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### APPENDIX 12

- A MANUFACTURER IMPACT ANALYSIS INTERVIEW
GUIDE
, GOVERNMENT REGULATORY IMPACT MODEL , AND

COMPLETE MIA RESULTS

TABLE OF CONTENTS

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- A.1. MANUFACTURER IMPACT ANALYSIS INTERVIEW GUIDES

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12

- A.2. GOVERNMENT REGULATORY IMPACT MODEL

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### MANUFACTURER IMPACT ANALYSIS INTERVIEW GUIDE S

Residential Clothes Washer Rulemaking Manufacturer Impact Analysis Interview Guide12

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T he Association of Home Appliance Manufacturers (AHAM) and the American Council for an Energy Efficient Economy (ACEEE) recently released a multi

- product standards agreement (Consensus Agreement) that address ed negotiated standards for residential refrigerator s/freezers, clothes washers, clothes dryers, room air conditioner s , and dishwashers. For clothes washers, the Consensus Agreement proposes updated standards for top

- loading standard and top

- loading
compact product classes, as well as splitting the existing front

- loading product class into front

loading standard and front

- loading compact clothes washers. DOE’s rulemaking process allows
for the publication of a direct final rule if DOE concludes that standards proposed in the Consensus Agreement meet certain statutory criteria. In order to evaluate the product classes and standards proposed in the Consensus Agreement for residential clothes washers, DOE is requesting in formation on the topics in this questionnaire

.

DOE is requesting information on the product classes in the table below.

Baseline Efficiencies for Considered Product Classes

Product Class Product Class Description Baseline MEF (ft 3 /kWh/cycle) Baseline

S tandby Power (W) Top

- Loading,
Standard Top

- loading with capacity

greater than or equal to 1.6 ft 3 1.26 0

Top

- Loading, Compact Top

- loading with capacity less

than 1.6 ft 3 0.65 0

Front

- Loading,
Standard Front

- loading with capacity

greater than or equal to 1.6 ft 3 1.72 2.3

Front

- Loading, Compact * Front

- loading with capacity

less than 1.6 ft 3 N / A N / A

*DOE is not aware of any compact front

- loading clothes washers available on the market, and is especially interested in information on this product class to evaluate the proposed standard in the Consensus Agreement.

Any amended standards f or residential clothes washers would be expressed in terms of the integrated modified energy factor (IMEF), as proposed in the test procedure NOPR published on September 21, 2010

. 75 FR 57556. Based on the current definition

, DOE expects IMEF to vary significantly from the current MEF metric. IMEF will account for standby and off mode energy consumption, as well as energy use from steam and self

- cleaning cycles. 1 The proposed test procedure also includes changes to the capacity measurement for top

- loading washers, which
will affect IMEF. T he discussion below references efficiency levels in terms of MEF to avoid
metrics unfamiliar to manufacturers.

1. KEY ISSUES

1.1 You previously indicated the following key issues in this rulemaking : [Fill in as appropriate]

. Do these remain key issues for your company in this rulemaking, and are there any additional key issues you believe DOE should consider in this rulemaking ?

2. ENG INEERING AND LIFE

- CYCLE COST

1 Note that the clothes washer test procedure final rule did not adopt provisions to measure the energy consumption
of steam and self

- cleaning cycles. 77 FR 13888 (March 7, 2012).12

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Are the AHAM

- supplied average incremental manufacturing costs at each efficiency level representative of costs your company incurs at each of these efficiency levels? Also, please indicate if the design options you previously stated for the given efficiency levels are still valid.

AHAM

- Supplied Standard Top

- Loading Incremental Costs

MEF (ft 3 /kWh/cycle) AHAM Average

Incremental Cost (materials, labor, OH) Actual
Incremental Cost (if different) Description of Design Options

1.40 $3.08

1.72 $8.39

1.80 $13.02

2.00 $23.99

2.26 $59.25

AHAM

- Supplied Standard Front

- Loading Incremental Costs

MEF (ft 3 /kWh/cycle) AHAM Average

Incremental Cost (materials, labor, OH) Actual
Incremental Cost (if different) Description of Design Options

1.80 $2.13

2.00 $6.09

2.20 $15.73

2.40 $38.89

2.89 $72.13

Front

- loading design options (not specific to a certain efficiency level): larger drum and tub, less
external hot water use and more internal heating, more efficient motors, higher spin speeds, more sophisticated drum designs, and less overall water usage.

At the time the Framework Document was published, the max

- tech units had MEF ratings of 2.26 and 2.89 for top

- loading and front

- loading clothes washers respectively . DOE is now aware of top

- loading clothes washers with a MEF of 2.57 , and front

- loading clothes washers with a
MEF of 3 .35. What design features and associated costs would be necessary to reach these
efficiencies?

Do the design options and associated costs in the tables above also apply to the compact front

and top

- loading product classes?

P lease comment on any issues related to the following proposed changes to the DOE clothes washer test procedure and how they may impact the design options used to reach higher
efficiencies for each product class, as appropriate :

2.1 Standby and Off Mode Power How would accounting for standby and off mode power impact the measured efficiencies of clothes washers? Would the inclusion of standby and off mode powe r affect the design options currently use d to reach higher efficiencies?12

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2.2 Steam Wash Cycles How would accounting for steam wash cycles affect the measured efficiency of clothes washers
with this feature compared to the efficiency as measured using the existing test procedure? Is it appropriate to account for steam wash cycles in the measured efficiency of clothes washers? What percentage of your total shipments do cl othes washers offering a steam wash cycle account
for?

2.3 Self

- Clean Cycles
How would including self

- clean cycles affect the measured efficiency as compared to the current test procedure? What fraction of your total clothes washer shipments includes a pre

- set self

clean cycle, and how fre quently do you recommend consumers use such a cycle?

2.4 Use Factors Will the proposed amendments to the use factors in the DOE test procedure significantly affect the measured efficiencies of any clothes washers? Are the proposed values consistent with a ctual
consumer use? Can you provide any non

- proprietary data related to consumer use of different cycles?

2.5 Capacity Measurement Method
Will th e proposed capacity measurement method affect the design options you use to reach higher efficiencies?

2.6 Energy Test Cycle Definition How will the changes to the energy test cycle definition change how your clothes washers are
tested? Will this revised definition limit the design options available for reaching higher
efficiencies?

3. CONVERSION COSTS

The MIA considers two types of conversion costs:

Capital conversion costs are one

- time investments in plant, property, and equipment (PPE) necessitated by an amended energy conservation standard. These may be incremental changes to existing PPE or the replace ment of existing PPE. Included are expenditures on buildings, equipment, and tooling.

Product conversion costs are costs related research, product development, testing, marketing and other costs for redesigning products necessitated by an amended energy c onservation standard.

The tables below show the AHAM

- submitted average capital conversion costs for a number of efficiency levels. Please indicate if your expected capital conversion costs vary from the AHAM

submitted estimate. In the description column, DOE is interested in understanding the kinds of changes that would need to be implemented to production lines and production facilities at each efficiency level. Where applicable, please quantify the number and cost of new production equipment, molds, etc. that would be required to implement the specified design changes.12

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AHAM

- Supplied Standard Top

- Loading Capital Conversion Costs

MEF (ft 3 /kWh/cycle) AHAM Average

Capital Conversion Costs ($mm) Actual Capital

Conversion Cost (if different) Description

1.40 $1.51

1.72 $34.98

1.80 $37.84

2.00 $41.76

2.26 $60.88

AHAM

- Supplied Standard Front

- Loading Capital Conversion Costs

MEF (ft 3 /kWh/cycle) AHAM Average

Capital Conversion Costs ($mm) Actual Capital

Conversion Cost (if different) Description

1.80 $0.85

2.00 $0.86

2.20 $13.32

2.40 $19.46

2.89 $25.78

The tables below show the AHAM

- submitted average product conversion costs for a number of efficiency levels. Please indicate if your expected product conversion costs vary from the

AHAM

- submitted estimate. In the description column, DOE is interested in un derstanding such expenses as product development, prototyping, testing, certification, and marketing. In the description column, please describe the assumptions behind the estimates provided.

AHAM

- Supplied Standard Top

- Loading Product Conversion Costs

M EF (ft 3 /kWh/cycle) AHAM Average

Product Conversion
Costs Actual Product

Conversion Cost (if different) Description

1.40 $0.93

1.72 $1.43

1.80 $3.62

2.00 $7.95

2.26 $12.84

AHAM

- Supplied Standard Front

- Loading Product Conversion Costs

MEF (ft 3 /kWh/cycle) AHAM Average

Product Conversion
Costs Actual Product

Conversion Cost (if different) Description

1.80 $0.53

2.00 $0.53

2.20 $3.10

2.40 $5.91

2.89 $11.4812

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Are the capital and product conversion costs described above applicable to the compact product classes as well? Would the magnitude and nature of the conversion costs differ for the compact product classes?

Please provide additional qualitative information to help DOE understand the types and nature of your investments, incl uding the plant and tooling changes and the product development effort required at different efficiency levels.

4. MARKUPS AND PROFITABILITY

DOE estimated the manufacturer production costs for the two standard product classes of
residential clothes washers

. DOE assumed the other two compact product classes would have similar baseline markup values. DOE defines manufacturer production cost as all direct costs associated with manufacturing a product: direct labor, direct materials, and overhead (which includes depreciation). The manufacturer markup is a multiplier applied to manufacturer production cost to cover non

- production costs, such as SG&A and R&D, as well as profit. It does not reflect a “profit margin.”

The manufacturer production cost multiplied by the manufacturer markup equals the manufacturer selling price. Manufacturer selling price is the price manufacturers charge their first customers, but does not include additional costs along the distribution channels.

Please comment on the baseline markups DOE calculated as compared to your company’s baseline markups for the clothes washer product classes.

Residential Clothes Washer Baseline Manufacturer Markups by Product Class

Product Class Product Class Description Estimated
Baseline Markup Manufacturer Comments

or Revised Estimates

Top

- Loading, Compact Top

- loading with capacity less than

1.6 ft 3 1.22

Top

- Loading,
Standard Top

- loading with capacity greater

than or equal to 1.6 ft 3 1.22

Front

- Loading, Compact Front

- loading with capacity less than

1.6 ft 3 1.30

Front

- Loading,
Standard Front

- loading with capacity greater

than or equal to 1.6 ft 3 1.30

One of the possible scenarios DOE uses to model impacts on industry profitability is the impact
of commoditization of premium products. Because the market disruption caused by standards can alter the pricing of premium products, DOE is interested in understanding if efficiency is a feature that earns a premium. Within each product class, do markups vary by efficiency level? If yes, please provide information about the markups at efficiencies above the baseline in the tables
below

. Would these markups also vary for compact product classes?12

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Estimated Standard Top

- Loading Markups by Efficiency Level

MEF (ft 3 /kWh/cycle) Estimated

Markup Manufacturer Comments

1.40

1.72

1.80

2.00

2.26

Estimated Standard Front

- Loading Markups by Efficiency Level

MEF (ft 3 /kWh/cycle) Estimated

Markup Manufacturer Comments

1.80

2.00

2.20

2.40

2.89

Would you expect changes in your estimated profitability following an amended energy conservation standard? If so, please explain why. Can you suggest any scenarios that would model these expected changes?

5. FINANCIAL PARAMETERS

In order to accurately collect information about clothes washer manufacturing, please compare your financial parameters to the GRIM parameters tabulated below.12

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Financial Parameters for Residential Clothes Washer Manufacturing
GRIM Input Definition Industry
Estimated
Value (%) Your Actual (If

Different from
DOE’s Estimate)

Income Tax

Rate Corporate effective income tax paid (percentage of

earnings before taxes, EBT) 34.3

Discount Rate Weighted average cost of capital (inflation

adjusted weighted average of corporate cost of

debt and return on equity) 8.0

Working Capital Current assets less current liabilities (percentage of revenues) 6.5

Net PPE Net plant property and equipment (percentage of revenues) 17.7

SG&A Selling, general, and adminis trative expenses (percentage of revenues) 11.3

R&D Research and development expenses (percentage of revenues) 2.2

Depreciation Amortization of fixed assets (percentage of revenues) 4.7

Capital Expenditures Outlay of cash to acquire or improve capital assets

(percentage of revenues, not including acquisition

or sale of business units) 2.7

Cost of Goods
Sold Includes material, labor, overhead, and

depreciation (percentage of revenues) 83.0

6. ADDITIONAL IMPACTS You previously indicated the following regulatory burdens: [Fill in as appropriate]

. Do these still represent regulatory burdens, and are there any additional regulatory burdens at this time? What costs do you anticipate incurring to meet these regulation s?

The impact of amended energy conservation standards on employment is an important consideration in the rulemaking process. Where are your residential clothes washer facilities that produce products for the United States located? Please also provide employment levels and total washer shipments at each of these facilities.

At what efficiency levels would you consider relocating current domestic production abroad?

Are you aware of any small businesses, niche manufacturers, or component manufacturers for which amended energy conservation standards would have a severe impact? If so, why?

Have any of your U

. S

. facilities qualified for grants available through the American Recovery
and Reinvestment Act? Has your company reached the $75 million limit for efficient appliances under the Energy Improvement and Extension Act of 2008? How many shipments of washers qualifying for a $250 production tax credit under the Ener gy Improvement and Extension Act do you anticipate manufacturing in 2010?12

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### Information Request for Compact

- Size Product Classes

for Residential Clothes Washers

The United States Department of Energy (DOE) is currently reviewing energy conservation
standa rds for residential clothes washers, including the standards proposed in the AHAM

ACEEE Multi

- Product Standards Agreement (“Consensus Agreement”). In particular, DOE would like to understand the rationale for the proposed efficiency standards for the top

- l oading compact and front

- loading compact product classes.

1. Consensus Agreement Standard Levels
Table 1 shows the proposed standards in the Consensus Agreement.

Table 1

. AHAM

- ACEEE Multi

- Product Standards Agreement for Residential Clothes
Washers

Product Description New Standard Jan. 1, 2015 (MEF/WF) New Standard Jan. 1, 2018 (MEF/WF) Top

- Loading, Compact (less than 1.6 cubic feet capacity) 1.26 / 14.0 1.81 / 11.6

Top

- Loading, Standard 1.72 / 8.0 2.0 / 6.0

Front

- Loading, Compact (less than 1.6 cubic feet capacity) 1.72 / 8.0

Front

- Loading, Standard 2.2 / 4.5

Table 2 compares the Consensus Agreement standards for the compact product classes to the current DOE standard, as well as the efficiency levels of compact top

- loaders currently on the
market.

Table 2 . Efficiency Levels for Compact

- Size R esidential Clothes Washers

Efficiency Level Source Efficiency Level

MEF WF
Top

- Loading, Compact

DOE Standard 0.65 none Level 1 (currently on the market) 0.78 13.9
Level 2 (currently on the market) 1.00 12.7

Consensus Agreement, 2015 1.26 14.0

Consensus Agreement, 2018 1.81 11.6

Front

- Loading, Compact

DOE Standard 1.26 none Consensus Agreement, 2015 1.72 8.012

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Questions:

 Top

- loading compact

o How were the standards for the top

- loading compact product class established?

o What was the rationale for the tiered standards?

o Are you aware of any products on the market that meet the 2015 standards? 2018
standards?

o Within the top

- loading compact product class, what percentage market share do your company’s shipments represent?

o Do you foresee any potenti al changes in the competitive landscape for compact clothes washers due to the proposed standards?

 Front

- loading compact

o How were the proposed standards for the front

- loading compact product class
established?

o Are you aware of any compact front

- loaders on the market that meet the proposed standards? If not, do you foresee any entrants into this market in the future?12

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2. D esign Options and Costs for Achieving Proposed Standard Levels The inclusion of more stringent standards for top

- loading compact and fro nt

- loading compact product classes in the Consensus Agreement implies that these standards are technologically achievable and economically justifiable. Because the proposed standards for the top

- loading product class represent a significant improvement ove r current standards, DOE would like to better understand how these higher standard levels can be achieved. Table 3 shows the design options considered for standard

- size top

- loading clothes washers.

Table 3 . Design Options for Standard

- Size Top

- Loading Clothes Washers

Design Options Applicable to Compact
Product Class?
More Advanced Controls Adaptive fill control (more accurate pressure switches) Temperature control (more accurate sensors) Water inlet valves (more accurate flow control)

Electronic controls

Accelerometers

Motor Improvements
More efficient motor Variable speed drive Higher spin speeds

Basket/Drum Modifications Basket shape modification
Stainless steel basket Larger capacity Stronger basket Agitator modification

Reduced Water Consumption Spray rinse Recirculation pumps Gray

- water rinse

Structural Improvements Better suspension system

Out

- of

- balance detection

Operational Design Options Longer cycle times Lower water temperatures12

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Questions:

 What design options are available for the compact product classes to meet the higher
standard levels?

 What design options are most likely to be used to reach the proposed 2015 standards?
The 2018 standards?

 What are the average costs associated with meeting each incremental standard level? (See
Table 4 )

Table 4

. Cost Associated with Meeting Each Incremental Efficiency Level

Efficiency Level Source Efficiency Level Incremental Cost ( $/Unit ) MEF WF
Top

- Loading, Compact

DOE Standard 0.65 none
Level 1 (currently on the market) 0.78 13.9

Level 2 (currently on the market) 1.00 12.7

Consensus Agreement, 2015 1.26 14.0

Consensus Agreement, 2018 1.81 11.6

Front

- Loading, Compact

DOE Standard 1.26 none
Consensus Agreement, 2015 1.72 8.0

 Are there any significant differences between product types or platforms ( e.g. stacked washer/dryer vs. portable top

- loading washer) that could affect the ability for a particular product type to achieve the proposed standard levels?

 Can the front

- loading compact efficiency standards be achieved assuming similar de sign options as “nearly compact” front

- loaders ranging from 1.6

– 2.4 cubic feet?12

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3. Consumer Utility DOE would like to better understand the unique consumer utility offered by compact

- size clothes
washers.

Questions:

 Does the market continue to demand clothes washers with capacity less than 1.6 cubic
feet?

 Are the disparate compact top

- loading products considered substitutes for each other? Or does each distinct product type satisfy a unique niche within the market? ( e.g. stacked washer/dryer vs. portab le top

- loading washer)

 Would the proposed standards have any negative impacts on consumer utility of
compact

- size clothes washers?12

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### GOVERNMENT REGULATORY IMPACT MODEL

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- A. 2.1 Introduction and Purpose

The purpose of the Government Regulatory Impact Model (GRIM) is to help quantify the impacts of energy conservation standards and other regulations on manufacturers. The basic mode of analysis is to estimate the change in value of the industry or manufacturers(s) following a regulation or a series of r egulations. The model structure also allows an analysis of multiple products with regulations taking effect over a period of time, and of multiple regulations on the same products.

Industry net present value is defined, for the purpose of this analysis, a s the discounted sum of industry free cash flows plus a discounted terminal value. The model calculates the actual cash flows by year and then determines the present value of those cash flows both without an energy conservation standard ( i.e. , the base case) and under different trial standard levels (TSLs).

Output from the model consists of summary financial metrics, graphs of major variables, and, when appropriate, access to the complete cash flow calculation.

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- A.2.2 Model Description

The basic struct ure of the GRIM is a standard annual cash flow analysis that uses manufacturer selling prices, manufacturing costs, a shipments forecast, and financial parameters as inputs and accepts a set of regulatory conditions as changes in costs and investments. Th e cash flow analysis is separated into two major blocks: income and cash flow. The income calculation determines net operating profit after taxes. The cash flow calculation converts net operating profit after taxes into an annual cash flow by including investment and non

- cash items. Below are definitions of listed items on the printout of the output sheet (see page 12

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Unit Sales: Total annual shipments for the industry were obtained from the Nation al Impact Analysis Spreadsheet;

Revenues: Annual revenues

- computed by multiplying equipment unit price at each efficiency level by the appropriate manufacturer markup;

Labor: The portion of cost of goods sold (COGS) that includes direct labor,
commissi ons, dismissal pay, bonuses, vacation, sick leave, social security contributions, fringe, and assembly labor up

- time;

Material : The portion of COGS that includes materials;

Overhead: The portion of COGS that includes indirect labor, indirect material, e nergy use, maintenance, depreciation, property taxes, and insurance related to assets. While included in overhead, the depreciation is shown as a separate line item;12

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Depreciation: Annual depreciation computed as a percentage of COGS . While included
in o verhead, the depreciation is shown as a separate line item;

Stranded Assets: In the year the standard becomes effective, a one

- time write

- off of stranded assets is accounted for;

Standard SG&A: Selling, general, and administrative costs are computed as a percentage of Revenues ;

R&D: GRIM separately accounts for ordinary research and development (R&D) as a percentage of Revenues ;

Product Conversion Costs : Product conversion costs are one

- time investments in research, development, testing, and marketin g focused on making product designs comply with the amended energy conservation standard. GRIM allocates these costs over the period between the standard’s announcement and effective dates;

Earnings Before Interest and Taxes (EBIT): Includes profits bef ore deductions for interest paid and taxes;

EBIT as a Percentage of Sales: GRIM calculates EBIT as a percentage of sales to compare with the industry’s average reported in financial statements;

Taxes: Taxes on EBIT are calculated by multiplying the tax rate contained in Major Assumptions by EBIT

.

Net Operating Profits After Taxes (NOPAT): Computed by subtracting Cost of Goods Sold, SG&A, R&D, Product Conversion Cost , and Taxes from Revenues.

NOPAT repeated : NOPAT is repeated in the Statement of Cash F lows;

Depreciation repeated : Depreciation is added back in the Statement of Cash Flows including stranded assets because both are non

- cash expenses;

Change in Working Capital : Change in cash tied up in accounts receivable, inventory,
and other cash inves tments necessary to support operations is calculated by multiplying working capital (as a percentage of revenues) by the change in annual revenues ;

Cash Flow From Operations : Calculated by taking NOPAT , adding back non

- cash items
such as a Depreciation , and subtracting out Change in Working Capital ;

Ordinary Capital Expenditures: Ordinary investments in property, plant, and equipment to maintain and replace existing production assets, computed as a percentage of Revenues ;

Capital Conversion Costs : Cap ital c onversion costs are one

- time investments in property, plant, and equipment to adapt or change existing production facilities so that new product designs can be fabricated and assembled under the new regulation;12

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Capital Investment s : Total investments in property, plant, and equipment are computed by adding Ordinary Capital Expenditures and Conversion Capital Expenditures;

Free Cash Flow: Annual cash flow from operations and investments; computed by subtracting Capital Investment from Cash Flow from O perations ;

Terminal Value: Estimate of the continuing value of the industry after 2044 . Computed by growing the Free Cash Flow i n year 2044 at a constant rate in perpetuity;

Present Value Factor: Factor used to calculate an estimate of the present value of an amount to be received in the future;

Discounted Cash Flow: Free Cash Flows (22) multiplied by the Present Value Factor

. For 2042 the discounted cash flow includes the discounted Terminal V alue ; and

Industry Value thru 2044 : The sum of Discounted Cash Flows.12 -A- 17 

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