12-i

CHAPTER 12. MANUFACTURER IMPACT ANALYSIS

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 ................................................................................... 12-3

12.2.3 Phase III: Subgroup Analysis............................................................................. 12-3

12.2.3.1 Manufacturing Interviews.................................................................... 12-3

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

12.2.3.3 Manufacturer Subgroup Analysis........................................................ 12-4

12.2.3.4 Small-Business Manufacturer.............................................................. 12-4

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

12.2.3.6 Employment Impact............................................................................. 12-5

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

12.3 MANUFACTURER IMPACT ANALYSIS KEY ISSUES.............................. 12-5

12.3.1 Impact on Dishwasher Performance .................................................................. 12-5

12.3.2 Issues with Test Procedures............................................................................... 12-6

12.3.3 Increased Competition ....................................................................................... 12-6

12.3.4 Concern over Cumulative Regulatory Burden................................................... 12-7

12.4 GRIM INPUTS AND ASSUMPTIONS............................................................ 12-7

12.4.1 Overview of the GRIM...................................................................................... 12-7

12.4.2 Sources for GRIM Inputs................................................................................... 12-8

12.4.2.1 Corporate Annual Reports ................................................................... 12-8

12.4.2.2 Standard and Poor Credit Ratings........................................................ 12-8

12.4.2.3 Shipment Model................................................................................... 12-8

12.4.2.4 Engineering Analysis........................................................................... 12-9

12.4.2.5 Manufacturer Interviews...................................................................... 12-9

12.4.3 Financial Parameters.......................................................................................... 12-9

12.4.4 Corporate Discount Rate.................................................................................. 12-10

12.4.5 Trial Standard Levels....................................................................................... 12-12

12.4.6 NIA Shipment Forecast.................................................................................... 12-12

12.4.6.1 Base-Case Shipments Forecast .......................................................... 12-13

12.4.6.2 Standards-Case Shipments Forecast .................................................. 12-13

12.4.7 Production Costs.............................................................................................. 12-13

12.4.8 Conversion Costs............................................................................................. 12-15

12.4.8.1 Residential Dishwasher Product and Capital Conversion Costs........ 12-15

12.4.9 Markup Scenarios ............................................................................................ 12-17

12.4.9.1 Flat Markup Scenario......................................................................... 12-18

12.4.9.2 Preservation of Operating Profit ........................................................ 12-18

12.5 INDUSTRY FINANCIAL IMPACTS ............................................................ 12-19

12.5.1 Introduction...................................................................................................... 12-19

12.5.2 Residential Dishwasher Industry Financial Impacts........................................ 12-20

12.6 IMPACTS ON SMALL RESIDENTIAL DISHWASHER MANUFACTURERS12-22
12-ii

12.7 OTHER IMPACTS.......................................................................................... 12-23

12.7.1 Employment..................................................................................................... 12-23

12.7.2 Production Capacity......................................................................................... 12-25

12.7.3 Cumulative Regulatory Burden ....................................................................... 12-26

12.7.3.1 DOE Regulations for Other Products Produced by Residential 

Dishwasher Manufacturers .................................................................. 12-26

12.7.3.2 Other Regulations That Could Impact Residential Dishwasher 

Manufacturers...................................................................................... 12-29

12.8 CONCLUSION................................................................................................ 12-30

12.8.1 Residential Dishwashers.................................................................................. 12-30

LIST OF TABLES

Table 12.2.1 SBA and NAICS Classification of Small Businesses Potentially Affected by 

This Rulemaking................................................................................................12-4

Table 12.4.1 GRIM Financial Parameters based on 2003–2010 Weighted Company 

Financial Data ..................................................................................................12-10

Table 12.4.2 Cost of Equity Calculation......................................................................12-11

Table 12.4.3 Cost of Debt Calculation.........................................................................12-12

Table 12.4.4 Trial Standard Levels for Residential Dishwashers................................12-12

Table 12.4.5 Total Base-Case 2018 NIA Shipments in the Reference NIA Shipment 

Scenario............................................................................................................12-13

Table 12.4.6 Base-Case Distribution of Efficiencies for Residential Dishwashers in 2018

..........................................................................................................................12-13

Table 12.4.7 MPC Breakdown for Standard Dishwashers..........................................12-14

Table 12.4.8 MPC Breakdown for Compact Dishwashers..........................................12-15

Table 12.4.9 Product and Capital Conversion Costs for Standard Dishwashers by TSL 12-

16

Table 12.4.10 Product and Capital Conversion Costs for Compact Dishwashers by TSL

..........................................................................................................................12-17

Table 12.4.11 Flat Markups for Standard Dishwashers...............................................12-18

Table 12.4.12 Preservation of Operating Profit Markups for Standard Dishwashers .12-18

Table 12.4.13 Flat Markups for Compact Dishwashers ..............................................12-19

Table 12.4.14 Preservation of Operating Profit Markups for Compact Dishwashers.12-19

Table 12.5.1 Manufacturer Impact Analysis for Residential Dishwashers – Flat Markup 

Scenario............................................................................................................12-21

Table 12.5.2 Manufacturer Impact Analysis for Residential Dishwashers – Preservation 

of Operating Profit Markup Scenario ..............................................................12-21

Table 12.7.1 Total Domestic Residential Dishwasher Production Workers in 2018* 12-24

Table 12.7.2 Other DOE and Federal Actions Affecting the Residential Dishwasher 

Industry ............................................................................................................12-27

Table 12.7.3 DOE Regulations on Products For Which Residential Dishwasher 

Manufacturers Hold Significant Market Share ................................................12-29

Table 12.7.4 Other Covered Products..........................................................................12-29
12-iii

LIST OF FIGURES

Figure 12.4.1 Using the GRIM to Calculate Cash Flow................................................12-7

Figure 12.5.1 Annual Industry Net Cash Flows for Residential Dishwashers (Flat Markup 

Scenario) ..........................................................................................................12-21

Figure 12.5.2 Annual Industry Net Cash Flows for Residential Dishwashers (Preservation 

of Operating Profit Markup Scenario).............................................................12-22

Figure 12.7.1 Total Residential Dishwasher Industry Domestic Employment by Year..12-

25
12-1

CHAPTER 12. MANUFACTURER IMPACT ANALYSIS

12.1 INTRODUCTION

In determining whether a standard is economically justified, the U.S. Department of 

Energy (DOE) is required to consider “the economic impact of the standard on the manufacturers 

and on the consumers of the products subject to such a standard.” (42 U.S.C. 6295(o)(2)(B)(i)) 

The statute also calls for an assessment of the impact of any lessening of competition as 

determined in writing by the Attorney General. Id. DOE conducted a manufacturer impact 

analysis (MIA) to estimate the financial impact of more stringent energy conservation standards 

on manufacturers of residential dishwashers, and assessed the impact of such standards on direct 

employment and manufacturing capacity.

The MIA has both quantitative and qualitative aspects. The quantitative part of the MIA 

primarily relies on the Government Regulatory Impact Model (GRIM), an industry cash-flow 

model adapted for each product in this rulemaking. The GRIM inputs include information on 

industry cost structure, shipments, and pricing strategies. The GRIM’s key output is the industry 

net present value (INPV), which is the sum of discounted industry cash-flow over the analysis 

period. The model estimates the financial impact of more stringent energy conservation 

standards by comparing changes in INPV between a base case and the various trial standard 

levels (TSLs) in the standards case. The qualitative part of the MIA addresses product 

characteristics, manufacturer characteristics, market and product trends, as well as the impact of 

standards on subgroups of manufacturers.

12.2 METHODOLOGY

DOE conducted the MIA in three phases. Phase I, “Industry Profile,” consisted of 

preliminary research directed at characterizing the residential dishwasher industry. This research 

involved collecting data on market share, sales volumes and trends, pricing, employment, and the 

industry financial structure.

In Phase II, “Industry Cash Flow,” DOE created a GRIM to model the economic impact 

of amended energy conservation standards on the residential dishwasher industry as a whole. The 

DOE also developed a manufacturer interview guide to gather additional information in Phase III 

on the potential impacts on manufacturers.

In Phase III, “Subgroup Impact Analysis,” DOE interviewed manufacturers representing 

over 80 percent of the residential dishwasher market. Interviewees included manufacturers with 

various market shares and product focus, providing a representative cross-section of the industry. 

During interviews, DOE discussed financial topics specific to each manufacturer and obtained 

each manufacturer’s view of the industry. The interviews provided DOE with valuable 

information for evaluating the impacts of amended energy conservation standards on 

manufacturer cash flows, investments, and employment.
12-2

12.2.1 Phase I: Industry Profile

In Phase I of the MIA, DOE prepared a profile of the residential dishwasher industry that 

built upon the market and technology assessment prepared for this rulemaking. (See chapter 3 of 

the direct final rule Technical Support Document (TSD)). Before initiating the detailed impact 

studies, DOE collected information on the present and past market structure and characteristics 

of the industry, tracking trends in market share, product attributes, product shipments, 

manufacturer markups, and the cost structure for various manufacturers.

The profile also included a top-down analysis of manufacturers in the industry using 

Security and Exchange Commission (SEC) 10–K filings,

a

Standard & Poor (S&P) stock reports,b

and corporate annual reports released by both public and privately held companies. DOE used 

this and other publicly available information to derive preliminary financial inputs for the GRIM 

(e.g. revenues; cost of goods sold; depreciation; selling, general and administrative expenses 

(SG&A); and research and development (R&D) expenses).

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

Phase II focused on the financial impacts of amended energy conservation standards on 

the residential dishwasher industry as a whole. Amended energy conservation standards can 

affect manufacturer cash flows in three distinct ways: (1) by creating a need for increased 

investment, (2) by raising production costs per unit, and (3) by altering revenue due to higher 

per-unit prices and/or possible changes in sales volumes. DOE used the GRIM to model these 

effects in a cash-flow analysis for the residential dishwasher industry. In performing this 

analysis, DOE used the financial values derived during Phase I and the shipment assumptions 

from the NIA. In addition to the cash-flow analysis, DOE also prepared a written guide for 

manufacturer interviews as part of Phase II.

12.2.2.1 Industry Cash-Flow Analysis

The GRIM uses several factors to determine a series of annual cash flows from the 

announcement year of amended energy conservation standards until several years after the 

standards’ compliance date. INPV is the sum of these annual cash flows discounted by the 

industry weighted average cost of capital. Inputs to the GRIM include the manufacturing costs, 

markups, and shipment forecasts developed in other analyses. DOE derived the manufacturing 

costs from the engineering analysis as presented in chapter 5 of the direct final rule TSD, 

information provided by the industry, publicly available financial reports, and interviews with 

manufacturers. DOE developed alternative markup scenarios for each GRIM based on 

discussions with manufacturers. DOE’s shipments analysis, presented in chapter 10 of the direct 

final rule TSD, provided the basis for the shipment projections. DOE derived the financial 

parameters using publicly available reports and revised them using information submitted 

confidentially during manufacturer interviews. DOE used the GRIM to compare INPV in the 

base case with INPV at various TSLs (the standards cases). The difference in INPV between the 

base and standards cases represents the financial impact of the amended standard on 

manufacturers.

 

a Available online at www.sec.gov.

b Available online at www2.standardandpoors.com.
12-3

12.2.2.2 Interview Guide

During Phase III of the MIA, DOE interviewed manufacturers of residential dishwashers 

to gather information on the effects of amended energy conservation on revenues and finances, 

direct employment, capital assets, and industry competitiveness. Before the interviews, DOE 

distributed an interview guide to representatives of each participating manufacturer. The 

interview guide provided a starting point to help identify relevant issues and understand the 

impacts of amended energy conservation standards on individual manufacturers or subgroups of 

manufacturers. Most of the information DOE received from these meetings is protected by nondisclosure agreements and resides with DOE’s contractors. The topics covered as part of these 

interviews include (1) key issues to this rulemaking; (2) engineering and life cycle cost followup; (3) manufacturer markups and profitability; (4) financial parameters; and (5) conversion 

costs. The interview guide is presented in appendix 12-A.

12.2.3 Phase III: Subgroup Analysis

While conducting the MIA, DOE interviewed a representative cross-section of residential 

dishwasher manufacturers. The MIA interviews broadened the discussion to include businessrelated topics. DOE sought to obtain feedback from industry on the approaches used in the 

GRIM and to isolate key issues and concerns. During interviews, DOE did not identify any 

manufacturer subgroups that would warrant a subgroup analysis.

12.2.3.1 Manufacturing Interviews

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

supplemented with information gathered from manufacturer interviews in Phase III. The 

interview process provides an opportunity for interested parties to express their views on 

important issues privately, allowing confidential or sensitive information to be considered in the 

rulemaking process.

DOE used these interviews to tailor the GRIM to reflect the unique financial 

characteristics of the residential dishwasher manufacturing industry. Companies with various 

market shares and product focus were interviewed to provide a representation of the industry. 

Interviews were scheduled well in advance to provide every opportunity for key individuals to be 

available for comment. Although a written response to the questionnaire was acceptable, DOE 

sought interactive interviews, which help clarify responses and identify additional issues. The 

resulting information provides valuable inputs to the GRIM.

12.2.3.2 Revised Industry Cash-Flow Analysis

In Phase II of the MIA, DOE provided manufacturers with preliminary GRIM input 

financial figures for review and evaluation. During the interviews, DOE requested comments on 

the values it selected for the parameters. DOE revised its industry cash-flow models based on 

this feedback. Section 12.4.3 provides more information on how DOE calculated the parameters.
12-4

12.2.3.3 Manufacturer Subgroup Analysis 

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

adequately assess differential impacts of amended energy conservation standards on 

manufacturer subgroups. For example, small businesses, manufacturers of niche products, or 

companies exhibiting a cost structure that differs significantly from the industry average could be 

more negatively affected. DOE used the results of the industry characterization to group 

manufacturers exhibiting similar characteristics. During the interviews, DOE discussed the 

potential subgroups and subgroup members it identified for the analysis. DOE asked 

manufacturers and other interested parties to suggest what subgroups or characteristics are the 

most appropriate to analyze. As discussed below, since DOE identified no small business 

manufacturers of residential dishwashers, DOE did not conduct a separate subgroup analysis of 

small business manufacturers.

12.2.3.4 Small-Business Manufacturer

DOE used the Small Business Administration (SBA) small business size standards 

published on August 22, 2008, as amended, and the North American Industry Classification 

System (NAICS) code, presented in Table 12.2.1, to determine whether any small entities would 

be affected by the rulemaking.cFor the product classes under review, the SBA bases its small 

business definition on the total number of employees for a business including the total employee 

count of a parent company and its subsidiaries. An aggregated business entity with fewer 

employees than the listed limit is considered a small business.

Table 12.2.1 SBA and NAICS Classification of Small Businesses Potentially Affected by 

This Rulemaking

Industry Description Revenue Limit Employee Limit NAICS

Other Major Household Appliance Manufacturing N/A 500 335228

DOE used the Association of Home Appliance Manufacturers (AHAM)1 member 

directory as well as public certification databases including the Consortium of Energy Efficiency 

(CEE),2 California Energy Commission (CEC),3and ENERGY STAR4to identify manufacturers 

of residential dishwashers. DOE then checked this list of dishwasher manufacturers against the 

employee limit for small businesses using reports from vendors such as Dun & Bradstreet. DOE 

also consulted publicly available data from the Small Business Association (SBA) to determine 

the presence of any additional small businesses in the industry. Further, DOE asked interested 

parties and industry representatives if they were aware of other small business manufacturers and 

checked any companies identified against the small business criteria. During its research, DOE 

identified no manufacturer of residential dishwashers that meets the small business criteria as 

specified by the SBA.

12.2.3.5 Manufacturing Capacity Impact

One significant outcome of amended energy conservation standards could be the 

obsolescence of existing manufacturing assets, including tooling and production equipment. The 

manufacturer interview guide contains a series of questions to help identify impacts of amended 

 

c The size standards are available on the SBA’s website at www.sba.gov/content/table-small-business-size-standards
12-5

standards on manufacturing capacity, specifically capacity utilization and plant location 

decisions in the United States and North America, with and without amended standards; the 

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

requirements; the nature and value of any stranded assets; and estimates for any one-time 

changes to existing plant, property, and equipment (PPE). DOE’s estimates of the one-time 

capital changes and stranded assets affect the cash flow projections in the GRIM. These 

estimates can be found in section 12.4.8; DOE’s discussion of the capacity impact can be found 

in section 12.7.2.

12.2.3.6 Employment Impact 

The impact of amended energy conservation standards on employment is an important 

consideration in the rulemaking process. To assess how domestic direct employment patterns 

might be affected, the interviews explored current employment trends in the residential 

dishwasher industry. The interviews also solicited manufacturer views on changes in 

employment patterns that may result from more stringent standards. The employment impacts 

section of the interview guide focused on current employment levels associated with 

manufacturers at each production facility, expected future employment levels with and without 

amended energy conservation standards, and differences in workforce skills and issues related to 

the retraining of employees. The employment impacts are reported in section 12.7.1.

12.2.3.7 Cumulative Regulatory Burden

DOE seeks to mitigate the overlapping effects on manufacturers due to amended energy 

conservation standards and other regulatory actions affecting the same products. DOE analyzed 

the impact on manufacturers of multiple, product-specific regulatory actions. Based on its own 

research and discussions with manufacturers, DOE identified regulations relevant to residential 

dishwasher manufacturers, such as other Federal regulations that impact other products made by 

the same manufacturers. Discussion of the cumulative regulatory burden can be found in section 

12.7.3.

12.3 MANUFACTURER IMPACT ANALYSIS KEY ISSUES

Each MIA interview starts by asking: “What are the key issues for your company 

regarding the energy conservation standard rulemaking?” This question prompts manufacturers 

to identify the issues they feel DOE should explore and discuss further during the interview. The 

following section describes key issues manufacturers mentioned for all product classes under 

review.

12.3.1 Impact on Dishwasher Performance

All manufacturers interviewed expressed concerns about the potential impacts of 

amended standards on product performance, citing several adverse and possibly severe 

consequences of standards above those agreed upon in a joint petition submitted by interested 

parties to DOE (“Joint Petition”).

d

For higher efficiency standards, the performance metrics 

 

d

“Agreement on Minimum Federal Efficiency Standards, Smart Appliances, Federal Incentives and Related Matters 

for Specified Appliances,” DOE Docket No. EERE–2011–BT–STD–0060, Comment 1.
12-6

manufacturers expect to be most severely impacted include wash performance, drying 

performance, cycle time, and the noise levels reached in operation. In considering these metrics, 

manufacturers anticipate negative reactions ranging from small but meaningful changes in 

consumer behavior to higher rates of service calls and returns. For efficiency standards well 

above those proposed in the Joint Petition, manufacturers foresee blanket rejection of poorly 

performing products in the market. In considering impacts to wash performance, manufacturers 

cited an increase in unnecessary rinsing or washing of dishes prior to loading the dishwasher, 

switching to a more aggressive cycle, and running multiple cycles when dishes are not 

adequately cleaned in a single cycle as the most likely changes in consumer behavior. 

Manufacturers went on to suggest that any of these changes would result in an increase in both 

energy and water consumption over that used by a dishwasher deemed by consumers to currently 

provide satisfactory performance. 

While manufacturers suggested that the efficiency level specified in the Joint Petition 

would not likely have a substantial negative impact on wash performance, they noted that 

standards above this level would certainly result in a notable decrease in performance. To 

mitigate the impact of future standards on product performance, several manufacturers 

recommend the adoption of a performance metric into the test procedure and standard.

12.3.2 Issues with Test Procedures

Manufacturers raised concerns over the current DOE dishwasher test procedure and the 

multitude of additional dishwasher test procedures in the field today. Several manufacturers 

suggested that the current DOE test procedure does not accurately capture the energy used by 

dishwashers in the field. These manufacturers cite the single cycle specification and lack of 

performance metrics in the test procedure as providing an easy avenue for circumvention of the 

standards. In the scenario described, manufacturers may optimize a particular cycle to perform 

well on the DOE test procedure with the implicit understanding that this cycle will not meet 

customer expectations and thus will not be used in the field as customers opt for a different, more 

energy-intensive cycle.

Other manufacturers, however, raised concerns over expanding the test procedure to 

include multiple cycles, citing the additional test burden. Some manufacturers raised concerns 

over how DOE would implement a performance test, noting that numerous dishwasher 

performance test procedures already exist—including those developed by AHAM, the 

International Electrotechnical Commission (IEC), and Consumer Reports—and that results for 

each of these test procedures would by optimized by a different wash cycle algorithm and 

product attributes.

12.3.3 Increased Competition

Manufacturers of both baseline and high efficiency products anticipate an increase in 

competition stemming from amended standards. Manufacturers whose market share largely 

comprises products currently below amended standards expect to see either the removal of 

features from higher efficiency units as a means to cut costs to maintain a low-cost minimally

compliant product, or the disappearance of entry-level models as manufacturers are forced to add 

other features and cost in line with current higher efficiency products. If the latter approach 
12-7

prevails, manufacturers of higher efficiency products expect to see increased competition as 

manufacturers which previously focused on low efficiency products move into their target 

segment of the market.

12.3.4 Concern over Cumulative Regulatory Burden

Several manufacturers noted that dishwashers are but one of a suite of appliances they 

produce and that the cumulative burden of R&D to meet standards, capital expenditure and 

retraining of staff to produce products at the new standards, and product testing to certify 

compliance of new products represent a significant burden when accounted for across their 

various product lines. Manufacturers suggest that the ability to establish standards in a 

coordinated fashion by such vehicles as a joint petition and adequate notice of DOE’s plans for 

amended standards are both necessary elements in mitigating the cumulative burden and aligning 

changes in efficiency regulations with the product development cycle.

12.4 GRIM INPUTS AND ASSUMPTIONS

The GRIM serves as the main tool for assessing the impacts on industry due to amended 

energy conservation standards. DOE relies on several sources to obtain inputs for the GRIM. 

Data and assumptions from these sources are then fed into an accounting model that calculates 

the industry cash flow both with and without amended energy conservation standards.

12.4.1 Overview of the GRIM

The basic structure of the GRIM, illustrated in Figure 12.4.1, is an annual cash flow 

analysis that uses manufacturer prices, manufacturing costs, shipments, and industry financial 

information as inputs, and accepts a set of regulatory conditions such as changes in costs, 

investments, and associated margins. The GRIM spreadsheet uses a number of inputs to arrive at 

a series of annual cash flows, beginning with the base year of the analysis, 2012, and continuing 

to 2047. The model calculates the INPV by summing the stream of annual discounted cash flows 

during this period.5

Figure 12.4.1 Using the GRIM to Calculate Cash Flow

The GRIM projects cash flows using standard accounting principles and compares 

changes in INPV between the base-case and the standard-case scenario induced by amended 
12-8

energy conservation standards. The difference in INPV between the base case and the standard 

case(s) represents the estimated financial impact of the amended energy conservation standards 

on manufacturers. Appendix 12-B provides more technical details and user information for the 

GRIM.

12.4.2 Sources for GRIM Inputs

The GRIM uses several different sources for data inputs in determining industry cash 

flow. These sources include corporate annual reports, company profiles, U.S. Census data, credit 

ratings, the shipments model, the engineering analysis, and the manufacturer interviews.

12.4.2.1 Corporate Annual Reports

Corporate annual reports for publicly held companies are freely available to the general 

public through the SEC as filings of Form 10-K. Additionally, some privately held companies 

publish annual financial reports on their corporate websites. DOE developed initial financial 

inputs to the GRIM by examining the publicly available annual reports of companies primarily 

engaged in the manufacture of home appliances whose combined product range includes 

residential dishwashers. As these companies do not provide detailed information about their 

individual product lines, DOE used the aggregate financial information at the corporate level in 

developing its initial estimates of the financial parameters to be used in the GRIM. In doing so, 

DOE assumes that the industry-average figures calculated for these companies were 

representative of manufacturing for residential dishwashers. These figures were later revised 

using feedback from interviews to be representative of manufacturing for each product. DOE 

used corporate annual reports to derive the following initial inputs to the GRIM:

• Tax rate;

• Working capital;

• SG&A;

• R&D;

• Depreciation;

• Capital expenditures; and

• Net PPE.

12.4.2.2 Standard and Poor Credit Ratings

S&P provides independent credit ratings, research, and financial information. DOE relied 

on S&P reports to determine the industry’s average cost of debt when calculating the weightedaverage cost of capital.

12.4.2.3 Shipment Model

The GRIM used shipment projections derived from DOE’s shipments model in the 

national impact analysis (NIA). The model relied on historical shipments data for residential 

dishwashers. Chapter 10 of the direct final rule TSD describes the methodology and analytical 

model DOE used to forecast shipments.
12-9

12.4.2.4 Engineering Analysis 

DOE conducted the engineering analyses for this rulemaking using the efficiency-level 

approach, combined with the cost-assessment approach, to develop a cost for each efficiency 

level for residential dishwashers. During this analysis, DOE used a manufacturing cost model to 

develop manufacturer production cost (MPC) estimates for residential dishwashers. The analysis 

yielded the labor, materials, overhead, and total production costs for products at each efficiency 

level. The engineering analysis also estimated a manufacturer markup to determine the 

manufacturer selling price (MSP) for each product at every efficiency level. Chapter 5 of the 

direct final rule TSD describes the engineering analysis in detail.

12.4.2.5 Manufacturer Interviews

As part of the MIA, DOE conducted interviews with a representative cross-section of 

manufacturers. Through these discussions, DOE obtained information to determine and verify 

GRIM input assumptions. Key topics discussed during the interviews and reflected in the GRIM 

include:

• Capital conversion costs (one-time investments in PPE);

• Product conversion costs (one-time investments in research, product development, 

testing, and marketing);

• Product cost structure, or the portion of the MPCs related to materials, labor, 

overhead, and depreciation costs;

• Projected total shipment and shipment distribution mix; and

• MPCs estimated in the engineering analysis.

12.4.3 Financial Parameters

In the manufacturer interviews, DOE used the financial parameters from 2003 to 2010 for 

four appliance manufacturers with a combined market share of over 90 percent as a starting point 

for determining the residential dishwasher industry financial parameters. The industry financial 

parameters were determined by weighting each manufacturer’s individual financial parameters 

by their respective market share, and correcting for the fraction of the market that was not 

represented. Table 12.4.1 below shows the data used to determine the initial financial parameter 

estimates.
12-10

Table 12.4.1 GRIM Financial Parameters based on 2003–2010 Weighted Company 

Financial Data

Parameter

IndustryWeighted 

Average

Manufacturer

A B C D

Tax Rate (% of Taxable Income) 33.3 42.6 25.4 14.0 30.7

Working Capital (% of Revenue) 7.0 11.9 20.7 3.8 3.9

SG&A (% of Revenue) 13.3 17.8 24.3 13.1 10.4

R&D (% of Revenues) 2.3 1.8 2.8 2.8 2.4

Depreciation (% of Revenues) 3.1 2.8 3.4 2.2 3.1

Capital Expenditures (% of Revenues) 3.2 3.1 4.2 2.6 3.2

Net Property, Plant, and Equipment (% of Revenues) 16.7 14.4 16.3 20.9 17.6

During interviews, manufacturers were asked to provide their own figures for the 

parameters listed in Table 12.4.1. DOE adjusted the tax rate, depreciation and capital 

expenditures according to the manufacturers’ feedback.

12.4.4 Corporate Discount Rate

A company’s assets are financed by a combination of debt and equity, and the weightedaverage cost of capital (WACC) represents the minimum rate of return necessary to cover the 

debt and equity obligations manufacturers use to finance operations. The WACC is the total cost 

of debt and equity weighted by their respective proportions in the capital structure of the 

company. 

DOE estimated the WACC for residential dishwasher industry based on several 

representative companies, using the following formula:

WACC = After-Tax Cost of Debt x (Debt Ratio) + Cost of Equity x (Equity Ratio) 

The cost of equity is the rate of return that equity investors (including, potentially, the 

company) expect to earn on a company’s stock. These expectations are reflected in the market 

price of the company’s stock. The capital asset pricing model (CAPM) provides one widely used 

means to estimate the cost of equity. According to the CAPM, the cost of equity (expected 

return) is:

Cost of Equity = Risk-free Rate of Return + β x Risk Premium 

where:

Risk-free rate of return is the rate of return on a “safe” benchmark investment, typically 

considered the short-term Treasury Bill (T-Bill) yield. In practice, investors use a variety of 

different maturity T-Bills to estimate the risk-free rate. DOE used the 10-year T-Bill return 

because it captures long-term inflation expectations and is less volatile than short-term rates. The 

risk-free rate is estimated to be approximately 5.2 percent, which is the average 10-year T-Bill

return between 1928 and 2010.
12-11

Risk premium is the difference between the expected return on stocks and the risk-free

rate of return. DOE used the average annual return on the S&P 500 between 1928 and 2010 as 

the expected return on stocks to arrive at an estimated market risk premium of 6.1 percent. 

Beta (β) is the correlation between the movement in the price of the stock and that of the 

broader market. In this case, Beta equals one if the stock is perfectly correlated with the S&P 500 

market index. A Beta lower than one means the stock is less volatile than the market index.

Values for Beta are only available for publicly traded companies.

DOE used the capital asset pricing model to calculate the cost of equity for three publicly 

traded dishwasher manufacturers whose combined market share is over 90 percent. DOE 

determined that the industry-average cost of equity for the residential dishwasher industry is 16.7

percent (see Table 12.4.2). 

Table 12.4.2 Cost of Equity Calculation

Parameter

IndustryWeighted 

Average 

%

Manufacturer

A B C D

(1) Average Beta 1.9 1.5 n/a 1.7 2.0

(2) Yield on 10-Year 

T-Bill (1928-2010) 5.2 - - - -

(3) Market Risk Premium (1928-2010) 6.1 - - - -

Cost of Equity (2)+[(1)*(3)] 16.7 14.4 n/a 15.5 17.5

Equity/Total Capital 68.6 71.0 86.5 92.7 65.8

Bond ratings are a tool to measure default risk and arrive at a cost of debt. Each bond 

rating is associated with a particular spread. One way of estimating a company’s cost of debt is 

to treat it as a spread (usually expressed in basis points) over the risk-free rate. DOE used this 

method to calculate the cost of debt for three manufacturers by using S&P ratings and adding the 

relevant spread to the risk-free rate. 

Since proceeds from debt issuance are tax deductible, DOE adjusted the gross cost of 

debt by the industry-average tax rate to determine the net cost of debt for the industry. DOE 

determined that the after-tax industry-average cost of debt for the residential dishwasher industry 

is 4.5 percent. Table 12.4.3 presents the derivation of the cost of debt and the capital structure of 

the industry (i.e. the debt ratio (debt/total capital)).
12-12

Table 12.4.3 Cost of Debt Calculation

Parameter

IndustryWeighted 

Average 

%

Manufacturer

A B C D

S&P Bond Rating -- BBB A AA BBB

(1) Yield on 10-Year T-Bill (1928-2010) 5.2 - - - -

(2) Gross Cost of Debt 6.8 6.8 6.2 5.9 6.8

(3) Tax Rate 33.3 42.6 25.4 14.0 30.7

Net Cost of Debt [(2) x ((1)-(3))] 4.5 - - - -

Debt/Total Capital 31.4 29.0 13.5 7.3 34.2

Correcting for an inflation rate of 3.1 percent over the analysis period, DOE’s calculated 

value for the residential dishwasher industry’s inflation-adjusted WACC and the initial estimate 

of the discount rate is 8.1 percent. DOE adjusted this figure to 8.5 percent for the GRIM based 

on feedback received during manufacturer interviews.

12.4.5 Trial Standard Levels 

DOE developed TSLs to analyze the impact on manufacturers of amended energy 

efficiency standards for two product classes of residential dishwashers—standard dishwashers 

and compact dishwashers. Table 12.4.4 presents the TSLs and the corresponding product class 

efficiency levels based on estimated annual energy use (EAEU) and water consumption (WC) 

according to the current test procedure (10 CFR part 430, subpart B, appendix C).

TSL 4 represents the maximum technologically feasible (“max-tech”) improvements in 

energy efficiency for residential dishwashers. TSL 3 consists of the next efficiency level below 

the max-tech level for standard dishwashers, and the max-tech level for compacts. The efficiency 

levels in TSL 2 correspond to the efficiency levels recommended in the Joint Petition. TSL 1 

consists of the first efficiency levels considered above the baseline.

Table 12.4.4 Trial Standard Levels for Residential Dishwashers

Product Class Baseline TSL 1 TSL 2 TSL 3 TSL 4

Standard Dishwashers Efficiency Level Baseline EL 1 EL 2 EL 4 EL 5

EAEU (%) 355 324 307 234 180

WC (gal/cycle) 6.5 5.8 5.0 3.8 1.6

Compact Dishwashers Efficiency Level Baseline EL 1 EL 1 EL 2 EL 2

EAEU (%) 260 222 222 154 154

WC (gal/cycle) 4.5 3.5 3.5 2.1 2.1

12.4.6 NIA Shipment Forecast

The GRIM estimates manufacturer revenues based on total-unit-shipment forecasts and 

the distribution of these values by efficiency level. Changes in the efficiency mix at each 

standard level are a key driver of manufacturer finances. For this analysis, the GRIM used 
12-13

residential dishwasher shipment data from the NIA. Chapter 10 of the direct final rule TSD 

explains DOE’s calculations of total shipments in detail. Table 12.4.5 shows total shipments 

forecasts for residential dishwashers in 2018.

Table 12.4.5 Total Base-Case 2018 NIA Shipments in the Reference NIA Shipment 

Scenario 

Product Class Total Industry Shipments

Standard Dishwashers 7,942,499

Compact Dishwashers 11,261

12.4.6.1 Base-Case Shipments Forecast

As part of the shipment analysis, DOE estimated the shipment distribution by efficiency 

level for residential dishwashers. DOE held the base-case energy efficiency distribution constant 

throughout the forecast period. Table 12.4.6 shows the base-case distributions of shipments by 

efficiency level estimated in the NIA for the residential dishwasher product classes.

Table 12.4.6 Base-Case Distribution of Efficiencies for Residential Dishwashers in 2018

Product Class Baseline EL 1 EL 2 EL 3 EL 4 EL 5

Standard Dishwashers 

EAEU 355 324 307 295 234 180

% of the 

Market at EL 3.8 25.2 32.7 18.5 10.8 9.0

Compact Dishwashers

EAEU 260 222 154

% of the 

Market at EL 25.0 25.0 50.0

12.4.6.2 Standards-Case Shipments Forecast

To examine the impact of amended energy conservation standards on shipments, which 

in turn affects the INPV, DOE used the base-case shipments described in the previous section as 

a point of comparison for shipments forecast in the standards case. For each TSL described in the 

standards case, DOE used the shipments forecasts developed in the NIA for residential 

dishwashers. DOE used a roll-up scenario to determine efficiency distributions for the standards 

case. In this scenario, products that fall below the amended energy conservation standards are 

assumed to “roll-up” to the new standards on the compliance date and thereafter. 

As in the shipments analysis, DOE assumed there was relative price elasticity of -0.34 in 

the residential dishwasher market, meaning that amended energy conservation standards that 

increase the first cost of residential dishwashers would result in lower total shipments.

12.4.7 Production Costs

Changes in the MPCs of residential dishwashers can affect revenues, gross margins, and 

cash flow of the industry, making these product cost data key GRIM inputs for DOE’s analysis. 
12-14

In the engineering analysis, DOE created separate cost curves for standard and compact product 

classes using data from tear-downs to develop both the baseline MPCs and the incremental costs 

that correspond to the proposed design options. Generally, manufacturing higher efficiency 

products is more costly than manufacturing baseline products due to the use of more complex 

components and higher-cost raw materials.

The cost model disaggregated the MPCs at each efficiency level into material, labor, 

overhead, and depreciation. For materials, DOE used the incremental component and raw 

material costs that correspond to the proposed design options at each EL. For labor, DOE 

estimated the labor contribution at each EL by examining how the proposed design options may 

influence manufacturing and assembly practices. For depreciation, DOE used a depreciation 

value that is consistent with historical information in SEC 10-Ks. The remainder of total 

overhead was allocated to factory overhead. 

Later, manufacturers validated these estimates and assumptions during interviews. DOE 

used the resulting MPCs and cost breakdowns as described in section 12.4.2.4 above, and further 

detailed in chapter 5 of the direct final rule TSD, for each efficiency level analyzed in the GRIM 

analysis.

The MSP is comprised of production costs (the direct manufacturing costs or MPCs), nonproduction costs (indirect costs like SG&A), and profit. DOE calculated the MSPs for residential 

dishwashers by multiplying the MPCs by the appropriate manufacturer markup for that product. 

Table 12.4.7 and Table 12.4.8 show the production cost estimates used in the GRIM for the 

representative product classes for residential dishwashers.

Table 12.4.7 MPC Breakdown for Standard Dishwashers 

EL EAEU 

(kWh/year) Labor Material Overhead Depreciation MPC Mfr. Markup MSP

Baseline 355 $34.24 $119.92 $24.99 $11.84 $190.98 1.24 $236.82

EL 1 324 $36.16 $135.44 $24.68 $12.97 $209.25 1.24 $259.47

EL 2 307 $38.47 $144.01 $26.51 $13.81 $222.80 1.24 $276.27

EL 3 295 $37.25 $180.29 $26.54 $16.13 $260.21 1.24 $322.66

EL 4 234 $38.46 $183.76 $27.44 $16.50 $266.16 1.24 $330.04

EL 5 180 $39.62 $188.04 $29.29 $16.98 $273.93 1.24 $339.68
12-15

Table 12.4.8 MPC Breakdown for Compact Dishwashers 

EL EAEU 

(kWh/year) Labor Material Overhead Depreciation MPC Mfr. Markup MSP

Baseline 260 $27.30 $129.07 $17.83 $11.51 $185.72 1.24 $230.29

EL 1 222 $27.16 $130.37 $17.61 $11.58 $186.72 1.24 $231.53

EL 2 154 $26.93 $140.22 $18.41 $12.27 $197.83 1.24 $245.31

12.4.8 Conversion Costs

Amended energy conservation standards typically cause manufacturers to incur one-time 

conversion costs to bring their production facilities and product designs into compliance with 

new regulations. For the MIA, DOE classified these one-time conversion costs into two major 

groups: capital conversion costs and product conversion costs. Capital conversion costs are 

investments in property, plant, and equipment to adapt or change existing production facilities so 

that new product designs can be fabricated and assembled. Product conversion costs are 

investments in research, development, testing, marketing, and other non-capitalized costs 

focused on making product designs comply with the amended energy conservation standard. 

These one-time conversion costs are separate and do not directly impact the manufacturer 

production cost as described in chapter 5 of the direct final rule TSD. The following sections 

describe the inputs DOE used in the GRIM in greater detail.

12.4.8.1 Residential Dishwasher Product and Capital Conversion Costs

DOE based its conversion cost estimates that would be required to meet each TSL on 

confidential information received during manufacturer interviews. For standard dishwashers, 

DOE matched manufacturers’ descriptions of proposed changes to PPE and investments in R&D 

to the corresponding design options at each efficiency level. DOE then aggregated the total 

industry capital and product conversion costs for each TSL, and divided the total by 0.81, the 

cumulative market share represented by manufacturers which provided this information. DOE 

also reviewed public information in the CEC, ENERGY STAR, CEE product databases as well 

as manufacturer websites to understand which products manufacturers would upgrade at each 

efficiency level. For compact dishwashers, DOE used capital and product conversion costs that 

correspond to similar design options for the standard product class, and scaled these figures by 

the relative number of product platforms currently available on the market. DOE estimated the 

number of standard and compact platforms using publicly available information from 

manufacturer websites and product databases as well as insights gained in the engineering 

analysis.

Table 12.4.9 and Table 12.4.10 show DOE’s estimates of the product and capital 

conversion costs necessary for both residential dishwasher product classes at each TSL.
12-16

Table 12.4.9 Product and Capital Conversion Costs for Standard Dishwashers by TSL

TSL (EL) EAEU 

(kWh/year) Design Options Considered

Product 

Conversion Costs

(2010$ millions)

Capital 

Conversion Costs

(2010$ millions)

Baseline 355 0.0 0.0

TSL 1

(EL 1) 324

Electronic controls 

Multiple Spray Arms 

Improved Water Filters 

Separate Drain Pump 

24.5 40.1

TSL 2

(EL 2) 307

Electronic controls

Improved Control Strategies 

Soil Sensing

Multiple Spray Arms 

Improved Water Filters 

Hydraulic System Optimization

Separate Drain Pump 

3-Phase Variable-Speed Motor

Tub Insulation

Switch Mode Power Supply

31.6 53.7

TSL 3

(EL 4) 234

Electronic controls

Improved Control Strategies 

Soil Sensing

Temperature Sensor

Humidity Sensor

Flow Meter

Multiple Spray Arms

Water Diverter Assembly

Improved Water Filters 

Separate Drain Pump 

Hydraulic System Optimization

Flow-Through Water Heater

3-Phase Variable-Speed Motor

Switch Mode Power Supply

Tub Insulation

Condensation Drying

62.2 188.3

TSL 4

(EL 5) 180

Electronic controls

Improved Control Strategies 

Soil Sensing

Temperature Sensor

Humidity Sensor

Flow Meter

Multiple Spray Arms

Water Diverter Assembly

Improved Water Filters 

Hydraulic System Optimization

Separate Drain Pump 

In-Pump Water Heater

3-Phase Variable-Speed Motor

Switch Mode Power Supply

Tub Insulation

Condensation Drying

Eliminate Vent Fan

72.4 219.1
12-17

Table 12.4.10 Product and Capital Conversion Costs for Compact Dishwashers by TSL

TSL (EL) EAEU 

(kWh/year) Design Options Considered

Product 

Conversion Costs

(2010$ millions)

Capital 

Conversion Costs

(2010$ millions)

Baseline 260 0.0 0.0

TSL 1

(EL 1) 222 Optimized Control Systems 3.3 5.3

TSL 2

(EL 1) 222 Optimized Control Systems 3.3 5.3

TSL 3

(EL 2) 154

Optimized Control Systems

Permanent Magnet Motor

Heater Incorporated into Base of Tub

Reduced Sump Volume

4.2 7.2

TSL 4

(EL 2) 154

Optimized Control Systems

Permanent Magnet Motor

Heater Incorporated into Base of Tub

Reduced Sump Volume

4.2 7.2

12.4.9 Markup Scenarios

MSP is equal to MPC times a manufacturer markup. The MSP includes direct 

manufacturing production costs (i.e., labor, material, and overhead estimated in DOE’s MPCs) 

and all non-production costs (i.e., SG&A, R&D, and interest), along with profit.

DOE used several standards case markup scenarios to represent the uncertainty about the 

impacts of amended energy conservation standards on prices and profitability. In the base case, 

DOE used the same baseline markups calculated in the engineering analysis for all product 

classes. In the standards case, DOE modeled two markup scenarios to represent the uncertainty 

about the potential impacts on prices and profitability following the implementation of amended 

energy conservation standards: (1) a flat markup scenario, and (2) a preservation of operating 

profit markup scenario. Modifying these markups from the base case to the standards cases 

yields different sets of impacts on manufacturers by changing industry revenue and cash flow.

To calculate the baseline manufacturer markup, DOE evaluated publicly available 

financial information for manufacturers of major household appliances whose product offerings 

include residential dishwashers. During manufacturer interviews, DOE received feedback 

supporting the calculated 1.24 baseline manufacturer markup. For both GRIM markup scenarios, 

DOE assumed a predominantly flat markup structure, placing no premium on higher efficiency 

products. This assumption is informed by a market structure in which over 96 percent of 

products currently adhere to ENERGY STAR standards, leaving little to no room for 

differentiation by efficiency level alone, and was further supported by manufacturer interviews.
12-18

12.4.9.1 Flat Markup Scenario

The flat markup scenario assumes that the baseline markup of 1.24 is maintained for all 

products in the standards case. This represents the upper bound of industry profitability as 

manufacturers are able to fully pass through additional costs due to standards to their customers 

in this scenario.

12.4.9.2 Preservation of Operating Profit

DOE also modeled the preservation of operating profit markup scenario to estimate a 

lower bound of profitability for the industry. This is similar to the flat markup scenario with the 

exception that in the standards case, minimally compliant products lose a fraction of the baseline 

markup. The lower markup for minimally compliant products is derived by matching the 

industry operating profits in the year standards go into effect with those of the same year in the 

base case. This scenario represents a more substantial impact to the dishwasher industry as 

manufacturers vie to maintain the lowest possible prices for entry level products while securing 

the same level of operating profit they saw prior to amended standards.

Table 12.4.11 through Table 12.4.14 list the products DOE analyzed with the 

corresponding markups at each TSL for residential dishwashers.

Table 12.4.11 Flat Markups for Standard Dishwashers 

EL (EAEU) Markups by TSL

Baseline TSL 1 TSL 2 TSL 3 TSL 4

Baseline (355) 1.240

EL 1 (324) 1.240 1.240

EL 2 (307) 1.240 1.240 1.240

EL 3 (295) 1.240 1.240 1.240

EL 4 (234) 1.240 1.240 1.240 1.240

EL 5 (180) 1.240 1.240 1.240 1.240 1.240

Table 12.4.12 Preservation of Operating Profit Markups for Standard Dishwashers 

EL (EAEU) Markups by TSL 

Baseline TSL 1 TSL 2 TSL 3 TSL 4

Baseline (355) 1.240

EL 1 (324) 1.240 1.239

EL 2 (307) 1.240 1.240 1.238

EL 3 (295) 1.240 1.240 1.240 1.240

EL 4 (234) 1.240 1.240 1.240 1.240 1.233

EL 5 (180) 1.240 1.240 1.240 1.240 1.240
12-19

Table 12.4.13 Flat Markups for Compact Dishwashers 

EL (EAEU) Markups by TSL

Baseline TSL 1 TSL 2 TSL 3 TSL 4

Baseline (260) 1.240

EL 1 (222) 1.240 1.240 1.240

EL 2 (154) 1.240 1.240 1.240 1.240 1.240

Table 12.4.14 Preservation of Operating Profit Markups for Compact Dishwashers

EL (EAEU) Markups by TSL

Baseline TSL 1 TSL 2 TSL 3 TSL 4

Baseline (260) 1.240

EL 1 (222) 1.240 1.240 1.240

EL 2 (154) 1.240 1.240 1.240 1.238 1.238

12.5 INDUSTRY FINANCIAL IMPACTS

Using the inputs and scenarios described in the previous sections, DOE used the GRIM to 

estimate the financial impacts on the residential dishwasher industry. The MIA uses two key 

financial metrics: INPV and annual cash flows. The main results of the MIA are reported in this 

section. 

12.5.1 Introduction

The INPV measures the industry value and is used in the MIA to compare the economic 

impacts of different TSLs in the standards case. The INPV is different from DOE’s NPV, which 

is applied to the U.S. economy. The INPV is specific to the dishwasher manufacturing industry, 

and is the sum of all net cash flows discounted at the industry’s cost of capital. The GRIM for the 

residential dishwasher industry models cash flows from 2012 to 2047. This timeframe models 

both the short-term impacts on the industry from the announcement of the standard until the 

compliance date, and a long-term assessment over the 30-year analysis period immediately 

thereafter. 

In the MIA, DOE compares the INPV of the base case (no amended energy conservation 

standards) to that of each TSL in the standards case. The difference between the base case and a 

standards case INPV is an estimate of the economic impacts that implementing that particular 

TSL would have on the industry. For the residential dishwasher industry, DOE examined the two 

markup scenarios described above: the flat markup scenario and the preservation of operating 

profit markup scenario. While INPV is useful for evaluating the long-term effects of amended 

energy conservation standards, short-term changes in cash flow are also important indicators of 

the industry’s financial situation. For example, a large investment over one or two years could 

strain the industry’s access to capital. Consequently, the sharp drop in financial performance 

could cause investors to flee, even if recovery is possible. Thus, a short-term disturbance can 
12-20

have long-term effects that the INPV cannot capture. To get an idea of the behavior of annual net 

cash flows, Figure 12.5.1 and Figure 12.5.2 below present the annual net or free cash flows from 

2012 through 2027 for the base case and each TSL in the standards case.

Annual cash flows are discounted to the base year, 2011. Between 2012 and the 2018

compliance date for TSL 1, TSL 3, and TSL 4 (2013 for TSL 2), cash flows are driven by the 

level of conversion costs and the proportion of these investments spent every year. After the 

standard announcement date (i.e., the publication date of the final rule), industry cash flows 

begin to decline as companies use their financial resources to prepare for the amended energy 

conservation standard. The more stringent the amended energy conservation standard, the greater 

the impact on industry cash flows in the years leading up to the compliance date, as product 

conversion costs lower cash inflows from operations and capital conversion costs increase cash 

outflows for capital expenditures.

Free cash flow in the year the amended energy conservation standards take effect is 

driven by two competing factors. In addition to capital and product conversion costs, amended 

energy conservation standards could create stranded assets, i.e., tooling and equipment that 

would have enjoyed longer use if the energy conservation standard had not made them obsolete. 

In this year, manufacturers write down the remaining book value of existing tooling and 

equipment whose value is affected by the amended energy conservation standard. This one time 

write down acts as a tax shield that alleviates decreases in cash flow from operations in the year 

of the write-down. In this year, there is also an increase in working capital that reduces cash flow 

from operations. A large increase in working capital can be attributed to more costly production 

components and materials, higher inventory carrying to sell more expensive products, and higher 

accounts receivable for more expensive products. Depending on these two competing factors, 

cash flow can either be positively or negatively affected in the year the standard takes effect.

In the years following the compliance date of the standard, the impact on cash flow 

depends on the operating revenue. More stringent TSLs typically have a positive impact on cash 

flows relative to the base case under the flat markup scenario because manufacturers are able to 

earner higher operating profit at each TSL in the standards case, which increases cash flow from 

operations. There is very little impact on cash flow from operations under the preservation of 

operating profit scenario because this scenario is calibrated to have the same operating income in 

the standards case at each TSL as the base case as in the year after the standard takes effect. In 

this scenario production costs increase, but operating profit remains approximately equal to the 

base case, effectively decreasing profit margins as a percentage of revenue.

12.5.2 Residential Dishwasher Industry Financial Impacts

Table 12.5.1 and Table 12.5.2 provide the INPV estimates for the residential 

dishwashers. Figure 12.5.1 and Figure 12.5.2 present the annual net cash flows for residential 

dishwashers for each of the different markup scenarios.
12-21

Table 12.5.1 Manufacturer Impact Analysis for Residential Dishwashers – Flat Markup 

Scenario

Base Case Trial Standard Level

1 2 3 4

INPV (2010$ 

millions) 637.5 593.2 563.6 508.6 491.9 

Change in 

INPV

(2010$ 

millions) - (44.3) (73.9) (128.9) (145.6)

(%) - (7.0%) (11.6%) (20.2%) (22.8%)

*For tables in section 12.5, values in parenthesis indicate negative numbers 

Table 12.5.2 Manufacturer Impact Analysis for Residential Dishwashers – Preservation of 

Operating Profit Markup Scenario

Base Case Trial Standard Level

1 2 3 4

INPV (2010$ 

millions) 637.5 592.2 552.9 463.1 434.8 

Change in 

INPV

(2010$ 

millions) - (45.3) (84.6) (174.4) (202.7)

(%) - (7.1%) (13.3%) (27.4%) (31.8%)

*For tables in section 12.5, values in parenthesis indicate negative numbers 

Figure 12.5.1 Annual Industry Net Cash Flows for Residential Dishwashers (Flat Markup 

Scenario)

($100.0)

($80.0)

($60.0)

($40.0)

($20.0)

$0.0 

$20.0 

$40.0 

$60.0 

$80.0 

$100.0 

Free Cash Flow in 2010$ (Millions)

Base Case TSL 1 TSL 2 TSL 3 TSL 4

TSL 2 Standard Date 2013 TSLs 1, 3, 4 Standard Date 2013
12-22

Figure 12.5.2 Annual Industry Net Cash Flows for Residential Dishwashers (Preservation 

of Operating Profit Markup Scenario)

12.6 IMPACTS ON SMALL RESIDENTIAL DISHWASHER MANUFACTURERS

To estimate the number of small businesses which could be impacted by the amended 

energy conservation standards, DOE conducted a market survey using all available public 

information to identify potential small manufacturers. DOE’s research included the AHAM 

membership directory, product databases (CEE, CEC, and ENERGY STAR databases) and 

individual company websites to find potential small business manufacturers. DOE also asked 

interested parties and industry representatives if they were aware of any other small business 

manufacturers during manufacturer interviews and at previous DOE public meetings. DOE 

reviewed all publicly available data and contacted various companies, as necessary, to determine 

whether they met the SBA’s definition of a small business manufacturer of covered residential 

dishwashers. DOE screened out companies that did not offer products covered by this 

rulemaking, did not meet the definition of a “small business,” or are foreign owned and operated.

Almost half of residential dishwashers are currently manufactured in the United States by 

one corporation that accounts for approximately 49 percent of the total market. Together, this 

manufacturer and 3 other manufacturers that do not meet the definition of a small business 

manufacturer comprise 99 percent of the residential dishwasher market. The small portion of the 

remaining residential dishwasher market (approximately 57,000 shipments) is supplied by a 

combination of approximately 15 international and domestic companies, all of which have small 

market shares. These companies are either foreign owned and operated or exceed the SBA’s 

employment threshold for consideration as a small business under the appropriate NAICS code. 

As such, DOE did not identify any small business manufacturers of dishwashers.

($100.0)

($80.0)

($60.0)

($40.0)

($20.0)

$0.0 

$20.0 

$40.0 

$60.0 

$80.0 

$100.0 

Free Cash Flow in 2010$ (Millions)

Base Case TSL 1 TSL 2 TSL 3 TSL 4

TSL 2 Standard Date 2013 TSLs 1, 3, 4 Standard Date 2013
12-23

Based on the discussion above, DOE certifies that the standards for residential 

dishwashers set forth in today’s rule would not have a significant economic impact on a 

substantial number of small entities. Accordingly, DOE has not prepared a regulatory flexibility 

analysis for this rulemaking. DOE will transmit this certification to the SBA as required by 5 

U.S.C. 605(b).

12.7 OTHER IMPACTS

12.7.1 Employment

For residential dishwashers, DOE used the GRIM to estimate the domestic labor 

expenditures and number of domestic production workers in the base case and at each TSL from 

2012 to 2047. DOE used the labor content of each product and the manufacturing production 

costs from the engineering analysis to estimate the total annual labor expenditures associated 

with residential dishwashers sold in the United States. Using statistical data from the most recent 

U.S. Census Bureau’s 2009 Annual Survey of Manufactures (ASM), and interviews with 

manufacturers, DOE estimates that 95 percent of residential dishwashers sold in the United 

States are manufactured domestically and hence that portion of total labor expenditures is 

attributable to domestic labor. Labor expenditures for the manufacture of a product are a function 

of the labor intensity of the product, the sales volume, and an assumption that wages in real 

terms remain constant.

Using the GRIM, DOE forecasts the domestic labor expenditure for residential 

dishwasher production labor in 2018 will be approximately $248.7 million. Using the $27.03

hourly wage rate including fringe benefits and 2,003 production hours per year per employee 

found in the 2009 ASM, DOE estimates there will be approximately 4,593 domestic production 

workers involved in manufacturing residential dishwashers in 2018, the year in which amended 

standards would go into effect for TSL 1, TSL 3, and TSL 4. In addition, DOE estimates that 

1,120 non-production employees in the United States will support residential dishwasher 

production.eThe employment spreadsheet of the residential dishwasher GRIM shows the annual 

domestic employment impacts in further detail. 

 

e

As defined in the 2009 ASM, production workers number include “workers (up through the line-supervisor 

level) engaged in fabricating, processing, assembling, inspecting, receiving, storing, handling, packing, 

warehousing, shipping (but not delivering), maintenance, repair, janitorial and guard services, product 

development, auxiliary production for plant's own use (e.g., power plant), recordkeeping, and other services 

closely associated with these production operations at the establishment covered by the report. Employees 

above the working-supervisor level are excluded from this item.” Non-production workers are defined as 

“employees of the manufacturing establishment including those engaged in factory supervision above the linesupervisor level. It includes sales (including driver-salespersons), sales delivery (highway truck drivers and 

their helpers), advertising, credit, collection, installation and servicing of own products, clerical and routine 

office functions, executive, purchasing, financing, legal, personnel (including cafeteria, medical, etc.), 

professional, and technical employees. Also included are employees on the payroll of the manufacturing 

establishment engaged in the construction of major additions or alterations utilized as a separate work force.” 
12-24

The production worker estimates in this section only cover workers up to the linesupervisor level who are directly involved in fabricating and assembling a product within an 

Original Equipment Manufacturer (OEM) facility. Workers performing services that are closely 

associated with production operations, such as material handling with a forklift, are also included 

as production labor. DOE’s estimates account only for production workers who manufacture the 

specific products covered by this rulemaking.

Table 12.7.1 depicts the potential levels of production employment that could result 

following amended energy conservation standards as calculated by the GRIM. This potential 

increase reflects the scenario in which manufacturers continue to produce the same scope of 

covered products in domestic facilities and domestic production is not shifted to lower-labor-cost 

countries. If all existing production were moved outside of the United States, the expected 

impact to domestic manufacturing employment would be a loss of 4,593 jobs, the equivalent of 

the total base case employment. Because there is a risk of manufacturers evaluating sourcing 

decisions in response to amended energy conservation standards, the expected impact to 

domestic production employment falls between the potential increases as shown in Table 12.7.1, 

and the levels of job loss associated with the total collapse of the domestic dishwasher 

manufacturing industry. The discussion below includes a qualitative evaluation of the likelihood 

of negative domestic production employment impacts at the various TSLs. Table 12.7.1

illustrates the potential impacts of amended energy conservation standards on domestic 

production employment levels at each TSL for the residential dishwasher market.

Table 12.7.1 Total Domestic Residential Dishwasher Production Workers in 2018*

Trial Standard Level 

Base Case 1 2 3 4

Total Number of 

Domestic Production 

Workers in 2018

(without changes in 

production location)

4,593 4,601 4,679 4,658 4,799 

* The compliance date for residential dishwashers at TSL 1, TSL 3, and TSL 4 is 2018. At TSL 2, the compliance 

date is 2013 as specified by the Joint Petition.

Figure 12.7.1 below shows total annual domestic employment levels for each TSL as 

calculated by the GRIM.
12-25

Figure 12.7.1 Total Residential Dishwasher Industry Domestic Employment by Year

All examined TSLs show relatively minor impacts on domestic employment levels 

relative to total industry employment. At all TSLs, most of the design options analyzed by DOE 

do not greatly alter the labor content of the final product. For example, longer or more complex 

wash cycles or improved sump designs involve one-time changes to the final product, but do not 

significantly change the number of steps required for the final assembly of the dishwasher 

(which would add labor). Because many manufacturers have recently introduced high efficiency 

products in the United States that meet or exceed the standards in today’s final rule, it is unlikely 

today’s direct final rule would greatly impact the sourcing decisions of these manufacturers. 

However, at higher TSLs, some of the design options analyzed greatly impact the ability of 

manufacturers to make product changes within existing platforms. The very large upfront capital 

costs at these levels could influence the decision of some manufacturers to relocate some or all of 

the domestic production of these dishwashers to lower labor cost countries.

12.7.2 Production Capacity

Nearly 64 percent of shipments of residential dishwashers already comply with the 

amended energy conservation standards as agreed upon in the Joint Petition and specified in this 

rulemaking. Further, every manufacturer that sells standard dishwashers offers products that 

meet this standard. Since manufacturers would only need to make minor platform changes and or 

increase the production of existing products by the 2013 compliance date specified by the Joint 

Petition, the industry would be able to meet the amended energy conservation standards 

proposed in the Joint Petition without any significant impact to manufacturing capacity.

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2012 2013 2014 2015 2016 2017 2018 2019 2020 Residential Dishwasher Industry Domestic Employment (#)

Baseline TSL 1 TSL 2 TSL 3 TSL 4

TSL 2 Standard Date 2013 TSLs 1, 3, and 4 Standard Date 2018
12-26

12.7.3 Cumulative Regulatory 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 an entire industry. Regulatory burdens can prompt 

companies to exit the market or reduce their product offerings, potentially reducing competition. 

Smaller companies in particular can be affected by regulatory costs since these companies have 

lower sales volumes over which they can amortize the costs of meeting new regulations. 

Assessing the impact of a single regulation may overlook this cumulative regulatory burden. A 

proposed standard is not economically justified if it contributes to an unacceptable level of 

cumulative regulatory burden.

For the cumulative regulatory burden analysis, DOE looks at other significant productspecific regulations that will take effect 3 years before or after the compliance date of the

amended energy conservation standards for residential dishwashers.

f

In addition to amended 

energy conservation regulations, several other Federal regulations apply to residential 

dishwashers. While this analysis focuses on the impacts on manufacturers born of other Federal 

requirements, DOE also has described a number of other non-Federal regulations in section 

12.7.3.2 because it recognizes that these regulations also impact the products covered by this 

rulemaking. 

12.7.3.1 DOE Regulations for Other Products Produced by Residential Dishwasher

Manufacturers

Companies that produce a wide range of regulated products may face more capital and 

product development expenditures than competitors with a narrower scope of products. Many 

manufacturers of residential dishwashers also produce other appliances. In addition to the

amended energy conservation standards for residential dishwashers, these manufacturers contend 

with several other Federal regulations and pending regulations that apply to other products. DOE 

recognizes that each regulation can significantly affect a manufacturer’s financial operations. 

Multiple regulations affecting the same manufacturer can quickly strain manufacturers’ profits 

and possibly cause an exit from the market. Table 12.7.2 lists the other DOE energy conservation 

standards that could also affect manufacturers of residential dishwashers in the 3 years leading 

up to and after the compliance date of amended energy conservation standards for these 

products. 

 

f The compliance date for residential dishwashers at TSL 1, TSL 3, and TSL 4 is 2018. At TSL 2, the compliance 

date is 2013 as specified by the Joint Petition. 
12-27

Table 12.7.2 Other DOE and Federal Actions Affecting the Residential Dishwasher 

Industry

Regulation

Approximate 

Compliance 

Date*

Number of Impacted 

Companies from the Market 

and Technology Assessment 

(MTA) (See Chapter 3 of the 

Direct Final Rule TSD)

Estimated Total Industry 

Conversion Costs

Commercial Distribution 

Transformers 2010g

1 $13.5 (2006$)h

Packaged Terminal Air 

Conditioners and Packaged 

Terminal Heat Pumps

2012 1 $17.3 million (2007$)i

Cooking Products 2012 10 $22.6 million (2006$)j

General Service Fluorescent 

Lamps and Incandescent 

Reflector Lamps

2012 1 $363.1 million (2008$)k

Dehumidifiers 2012 2 N/A†

Commercial Clothes Washers 2013 4 $20.4 million (2008$)l

Battery Chargers and 

External Power Supplies 2013* 1 N/A††

Residential Refrigerators and 

Freezers 2014 11 1,243 million (2009$)m

ER, BR, and Small Diameter 

IRLs 2014* 1 N/A††

*The dates listed are an approximation. The exact dates are pending final DOE action.

† For minimum performance requirements prescribed by the Energy Independence and Security Act of 2007 (EISA 

2007), DOE did not estimate total industry conversion costs because an MIA was not completed as part of a 

rulemaking. Pub. L. 110-140. EISA 2007 made numerous amendments to the Energy Policy and Conservation Act 

(EPCA) of 1975, Pub. L. 94-163, (42 U.S.C. 6291–6309), which established an energy conservation program for 

major household appliances and industrial and commercial equipment.

†† For energy conservation standards for rulemakings awaiting DOE final action, DOE does not have a finalized 

estimated total industry conversion cost. 

 

g

Standards for commercial distribution transformers with a compliance date of January 1, 2010 were published in 

October 2007. 72 FR 58190. DOE expects to publish amended standards with a compliance date of 2015.

hEstimated industry conversion expenses were published in the TSD for the October 2007 commercial distribution 

transformer final rule. 72 FR 58190. The TSD can be found at 

www1.eere.energy.gov/buildings/appliance_standards/commercial/distribution_transformers_fr_tsd.html

iEstimated industry conversion expenses were published in the TSD for the October 2008 packaged terminal air 

conditioners and packaged terminal heat pumps final rule. 73 FR 58772. The TSD can be found at 

www1.eere.energy.gov/buildings/appliance_standards/commercial/ptacs_pthps_final_tsd.html.

jEstimated industry conversion expenses were published in the TSD for the April 2009 residential cooking products 

final rule. 74 FR 16040. The TSD can be found at 

www1.eere.energy.gov/buildings/appliance_standards/residential/cooking_products_final_rule_tsd.html.

kEstimated industry conversion expenses were published in the TSD for the July 2009 general service fluorescent 

lamps and incandescent reflector lamps final rule. 74 FR 34080. The TSD can be found at

www1.eere.energy.gov/buildings/appliance_standards/residential/incandescent_lamps_standards_final_rule_tsd.htm

l.

lEstimated industry conversion expenses were published in the TSD for the January 2010 commercial clothes 

washers final rule. 75 FR 1122. The TSD can be found at

www1.eere.energy.gov/buildings/appliance_standards/commercial/clothes_washers_ecs_final_rule_tsd.html

m Estimated industry conversion expenses were published in the TSD for the September 2011 refrigerators and 

freezers final rule. 76 FR 57516. The TSD can be found at

www1.eere.energy.gov/buildings/appliance_standards/pdfs/refrig_finalrule_tsd.pdf
12-28

Table 12.7.2 (continued) - Other DOE and Federal Actions Affecting the Residential 

Dishwasher Industry

Regulation

Approximate 

Compliance 

Date*

Number of Impacted 

Companies from the Market 

and Technology Assessment

Estimated Total 

Industry Conversion 

Costs

Room Air Conditioners 2014 3 171 million (2009$)n

Residential Clothes Dryers 2014 9 95 million (2009$)o

Fluorescent Lamp Ballasts 2014* 1 N/A††

Microwave Ovens 2014* 2 N/A††

Residential Water Heaters 2015 2 $95.9 million (2009$)p

Metal Halide Lamp Fixtures 2015* 1 N/A††

Residential Clothes Washers 2015* 10 N/A††

Commercial Electric Motors 2015* 1 N/A††

Commercial Distribution 

Transformers 2015* 1 N/A††

Commercial Refrigeration 

Equipment 2016* 1 N/A††

*The dates listed are an approximation. The exact dates are pending final DOE action.

† For minimum performance requirements prescribed by the Energy Independence and Security Act of 2007 (EISA 

2007), DOE did not estimate total industry conversion costs because an MIA was not completed as part of a 

rulemaking. Pub. L. 110-140. EISA 2007 made numerous amendments to the Energy Policy and Conservation Act 

(EPCA) of 1975, Pub. L. 94-163, (42 U.S.C. 6291–6309), which established an energy conservation program for 

major household appliances and industrial and commercial equipment.

†† For energy conservation standards for rulemakings awaiting DOE final action, DOE does not have a finalized 

estimated total industry conversion cost. 

Some Federal DOE regulations have a more significant impact on manufacturers of 

residential dishwashers than others because manufacturers hold a significant market share in 

those covered products. Where market share and company financial data is available, DOE 

attempts to quantify the cumulative regulatory burden as measured by the fraction of corporate 

revenues that are derived from the manufacture of products covered by other standards 

rulemakings.

Table 12.7.3 below shows the DOE energy conservation standards with compliance dates 

within 3 years of residential dishwashers where manufacturers are expected to be most impacted 

due to their market positions. For these rulemakings, residential dishwasher manufacturers would 

likely be burdened by a significant portion of the estimated industry conversion costs.

 

n Estimated industry conversion expenses were published in the TSD for the April 2011 room air conditioners final 

rule. 76 FR 22454. The TSD can be found at

www1.eere.energy.gov/buildings/appliance_standards/residential/residential_clothes_dryers_room_ac_direct_final_

rule_tsd.html.

o Estimated industry conversion expenses were published in the TSD for the April 2011 residential clothes dryers 

final rule. 76 FR 22454. The TSD can be found at

www1.eere.energy.gov/buildings/appliance_standards/residential/residential_clothes_dryers_room_ac_direct_final_

rule_tsd.html.

p Estimated industry conversion expenses were published in the TSD for the April 2010 heating products final rule. 

75 FR 20112. The TSD for the 2010 heating products final rule can be found at

www1.eere.energy.gov/buildings/appliance_standards/residential/heating_products_fr_tsd.html.
12-29

Table 12.7.3 DOE Regulations on Products For Which Residential Dishwasher

Manufacturers Hold Significant Market Share

GE Whirlpool Electrolux BSH

Revenue ($MM) $150,211 $18,366 $16,492 $12,031

Industry Sales 

($MM)

Market 

share

% of 

Revenue

Market 

share

% of 

Revenue

Market 

share

% of 

Revenue

Market 

share

% of 

Revenue

Refrigerators and 

Freezers $10,310 22% 1.5% 24% 13.5% 23% 14.4%

Residential 

Clothes Dryers $2,486 14% 0.2% 71% 9.6% 7% 1.1%

Room Air 

Conditioners $1,050 13% 0.7% 13% 0.8%

Residential 

Clothes Washers $3,373 16% 0.4% 64% 11.8% 6% 1.2%

Dishwashers $2,106 27% 0.4% 49% 5.6% 18% 2.3% 5% 0.9%

Cooking Products $4,491 44% 1.3% 15% 4.1%

Dehumidifiers $199 35% 0.4% 6% 0.1%

Microwave Ovens $1,377 4% 0.3%

Totals 3.8% 41.9% 23.9% 0.9%

Where specific market share data was not available, DOE identified manufacturers of 

other products covered by additional efficiency standards as shown in Table 12.7.4.

Table 12.7.4 Other Covered Products 

Manufacturer Other Covered Products Manufactured

AM Appliance Group / Asko Commercial clothes washers, residential clothes dryers, residential; clothes washers

Equator Residential refrigerators and freezers, residential clothes dryers, 

residential clothes washers

Fagor Cooking products, residential refrigerators and freezers, residential clothes dryers, 

residential clothes washers

Fisher & Paykel Cooking products, residential clothes dryers, residential clothes washers

Haier Cooking products, residential clothes dryers, room air conditioner, 

residential clothes washers

Indesit Cooking products, residential refrigerators and freezers, residential clothes dryers, 

residential clothes washers

Miele Cooking products, residential refrigerators and freezers, residential clothes dryers, 

residential clothes washers

Summit Residential refrigerators and freezers, residential clothes dryers, commercial 

refrigeration equipment, residential clothes washers

Viking Residential refrigerators and freezers, cooking products. microwave ovens, 

commercial refrigeration equipment, residential clothes washers

12.7.3.2 Other Regulations That Could Impact Residential Dishwasher

Manufacturers

While the cumulative regulatory burden focuses on the impacts on manufacturers of other 

Federal requirements, in this section DOE has described a number of other regulations below 

that could also impact the residential dishwashers covered by this rulemaking.
12-30

State Energy Conservation Standards

Manufacturers indicated that California has several programs that are either already in 

place or are currently in development that affect manufacturers of residential dishwashers. 

Various building, electrical, mechanical, and plumbing codes in California affect dishwashers, 

and products are also subject to California’s laws on the Restriction on the use of certain 

Hazardous Substances (RoHS). California’s RoHS law took effect January 1, 2007 and was 

modeled after the European Union’s (EU’s) directive (described below), which bans certain 

hazardous substances from electrical and electronic equipment.

International Energy Conservation Standards

Residential dishwasher manufacturers that sell products outside of the United States are 

subject to several international energy conservation standards. In the EU, products are also 

subject to RoHS. This regulation bans the sale of new equipment in the EU that contains 

quantities in excess of agreed upon levels for lead, cadmium, mercury, hexavalent chromium, 

polybrominated biphenyl (PBB) and PBDE flame retardants. Waste Electrical and Electronic 

Equipment (WEEE) and the Registration, Evaluation, Authorization, and restriction of 

Chemicals (REACH) are additional regulations that create compliance costs for manufacturers 

that compete in Europe. REACH deals with chemicals and their safe use and has provisions that 

will be phased-in over 11 years, beginning June 1, 2007. The EU also sets limits for the amount 

of energy consumed by equipment when it is in standby mode and off mode. Additionally, HFCs 

are banned in refrigerants in several countries, such as Austria, Denmark, and Switzerland. 

Canada and several other foreign countries have regulations or have initiated regulations 

affecting dishwasher manufacturers.

12.8 CONCLUSION

The following sections summarize the different impacts for the scenarios DOE believes 

are most likely to capture the range of impacts on residential dishwasher manufacturers at each 

TSL in the standards case. While these scenarios bound the range of the most plausible impacts 

on manufacturers, some circumstances could cause manufacturers to experience impacts outside 

this range.

12.8.1 Residential Dishwashers

At TSL 1, DOE estimates impacts on INPV to range from -$44.3 million to -$45.3

million, or a change in INPV of -7.0 percent to -7.1 percent. At this level, industry free cash flow 

is estimated to decrease by approximately 56.5 percent to $21.9 million, compared to the basecase value of $50.5 million in the year leading up to the amended energy conservation standards. 

As TSL 1 corresponds to current ENERGY STAR standards, and these products represent over 

96 percent of shipments in the year leading up to amended standards, only a very small fraction 

of the market is affected at this efficiency level. In either markup scenario, the impact to INPV 

at TSL 1 stems from the conversion costs required to switch production lines from 

manufacturing baseline units to those meeting the standards set at EL 1 for both product classes.
12-31

As a large fraction of the energy used in dishwashing is associated with heating the wash 

water, the design options proposed to meet this efficiency level relate primarily to minimizing 

the amount of wash water through spray-arm optimization and enabling greater control over the 

wash water temperature. Both of these practices are in common use in higher efficiency 

platforms across the industry and contribute to an MPC of $209.25 for standard dishwashers. 

Because the industry already produces a substantial number of products at this efficiency level, 

product and capital conversion costs are limited to 73.2 million, which accounts for switching 

production lines from baseline products to existing higher efficiency platforms.

TSL 2 represents the efficiency level agreed upon in the Joint Petition, and establishes a 

compliance date of 2013 as compared to all other TSLs which require product compliance to 

amended standards by 2018. At TSL 2, DOE estimates impacts on INPV to range from -$73.9

million to -$84.6 million, or a change in INPV of -11.6 percent to -13.3 percent. At this level, 

industry free cash flow is estimated to decrease by approximately 192.2 percent to -$39.2

million, compared to the base-case value of $42.5 million in the year leading up to the amended 

energy conservation standards. As with TSL 1, the impact to INPV at TSL 2 stems from the 

conversion costs required to switch production lines from manufacturing baseline units to those 

meeting the standards set at EL 2 for both product classes. However, at TSL 2, these impacts 

grow as the number of products requiring changes grows nearly ten-fold from 3.8 percent of 

shipments in the year leading up to amended standards to 36.1 percent. 

As a large fraction of the energy used in dishwashing is associated with heating wash 

water, the design options proposed to meet this efficiency level relate primarily to minimizing 

the amount of wash water through additional optimization of the water lines as well as upgrades 

to higher efficiency pumps and electronic controls. Incorporating these design options leads to an 

estimated MPC of $222.80 for standard products. While a significant fraction of dishwashers 

currently employ these energy and water saving measures, the product and capital conversion 

costs rise to $94.0 million (as compared to $73.2 million for TSL 1), to account for the additional 

switching of production lines to higher efficiency platforms.

At TSL 3, DOE estimates impacts on INPV to range from -$128.9 million to -$174.4

million, or a change in INPV of -20.2 percent to -27.4 percent. At this level, industry free cash 

flow is estimated to decrease by approximately 212.6 percent to -$56.8 million, compared to the 

base-case value of $50.5 million in the year leading up to the amended energy conservation

standards. While TSL 3 returns the compliance date to 2018 (5 years after that at TSL 2) the 

impact to INPV is more severe as less than 20 percent of shipments in the year leading up to 

amended standards meet or exceed this efficiency level. As such, the capital and product 

conversion costs required to bring these products into compliance rise significantly to a total of 

$261.9 million, $167.9 million more than at TSL 2. These conversion costs stem from both the 

research programs needed to develop such optimized products, and the capital investment 

required to change over the majority of production lines to produce these high efficiency 

products. 

The design options proposed to meet efficiency standards at TSL 3 include swapping a 

heated drying system in favor of a condensation drying system, further optimization of the 

hydraulic system extending to a redesign of both the sump and water lines, as well as the 
12-32

incorporation of a flow meter, temperature control, and humidity sensor to finely tune water 

consumption, temperature, and the drying cycle. Beyond component swaps alone, the design 

options proposed at TSL 3 extend to include control strategies that would reduce the wash and 

rinse water temperatures. The component changes required to enable these improvements 

contribute to an MPC of $266.16 for standard dishwashers, $43.37 above that at TSL 2. 

At TSL 4, DOE estimates impacts on INPV to range from -$145.6 million to -$202.7

million, or a change in INPV of -22.8 percent to -31.8 percent. At this level, industry free cash 

flow is estimated to decrease by approximately -246.0 percent to -$73.7 million, compared to the 

base-case value of $50.5 million in the year leading up to the amended energy conservation 

standards. TSL 4 represents the max-tech efficiency level for all dishwashers. The effects on 

INPV result from similar sources as TSL 3, however the fraction of products in the market that 

currently meet this standard shrinks to less than 9 percent in the year leading up to amended 

standards. As such, standards will affect nearly all platforms and will result in substantial capital 

conversion costs associated with improvements to nearly all production facilities. Because so 

few products exist at this level today, nearly all manufacturers will face clean sheet redesigns for 

products that meet this standard. Accordingly, the product conversion costs grow to reflect this 

substantial research effort. The total conversion cost required to meet standards at TSL 5 is 

approximately $303.0 million—a $41.1 million increase from TSL 4. 

The design options proposed to meet the efficiency levels specified at TSL 4 start with 

those at TSL 3, but replace the in-line flow-through water heater with one that is integrated with 

the pump and eliminates the fan used to circulate air during drying. Where these design options 

have little impact on the product MPC, contributing to only a $7.77 increase over that at TSL 3, 

they significantly impact INPV because of the large conversion costs associated with developing 

and producing these highly optimized products.
12-33

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1 Association of Home Appliance Manufacturers. Current Members. Last accessed October 2, 

2011. Available online at: www.aham.org/ht/d/Organizations/divisions/Y/pid/2344.

2 Consortium of Energy Efficiency. Dishwasher Qualifying Products List. Last accessed 

October 2011. Available online at: www.cee1.org/resid/seha/dishw/dishw-main.php3

3 California Energy Commission. Appliance Efficiency Database. Last accessed October 2011. 

Available online at: www.appliances.energy.ca.gov/QuickSearch.aspx

4 ENERGY STAR. Qualified Dishwashers. Last accessed October 2011. Available online at : 

www.energystar.gov/index.cfm?fuseaction=find_a_product.showProductGroup&pgw_code=

DW.

5 McKinsey & Company, Inc. Valuation: Measuring and Managing the Value of

Companies, 3rd Edition, Copeland, Koller, Murrin. New York: John Wiley & Sons, 2000.