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Water Heater Manufacturers Interview Guide

Introduction The Department proposes to conduct interviews with manufacturer representatives to gather key information onthe effects that potential new energy efficiency standards for water heaters might have on their company's revenues and finances, and on their workforce. This interview guide provides a starting point to identify relevant issues and qualitatively and quantitatively describe the impacts ofpossible candidate standards levels.

PartA: CurrentOrganizational Characteristics The Department's interest concerning manufacturer impact is focused at theplant or profit center level directly pertinent to water heater production. The context within which the plant operates and the details ofplant production and costs are not readily available fromthe published literature, however, sothe Department invites manufacturers to provide these details confidentially in their own words to the extent practical. The organizational setting around the waterheater profit center is of interest toround out the Department's understanding oftheprobable future ofthe water heater manufacturing activity without and with energy efficiency standards. A. 1 Identify names ofparent companies and any subsidiaries relevant tothe water heater industry. A.2 Please provide the locations ofyour water heater production facilities and the product mix manufactured there. A.2.1 How would energy efficiency standards affect each production facility mix? A.3 How has your company incorporated energy efficiency improvements in water heater technology into its product line and marketing strategy? A.4 How would a new energy efficiency standard on water heaters affect your product mix and marketing strategy? PartB: IndustryInfrastructure As part ofan attempt tobetterunderstand the industry infrastructure and the impact energy efficiency standards might have on it, the Department would like forDraft - For Discussion Purposes Only

manufacturer representatives to discuss their major distribution channels and major sources ofsupply. Major Customer Types The following questions are intended to gain an understanding ofhowpotential energy standards levels might affect customer mix and distribution channels. B. 1. Generally how would a new waterheater standard impact your customer mix, distribution channels and corresponding profit margins? Major Suppliers The Department recognizes that manufacturers do not operate in insolation and that changes in production levels or economic health of a manufacturer can have significant impacts on its suppliers and othertrade allies. TheDepartment plans tobe available to meet with representatives ofthese trade allies and to consider their impacts. B.3. Who are the suppliers that may be affected by changes in yourproduct mix as a result ofstandards? How might they be affected?

PartC: ManufacturerCash Flow Analysis Each manufacturer has been given the Government Regulatory Impact Model (GRIM) to develop its own cash flow model to compare with that ofthe "industry" cash flow. This will allow each manufacturer touse its own financial information to arrive atthe expected differences in cash flow due to new energy efficiency standards. These results, together with an adequate understanding ofhow they were developed, will help the Department to estimate industry impacts for different types ofmanufacturers. C.

. Costs How do you explain differences, ifany, between your manufacturing costs with and without new energy efficiency standards and those presented inthe sample results for the industry as a whole? C.1.1. Is the "Industry" cost structure (materials, labor, overhead, tooling, etc.) representative ofyour firm's costs? What are the differences and their causes? C.1.2. How might new standards alter this cost structure? C.2 Prices How do you explain differences, ifany, between your expected product prices with and without new energy efficiency standards and those presented inthe sample results for the industry as a whole?Draft - For Discussion Purposes Only

C.2. 1. Are your gross margins (% revenue) different post standards? Ifso, what are the causes? C.3 Shipments How do you explain differences, ifany, between yourexpected product shipments with and without new energy efficiency standards? C.3.1. What assumption(s) did you make about your firm's market share poststandards? What was your reasoning? C.3.2 Is yourproduct mix significantly different from the overall industry proportions? C.4 Financial How do you explain differences, ifany, between yourfinancial data and those presented for the industry as awhole? C.5 Impacts onthe Business Please discuss your interpretations ofthe cash flow analyses results for the standards cases. What do the results imply about the future ofthebusiness? Availability ofcapital? Are there additional financial impacts on new standards that are not being captured inthe cash flow analysis? Please explain? C.6 Additional Economic Measures Please discuss any additional measures, ifany, that you might have developed that provide insight into the economic effects ofchanges in energy-efficiency standards. PartD: Competitive Impacts Assessment Competitive impacts are assessed mainly in terms ofmarket power, which is defined as the ability to set agiven productprice within a limited range. The Department is interested in manufacturer viewpoints on theextent towhich new energy efficiency standards would increase market power and thereby lesson competition within the water heater industry. D.1. How would new energy efficiency standards affect your ability to compete in the marketplace? D.2. Do you believe that new energy efficiency standards would unfairly assist or harm the ability ofsome firms in theindustry to compete? D.3. Please discuss examples, ifany, wherein substantial consumer subgroups would experience economic orperformance penalties as aresult ofnew standards. D.4. Can your firm meet potential efficiency levels withoutchanging your products in ways that consumers might care about?Draft - For Discussion Purposes Only

D.5. Does your company have specific information for the Department on consumer preferences forproduct attributes potentially affected by new standards? PartE: Employment Impacts Assessment The impact ofnew energy efficiency standards on employment is an important consideration inthe rulemaking process. This section ofthe interview guide seeks to explore current trends in water heater production employment and solicit manufacturer views on how domestic employment patterns might be affected bynew energy efficiency standards. E. 1. How would your employment levels change under new energy efficiency standards? E.2. Would the workforce skills required under new energy efficiency standards be different enough torequire extensive retraining or replacement ofemployees? PartF: Manufacturing CapacityImpacts Assessment The information discussed here is important for developing an understanding ofthe investment cost inputs to GRIM. F.1. How would the imposition ofnew energy efficiency standards affect your capacity utilization and manufacturing assets levels at your domestic production facilities? F.1.1 Would any facilities be closed or downsized? F. 1.2. Would any facilities be added or upgraded? F.2. Ifcurrent capacity were to bemade obsolete, would it be remodeled to accommodate a new product mix? F.3. Please estimate thevalue ofstranded assets resulting from anew standard, and/or the costs ofrefitting the facility and carrying out the research, engineering, and other supporting activities required to accommodate the new product mix. Part G: Cumulative Impact ofRegulation Please discuss the cumulative impact, ifany, ofother current orfuture product regulations on your business, particularly those (such as HCFC phase-out) which could mitigate or exacerbate the impact ofnew energy-efficiency standards.