levels, since higher standard levels 

would require complete redesign of low-end dishwashers, and complete retooling of low-end 

dishwasher platforms and factories. Platform changes would also potentially result in relocation 

of factories to Mexico or to offshore sites. 

12.3.2.5 Dishwasher Manufacturing Capacity and Employment Levels 

Based on the interviews the Department understands that U.S. dishwasher production is 

still largely a U.S. based industry with several manufacturers having domestic production 

facilities. Ultimately, manufacturers’ decisions regarding the location of production facilities 

will depend on the efficiency standard chosen. If manufacturers can meet the efficiency standard 

without needing to completely redesign their product platform, they are likely to continue to 

produce dishwashers domestically. However if the standard is so high as to require entirely new 

platforms, manufacturing facilities may be relocated abroad to reduce labor costs. 

In some instances dishwashers may be manufactured in integrated facilities that produce 

more than just dishwashers. If dishwashers are a central focus of such an integrated facility 

manufacturer this facility may be relocated to a lower cost labor market, multiplying the impact 

on U.S. job losses. 

12-12 

EE-2006-STD-0127 COMMENT 39.2
12.3.2.6 Dishwasher Market Share and Industry Consolidation 

Several manufacturers stated that any forced investment a company must make to stay in 

business increases the likelihood of consolidation. One way manufacturers can avoid forced 

investments is by selling segments which require forced investments. Another way to reduce the 

burden of capital and product conversion costs is to reduce the number of product platforms and 

consolidate manufacturing facilities. This strategy is particularly rewarding when companies are 

merged, allowing the merged firm to reduce costs. Finally it is possible that a company would 

elect to source their dishwashers instead on manufacturing them themselves. 

12.3.2.7 Dishwasher Product Utility and Innovation 

Multiple manufacturers expressed concern that high efficiency standards may require 

dishwasher performance tradeoffs. This could encourage consumers to increase their pre-rinsing 

of dishes, or to switch to hand-washing dishes altogether. Multiple manufacturers noted that 

dishwashers use much less energy compared to hand-washing dishes, so a standard that increases 

pre-rinsing and hand-washing could lead to increased energy use and decreased consumer utility. 

Multiple manufacturers noted that the trade-off between energy efficiency and 

performance is particularly acute in their low-end dishwasher models. These manufacturers 

stated that they had already made performance compromises on their low-end dishwasher models 

in order to meet existing standards without significantly increasing prices. 

Some dishwasher manufacturers stated that more stringent standards would require the 

redesign of some portion of their products. This consumes R&D resources, both human and 

financial, and directs these assets away from other potential investments that would normally go 

toward enhancing the functionality of existing products or developing new products. 

Manufacturers were not aware of any new product innovations that would increase energy 

efficiency further. 

12.3.2.8 Dishwasher Cumulative Burden 

 Regulations which contribute to the cumulative burden of most or all of the products 

subject of this rulemaking are described in section 12.3.1.8. Other issues more specific to 

dishwashers were also discussed and are summarized below. 

Multiple manufacturers expressed the view that Energy Star efficiency levels have 

become a de-facto standard for dishwashers since multiple retail outlets require all dishwashers 

they carry to meet Energy Star levels. Energy Star released a new standard for dishwashers 

effective January, 2007 and manufacturers are working to meet this standard in order to meet 

retailers’ Energy Star requirements. 

Multiple manufacturers expressed concern about the potential phase-out of phosphate in 

detergents. Several municipalities in the U.S., including those within Spokane County, 

Washington, and Kootenai County, Idaho are debating bans on phosphates in dishwasher 

12-13 

EE-2006-STD-0127 COMMENT 39.2
detergent. One manufacturer stated that any decrease in the chemical cleaning energy provided 

by the phosphates in the detergent will have to be compensated with increased thermal and 

mechanical energy, increasing dishwasher energy consumption. 

12.3.3 Dehumidifier Preliminary MIA Results 

During the course of the preliminary MIA for dehumidifiers, DOE interviewed 

manufacturers representing over 66 percent of domestic dehumidifier sales. These same 

interviews were used to review the engineering analysis cost and performance data contained in 

Chapter 5 of the TSD. The MIA interviews shifted the discussion from technology-related topics 

to business-related topics. DOE’s objective was to become familiar with each company’s 

particular market approach and financial structure, and its concerns and issues related to new 

efficiency standards. Most of the information received from these meetings is protected by nondisclosure agreements and resides with DOE’s contractors. Before each interview, DOE 

provided company representatives with an interview guide that included the topics we hoped to 

cover. Additionally, DOE often introduced, entertained, and discussed other topics during the 

course of the interviews. The following paragraphs summarize the principle manufacturer 

concerns and issues related to new efficiency standards for dehumidifiers. 

12.3.3.1 Dehumidifier Key Issues 

The concerns expressed by dehumidifier manufacturers which in their opinion rise to the 

level of key issues are: the ability to pass cost increases on to consumers, the increased pressure 

from foreign competition, and the ability to maintain Energy Star product offerings. 

These issues are elaborated in the relevant sections which follow. 

12.3.3.2 Dehumidifier Product Mix 

Manufacturers noted that the upcoming EPACT 2005 standards for dehumidifiers are the 

current Energy Star levels. Therefore, manufacturers will have to develop a new, more efficient 

Energy Star-rated line and might not be able to maintain Energy Star-rated products in all 

product classes. 

Dehumidifier manufacturers also make extensive use of product platforms to minimize 

tooling costs. Dehumidifiers of varying capacities will thus share many common parts, such as 

injection-molded exterior panels, stamped base pans, controls, and the like. The common 

interior and exterior dimensions limit the ability of a manufacturer to offer optimized solutions 

for every capacity. Platforms are typically optimized around the capacity that leads by sales 

volume. 

Within a product line of dehumidifiers, it is not unusual to find higher-capacity units that 

differ only from lower-capacity units via a larger compressor and some other minor changes. As 

the heat exchangers and fans are typically not changed substantially whenever a chassis is 

12-14 

EE-2006-STD-0127 COMMENT 39.2
shared, the energy efficiency of higher-capacity units will thus suffer. While optimized units 

may be able to reach Energy Star efficiency levels, other units within the same product line may 

not. 

The number of platforms per manufacturer is typically driven by shipment volumes. 

Higher volumes allow a manufacturer to offset the increased tooling investment requirements 

with savings via reduced material costs. According to one industry executive, the average lifecycle of a dehumidifier design is 3 years, which underscores why manufacturers attempt to 

consolidate as many capacities into one package as they can. 

Another trend within the dehumidifier industry is private-label outsourcing where 

common platforms are clad with branded exterior cases. Branding efforts range from swapping 

logos to engineering customized external cases. 

12.3.3.3 Dehumidifier Profitability 

The dehumidifier manufacturers interviewed were not sure if the proposed standard 

levels would affect their profitability. Maintaining profitability will require passing on 

standards-induced cost increases to consumers however it is only possibly for a manufacturer to 

pass on cost increases to consumers if all manufacturers pass on cost increases. Otherwise, a 

manufacturer that chooses to absorb cost increases will gain market share from manufacturers 

some that elect to pass on cost increase. 

One manufacturer stated that consumers might tolerate a 25 percent cost increase since 

dehumidifiers are often not a discretionary product, but that any cost increase will discourage 

first-time buyers and encourage consumers to repair broken units instead of replacing them. 

Dehumidifier manufacturers foresee other factors impacting profitability in addition to 

increased manufacturing costs. One manufacturer stated that, if new standard levels required a 

chassis redesign that resulted in a different footprint, new packaging would be required. This in 

turn would affect how many dehumidifiers could be loaded in a truck for shipping, impacting 

shipping costs. One manufacturer commented on the changes in the number of units that could 

be packed in a shipping container if the packaging needed to be changed, again affecting 

shipping costs. 

12.3.3.4 Dehumidifier Conversion Costs 

One of DOE’s major objectives during the manufacturer interviews was to determine the 

level and types of investment the companies expected to incur to comply with a new efficiency 

standard. AHAM provided aggregated industry values for the required capital and product 

conversion outlays for all efficiency levels. These values are summarized in Table 12.3.2, Table 

12.3.3, and Table 12.3.4. 

12-15 

EE-2006-STD-0127 COMMENT 39.2
Table 12.3.2 AHAM Capital and Product Conversion Cost Data Submittal, 0 – 35.00 

Pints/Day 

Product Class 0 – 35.00 pints/day 

Efficiency Level 1 2 3 4 5 

Energy Factor (liters / kWh) 1.25 1.30 1.35 1.40 1.45 

One-Time Product Conversion Expenses, 

Million $, Total for all Manufacturers 

R&D 0.05 0.15 2.25 4.75 7.15 

Marketing 0.1 0.15 1.7 4.75 6 

Conversion Capital Expenditure 

Assumptions, Million $, Total for all 

Manufacturers 

Building 0.025 5.05 5.1 5.15 5.2 

Tooling and 

Equipment 

0.3 1.85 3.9 6.95 9 

Table 12.3.3 AHAM Capital and Product Conversion Cost Data Submittal, 35.01 – 45.00 

Pints/Day 

Product Class 35.01 – 45.00 pints/day 

Efficiency Level 1 2 3 4 5 

Energy Factor (liters / kWh) 1.35 1.40 1.45 1.50 1.74 

One-Time Product Conversion Expenses, 

Million $, Total for all Manufacturers 

R&D 1.7 3.43 3.6 4.6 N/A 

Marketing 0.6 2.65 2.7 3.75 N/A 

Conversion Capital Expenditure 

Assumptions, Million $, Total for all 

Manufacturers 

Building 0.025 0.05 0.1 5.15 N/A 

Tooling and 

Equipment 

2.45 4.5 4.55 8.65 N/A 

Table 12.3.4 AHAM Capital and Product Conversion Cost Data Submittal, 54.01 – 74.99 

Pints/Day 

Product Class 54.01 – 74.99 pints/day 

Efficiency Level 1 2 3 4 5 

Energy Factor (liters / kWh) 1.55 1.60 1.65 1.70 1.80 

One-Time Product Conversion Expenses, 

Million $, Total for all Manufacturers 

R&D 0.1 0.23 0.4 6.9 11.8 

Marketing 0.1 0.15 0.2 6.35 11 

Conversion Capital Expenditure 

Assumptions, Million $, Total for all 

Manufacturers 

Building 0.025 0.05 0.1 6.15 6.2 

Tooling and 

Equipment 

0.65 0.7 0.75 8.1 12 

Capital investments include modifications or additions to plant, property, and equipment 

that increase its useful life. Capacity increases and new tooling are capital expenditures, which 

are amortized over their length of their useful lives. Non-capital expenses, such as marketing 

and R&D, are typically expensed in the year in which they are incurred. During the interviews 

manufacturers were asked to comment on the data submitted by AHAM and provide additional 

information to better explain the trends in costs and the cost drivers at each efficiency level. 

Manufacturers interviewed were all in agreement with the aggregated cost figures 

submitted by AHAM. The pattern of costs was explained by the industry practice of designing 

and tooling product lines using common product platforms. In general, manufacturers only 

12-16 

EE-2006-STD-0127 COMMENT 39.2
expected large conversion costs associated with standards that would require the complete 

redesign of a product platform. 

One manufacturer noted that dehumidifier chassis designs are based around the size of 

the compressor used in the dehumidifier. More efficient compressors are generally larger, and 

any efficiency standard which required modification or redesign of the chassis to accommodate a 

larger compressor could require retooling and other significant conversion costs. 

One manufacturer noted that they might try to absorb incremental efficiency 

improvement costs by reducing labor costs through dehumidifier design alterations. The reverseengineering team observed a wide range of manufacturing strategies, with some manufacturers 

making much more use of design for manufacturing and assembly (DFMA) engineering than 

others. As a result, there were few consistent trends by efficiency level regarding dehumidifier 

construction other than the HVAC circuit itself. 

12.3.3.5 Dehumidifier Manufacturing Capacity and Employment Levels 

Based upon manufacturer interviews, DOE understands that the majority of dehumidifier 

production is situated outside of the United States. Dehumidifier manufacturers noted that few 

manufacturers produce dehumidifiers domestically. It is widely believed that any actions that 

increase the cost of dehumidifiers could move additional jobs overseas. Domestic manufacturing 

facilities would likely not be relocated in response to incremental efficiency improvements, but 

any step changes in efficiency standards would require complete redesign, and consideration of 

shifting production overseas. 

12.3.3.6 Dehumidifier Market Share and Industry Consolidation 

None of the manufacturers interviewed expressed the view that new standards would 

result in industry consolidation. 

12.3.3.7 Dehumidifier Product Utility and Innovation 

 Interviews with manufacturers yielded no significant concerns over future product 

innovation. One manufacturer noted that innovation only occurs in high-end dehumidifier 

products, so standards are unlikely to affect innovation. Another manufacturer agreed that 

standards would be unlikely to significantly affect produce innovation. 

Product utility concerns centered around price, performance and size. One manufacturer 

emphasized that consumers care primarily about basic performance and price. As long as 

efficiency standards do not dramatically decrease performance or dramatically increase cost, 

consumer utility will not be affected. It was also noted that dehumidifier efficiency is largely a 

function of compressor size and efficiency. Larger, more efficient compressors require increases 

in dehumidifier chassis size, restricting dehumidifier placement and reducing consumer utility. 

12-17 

EE-2006-STD-0127 COMMENT 39.2
12.3.3.8 Dehumidifier Cumulative Burden 

All dehumidifier manufacturers noted the U.S. Environmental Protection Agency’s 

mandatory HCFC refrigerant phase-out. While some low-capacity units on the market already 

feature non-HCFC refrigerants, the industry still largely relies on R22 at the present time. One 

manufacturer noted that the replacement refrigerant choice will be driven by compressor 

manufacturers, and that until these manufacturers make a decision, the dehumidifier 

manufacturers cannot conduct the necessary engineering to accommodate the change. 

Additionally, multiple dehumidifier manufacturers produce a wide range of consumer products 

which may face additional regulations. 

12.3.4 Commercial Clothes Washer Preliminary MIA Results 

During the course of the preliminary MIA for commercial clothes washers, DOE 

interviewed manufacturers representing approximately 100 percent of domestic commercial 

clothes washer sales. These same interviews were used to review the engineering analysis cost 

and performance data contained in Chapter 5 of the TSD. The MIA interviews shifted the 

discussion from technology-related topics to business-related topics. DOE’s objective was to 

become familiar with each company’s particular market approach and financial structure, and its 

concerns and issues related to new efficiency standards. Most of the information received from 

these meetings is protected by non-disclosure agreements and resides with DOE’s contractor. 

Before each interview, DOE provided company representatives with an interview guide that 

included the topics we hoped to cover. Additionally DOE often introduced, entertained, and 

discussed other topics during the course of the interviews. The following paragraphs summarize 

the principle manufacturer concerns and issues related to new efficiency standards for 

commercial clothes washers 

12.3.4.1 Commercial Clothes Washer Key Issues 

The concerns expressed by commercial clothes washer manufacturers which in their 

opinion rise to the level of key issues are: 

• the risk of eliminating low-cost vertical-axis washers from the market; 

• reduced product shipments due to 

o a move away from central laundry facilities to in-unit residential laundry; and 

o increased repair and remanufacturing of existing units; 

• reduced cleaning performance due to the use of some energy saving design options; 

• the possible relocation of production facilities outside the country; and 

• the potential for industry consolidation and/or the elimination of the Low-Volume 

Manufacturer (LVM). 

12.3.4.2 Commercial Clothes Washer Product Mix 

Commercial clothes washer manufacturers stated that the effect of standards on product 

offerings would depend significantly on the standard level chosen. Multiple manufacturers 

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EE-2006-STD-0127 COMMENT 39.2
stated that high standards could eliminate the vertical-axis washer product category, forcing 

manufacturers to only offer horizontal-axis washers. This would effectively eliminate an entire 

type of clothes washer, a move which one manufacturer asserts is in violation of NAECA 

provisions protecting consumer utility. 

12.3.4.3 Commercial Clothes Washer Customer Mix 

Commercial clothes washer manufacturers stated that the commercial laundry industry 

structure encourages route operators to pass on cost increases to consumers. Route operators 

generally do not pay for the utilities their washers use on site, so they receive no economic 

benefit from higher efficiency commercial clothes washers. Therefore, route operators would 

likely raise per load wash costs to recover the additional purchase cost of higher efficiency 

commercial clothes washers. 

One manufacturer stated that higher purchase costs of commercial clothes washers would 

increase the payback period of the washer’s energy savings to beyond the clothes washer’s life. 

If laundromat owners cannot recoup the higher purchase cost of commercial clothes washers 

through energy savings, they will choose to pass on these costs by raising per load wash costs. 

12.3.4.4 Commercial Clothes Washer Profitability 

Manufacturers of commercial clothes washers are concerned that more stringent 

standards would reduce product shipments. At the higher efficiency levels it is believed that 

higher commercial clothes washer costs would encourage route operators and laundromats to 

repair existing washers more to avoid purchasing new machines. This would reduce sales, and 

impact profitability. 

Manufacturers also fear that higher washer costs could encourage housing developers to 

consider eliminating central washing facilities in multi-family housing units in favor of in-unit 

washers instead. One manufacturer cited a study which indicates that common-area laundry 

facilities are more energy-efficient than in-unit facilities1

. 

One manufacturer noted that sales of commercial clothes dryers are directly linked to 

sales of commercial clothes washers. Therefore, the financial impact of any decrease in sales of 

commercial clothes washers will be multiplied by a corresponding decrease in sales of 

commercial clothes dryers, further decreasing profitability. 

12.3.4.5 Commercial Clothes Washer Conversion Costs 

DOE asked commercial clothes washer manufacturers what level of conversion costs 

they anticipated if efficiency standards were to take effect. In general, manufacturers noted that 

conversion costs were highly dependant on the standard level adopted. A standard which would 

force manufacturers to convert their vertical-axis washer manufacturing facilities to horizontal12-19 

EE-2006-STD-0127 COMMENT 39.2
axis washers would result in the most significant conversion costs, since vertical-axis washers 

and horizontal-axis washers represent completely different platforms and share few, if any, parts. 

Multiple manufacturers noted that it would be more cost effective to outsource 

horizontal-axis washers to foreign manufacturers than to convert their vertical-axis 

manufacturing facilities to produce horizontal-axis washers. All manufacturers stated that a 

standard eliminating vertical-axis commercial clothes washers would result in significant 

stranded assets. One manufacturer stated that a shutdown of its vertical-axis commercial clothes 

washer line would likely cause it to exit manufacturing vertical-axis clothes washers altogether. 

12.3.4.6 Commercial Clothes Washer Manufacturing Capacity and Employment 

Levels 

Manufacturers stated that commercial clothes washers are still largely produced in the 

United States. Multiple manufacturers stated that incremental efficiency improvements can be 

accommodated without platform redesign. Multiple manufacturers stated that they would 

consider outsourcing or moving their commercial washer manufacturing abroad if standards 

require complete product platform re-design. One manufacturer expressed concern about such 

changes jeopardizing its entire domestic clothes washer business. If significant investments were 

required, this manufacturer would choose among several options, including moving production 

abroad, outsourcing production, or exiting the clothes washer business altogether. 

All manufacturers currently make their vertical-axis commercial clothes washers in the 

U.S., while horizontal-axis washers are manufactured in the U.S. and abroad. Therefore, an 

efficiency standard which would eliminate vertical-axis washers would only affect U.S. 

production facilities. Any resultant increases in the production of horizontal-axis clothes 

washers would mainly benefit non-domestic manufacturing facilities. 

One domestic manufacturer of horizontal-axis clothes washers stated that a standard 

which prescribes horizontal-axis clothes washers would likely lead to the commoditization of 

such units and hence margin pressure. The manufacturer also stated that margin pressure could 

require it to move production abroad or cease clothes washer production altogether. 

12.3.4.7 Commercial Clothes Washer Market Share and Industry Consolidation 

Multiple commercial clothes washer manufacturers stated that the commercial clothes 

washer industry is already heavily consolidated. One manufacturer stated that high costs to meet 

standards could encourage additional industry consolidation if some manufacturers cannot afford 

to meet these costs. This manufacturer believes that certain efficiency levels (MEF 1.60 / WF 

8.5, MEF 1.72 / WF 8.0 , and MEF 1.80 / WF 7.5), are levels, which they can not achieve given 

the development costs and issues associated with developing top-loading clothes washer to meet 

these levels. 

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EE-2006-STD-0127 COMMENT 39.2
These issues include the existence of proprietary designs and the significant lower 

volume production associated with commercial clothes washers which do not justify investing in 

unconventional design options to meet efficiency standards with vertical-axis technology. Such 

options have proven costly and met poor acceptance in the residential market. For example, two 

non-agitator clothes washers have been withdrawn from the residential clothes washer market 

within the last five years. 

One manufacturer noted that high standards could attract new foreign entrants to the 

commercial clothes washer industry, since developing commercial versions of their existing 

high-efficiency, high-cost residential clothes washers as line extensions may become financially 

attractive. 

12.3.4.8 Commercial Clothes Washer Product Utility and Innovation 

Multiple manufacturers noted that the commercial clothes washer market is not large 

enough to justify innovative research, so manufacturers leverage their residential clothes washer 

technologies to develop efficiency improving options for commercial clothes washers. One 

manufacturer noted that the resources required to meet the proposed standard levels could reduce 

manufacturers’ investment in residential product innovation. Manufacturers were not aware of 

any new innovative product features that would reduce energy efficiency significantly. 

Multiple manufacturers stated that commercial clothes washers are operated differently 

than residential clothes washers and therefore they possess a different set of utility attributes. 

For example, customers are more likely to overload commercial clothes washers in order to 

reduce their total wash cost. Manufacturers are aware of this, and design their machines and 

wash cycles to wash adequately despite being overloaded. Frequent overloading stresses the 

machines, and reduces the washing performance of some energy saving design options. 

One manufacturer stated that commercial clothes washers tend to be used more 

efficiently since users have to pay for each wash individually. The manufacturer commented 

further that commercial clothes washers tend to be more fully loaded than residential models, 

minimizing wash water and energy consumption per pound of clothing washed. While some 

residential clothes washers allow warm rinses as an option, all commercial clothes washers 

exclusively use cold rinses. Final spin speeds on commercial models can also be higher than on 

residential models, further improving energy efficiency. 

Higher mandatory standards that would force manufacturers to utilize residential design 

options in commercial clothes washers could reduce the wash performance of overloaded 

commercial clothes washers. One manufacture expressed concern that some commercial 

vertical-axis clothes washers currently sold may not have full acceptance by all customers or 

end-users. These models employ a rinsing method which is not embraced by all users. Without 

complete customer acceptance, the manufacturer believes these models can never become the 

basis of a national minimum standard. 

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EE-2006-STD-0127 COMMENT 39.2
12.3.4.9 Commercial Clothes Washer Cumulative Burden 

One manufacturer noted that energy efficiency and environmental regulations for 

multiple appliance categories it manufacturers would take precedence over its commercial 

clothes washer business. 

12.3.4.10 Commercial Clothes Washer State Energy Conservation Standards 

Commercial clothes washers are covered by the State standards listed in Table 12.3.5. 

Table 12.3.5 State Commercial Clothes Washer Regulations Similar to EPACT 2005 

State Effective Date Difference from EPACT 2005 

Arizona MEF and WF: 1/1/08 Standards effective one year later than EPACT 2005 

California MEF: 1/1/05 

WF: 1/1/07 

MEF standard effective two years earlier than EPACT 

2005 

Connecticut MEF and WF: 7/1/06 Standards effective six months earlier than EPACT 

2005 

Maryland MEF and WF: 3/1/07 Standards effective two months later than EPACT 2005 

New Jersey MEF: 1/1/07 

WF: 1/1/10 

Water factor standard effective three years later than 

EPACT 2005 

Oregon MEF and WF: 1/1/08 Standards effective one year later than EPACT 2005 

Rhode Island MEF and WF: 1/1/07 Identical to EPACT 2005 

Washington MEF - For Sale: 1/1/07 

MEF – Installation: 1/1/08 Does not address water factor 

As presented in the table above, the State of California mandates energy and water 

conservation standards for commercial front-loading and commercial top-loading automatic 

clothes washers. Table 12.3.6 provides the State’s commercial clothes washer energy 

conservation standards, which are dependent on clothes container capacity, and the water 

conservation standards, which are effective two years after the MEF standards. 

Table 12.3.6 California State Efficiency Standards for Commercial Clothes Washers 

Clothes Washer 

Classification 

Clothes Container 

Compartment 

Capacity (ft3

) 

Minimum MEF 

Effective 

January 1, 2005 

Maximum Water 

Factor Effective 

January 1, 2007 

Front-loading < 3.5 ft3 1.26 9.5 

Top-loading < 1.6 ft3 

≥ 1.6 ft3 and < 4.0 ft3 

0.65 

1.26 

9.5 

9.5 

In addition to the efficiency standards discussed above, the State of California requires 

that commercial top-loading semi-automatic clothes washers and commercial suds-saving 

clothes washers manufactured on or after January 1, 2005 have an unheated rinse water option. 

12-22 

EE-2006-STD-0127 COMMENT 39.2
 Additionally, California issued minimum water conservation standards for residential 

clothes washers. While this does not directly affect products covered by the rulemakings, DOE 

is aware that this standard may have impacts on manufacturers of commercial clothes washers 

and other household appliances. Although Federal standards exist for the energy consumption of 

residential clothes washers, no such standard exists for the water efficiency. On September 16, 

2005, the California Energy Commission (CEC) issued a petition for an exemption from Federal 

preemption to seek to apply its own State regulation. DOE accepted written comments regarding 

this California petition until April 7, 2006. Table 12.3.7 provides the State’s proposed residential 

clothes washer water conservation standards and their respective effective dates. 

Table 12.3.7 California Water Conservation Standards for Residential Clothes Washers 

Clothes Washer Maximum Water Factor (gallons/cu. ft.) 

Classification Effective January 1, 2007 Effective January 1, 2010 

Top-loading 8.5 6.0 

Front-loading 8.5 6.0 

On December 28, 2006, DOE issued a decision denying the California petition. 71 FR 

78157. The denial of the petition was based on three factors. First, DOE determined that it does 

not have the statutory authority to prescribe a rule for California that would become effective by 

January 1, 2007, the first of two compliance dates contained in Title 20, section 1605.2(p)(1) of 

the California Code of Regulations. Second, DOE ruled that CEC had not established by a 

preponderance of the evidence that the State of California has unusual and compelling water 

interests, a condition required by EPCA for DOE to grant California a waiver from Federal 

preemption. 42 USC 6297(d)(1)(B). Finally, a preponderance of evidence showed that the 

California regulation would likely result in the unavailability of a class of residential clothes 

washers, specifically top-loader machines, in California. 

12.3.4.11 Commercial Clothes Washer International Energy Conservation 

Standards 

DOE is not aware of any foreign standards covering commercial clothes washers. 

However, several foreign standards cover residential clothes washers, and DOE understands that 

this standard may still impact some North American manufacturers in the home appliance 

industry. 

The Canadian government regulates the efficiency of residential clothes washers. This 

standard applies to standard or compact electrically operated household clothes washers that are 

top- or front-loaded, and that have an internal control system that regulates the water temperature 

without the need for user intervention subsequent to initiation of machine operation. The current 

standards went into effect January 1, 2007, with increases in the standards for some product 

classes compared to the previous standards which had been in effect since January 1, 2004. 

12-23 

EE-2006-STD-0127 COMMENT 39.2
Mexico mandates energy conservation standards for residential clothes washers sold in 

the country; however the standard does not apply to clothes washers that do not use electricity or 

are used for commercial or industrial applications. 

12.3.4.12 Commercial Clothes Washer Impact on Small Manufacturers 

The U.S. commercial clothes washer market has three principal manufacturers. While 

two of them are well-diversified appliance manufacturers, the third is a low-volume 

manufacturer (LVM) that is focused principally on the laundry business. In addition to being 

focused on laundry, the LVM derives 87 percent of its clothes washer revenues from sales to 

commercial market segments. As a result, the LVM will be affected disproportionately by any 

changes to the commercial clothes washer energy efficiency requirements than its larger 

competitors, which are more diversified and for whom commercial clothes washer sales amount 

to less than 2 percent of total clothes washer sales. 

Should an energy efficiency standard effectively eliminate agitator vertical axis 

commercial clothes washers, the LVM has threatened legal action since such a standard would 

more likely than not force it to exit the commercial clothes washer business. 

As described in the engineering analysis section (see Chapter 5 and Appendix 5C of the 

TSD), the LVM operates at much lower overall production volumes than its competitors. While 

its agitator vertical-axis clothes washers have benefited from decades of production experience at 

higher volumes, the horizontal-axis clothes washer the LVM released to production in 1999 is 

unlikely to have benefited from cost optimization for higher production volumes that such 

volumes justify. As can be seen in Table 12.3.8, vertical-axis clothes washer sales dominate 

sales as a function of sales revenue and unit shipments. 

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EE-2006-STD-0127 COMMENT 39.2
Table 12.3.8 DOE Estimate of LVM Clothes Washer Sales and Unit Shipments in 2006 

Market 

Segment 

Drum 

Axis 

Estimated 

Revenue Percentage Revenue of Unit Shipment Volume 

($MM) Clothes Washer Business by Sales Channel 

Commercial Vertical $42.5 59.9% 81,502 

Horizontal $19.2 27.0% 22,234 

Residential Vertical $8.7 12.3% 19,586 

Horizontal $0.6 0.8% 707 

Total Clothes Washer Shipments 124,028 

The legacy of higher-volume agitator vertical-axis clothes washer production has allowed 

the LVM to accumulate a well-depreciated property plant and equipment that helps overcome 

one of the inherent disadvantages of producing at low volumes: high depreciation costs. These 

are sunk investments, along with accumulated research and development. A transition to a 

horizontal-axis-only commercial clothes washer standard could have material effects to the LVM 

for the following reasons: 

• Baseline vertical-axis clothes washers have a long history of price competition and 

commoditization. Should the commercial clothes washer market shift to exclusive use of 

horizontal-axis clothes washers, a similar commoditization is likely to occur for 

horizontal-axis commercial clothes washers, causing margin pressure. 

• A transition to higher-volume horizontal-axis clothes washer production would require 

substantial investments by the LVM without the benefit of high production volumes to 

spread them over. Unlike its larger competitors, the LVM cannot treat its commercial 

clothes washer business as an extension of the residential clothes washer business. 

Lacking this scale, the LVM will likely encounter higher production costs due to higher 

depreciation, higher purchased parts costs, and lower productivity. 

• In addition making investments that allow higher-volume manufacturing of horizontalaxis clothes washers, the likely commoditization would force the LVM to redesign its 

horizontal-axis clothes washers to be less costly to manufacture. However, given the 

high costs of such a redesign, the required manufacturing investments, and the low 

expected returns, the LVM would more likely exit from manufacturing commercial 

clothes washers.. 

• Whether the LVM would continue to manufacture agitator vertical-axis clothes washers 

for the residential market is also debatable since the current shipment volumes for that 

market segment are relatively low and price competition is fierce. Its higher-volume 

competitors will continue to enjoy the benefits of scale, wider distribution, and lower 

costs. 

Thus, any transition to a horizontal-axis-only commercial clothes washer standard is 

likely to affect the LVM disproportionately. The LVM has stated that any large-scale 

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investments without adequate returns would ultimately force the LVM to exit the clothes washer 

business, which would cause material harm to it and damage competition as well. 

A wholesale plant refit could become sufficiently expensive as to justify the construction 

of a new facility. This scenario could prompt management to move production to other 

countries, or to outsource production altogether, as some of the LVM competitors already have 

for some of their product lines. The LVM currently employs about 1,500 people, most of them 

in the United States. 

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EE-2006-STD-0127 COMMENT 39.2
1 

REFERENCES 

National Research Center, Inc. A National Study of Water and Energy Consumption in 

Multifamily Housing, November 2002. Boulder, CO. 

<http://www.laundrywise.com/downloads/Water_Energy%20Survey.pdf> 

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EE-2006-STD-0127 COMMENT 39.2