3 days ago
Whirlpool Tests Owner-Manager Model for Its Indian Business
Whirlpool Corporation owns a large part of its Indian business but is changing how it manages it.
Instead of closely directing daily operations, it is letting Indian executives run the company.
Some senior managers are also being asked to invest their own money in the business.
The idea is that managers who own shares may make more careful decisions about costs and risks.
Whirlpool still owns about 40% and can intervene on important matters.
The company also keeps its economic interest and rights to the Whirlpool brand.
Whirlpool India has struggled because competitors such as LG, Samsung, Voltas and Haier have taken market share.
One expert sees the plan as a way to give local leaders room to revive the business.
Another believes it may help Whirlpool reduce its investment gradually if the turnaround fails.
Whirlpool Corporation has reduced its stake in Whirlpool India to about 40%.
The parent has given Indian management greater operating autonomy and encouraged senior executives to own shares.
Whirlpool India’s market capitalization fell nearly 60% in two years to Rs 10,314 crore.
Whirlpool retains voting rights, economic interest and brand ownership through long-term licensing agreements.
Analysts differ on whether the arrangement is a turnaround strategy or a gradual exit from India.
- Who
- Whirlpool Corporation, Whirlpool India and the Indian management team, including the managing director and chief financial officer.
- What
- Whirlpool Corporation is testing a model in which it retains a substantial stake while giving local management greater authority to run the company.
- Where
- The arrangement involves Whirlpool Corporation in the United States and its listed Indian subsidiary.
- When
- The change follows a nearly 60% decline in Whirlpool India’s market capitalization over the past two years.
- Why
- Whirlpool is seeking an alternative to either increasing direct control or exiting, while attempting to improve performance through local autonomy and management ownership.
Autonomy as a Turnaround Strategy
Autonomy as a Gradual Exit
Purpose of reducing control
Autonomy as a Turnaround Strategy
Whirlpool is deliberately pairing partial dilution with local management autonomy, management ownership and continued brand support to revive the business.
Autonomy as a Gradual Exit
The parent may no longer want to fund a poorly performing business and could be reducing its exposure gradually while leaving the turnaround to local managers.
Meaning of the 40% stake
Autonomy as a Turnaround Strategy
The retained stake, voting rights and brand agreements show that Whirlpool remains a committed long-term owner with strategic oversight.
Autonomy as a Gradual Exit
Although Whirlpool remains the largest shareholder, its position could allow it to reduce its involvement over time rather than actively operate the subsidiary.
Role of management ownership
Autonomy as a Turnaround Strategy
Giving executives shares may align their decisions on costs, capital and risk with shareholder interests and improve performance.
Autonomy as a Gradual Exit
Management ownership alone may not resolve the competitive pressures that have weakened Whirlpool India’s market position.
Key facts
- Parent stake
- Whirlpool Corporation has reduced its holding in Whirlpool India to around 40%.
- Market capitalization
- Whirlpool India’s market capitalization fell from Rs 26,090 crore to Rs 10,314 crore in two years.
- Management ownership
- Key executives, including the managing director and chief financial officer, have been asked to hold stakes in the company.
- Retained rights
- Whirlpool retains economic interest, voting rights and ownership of the Whirlpool brand through long-term licensing contracts.
- Competitive pressure
- LG, Samsung, Voltas and Haier have intensified competition in the appliances market.
- Possible future stake sale
- Plans to halve the remaining 40% stake are reportedly on hold for now.
Quotes
Harish HV
Founder of Bengaluru-based management consultancy ECube Investments
“The arrangement is unusual because Whirlpool Corp. has not completely walked away. It retains its economic interest, voting rights and ownership of the Whirlpool brand through long-term licensing contracts. At the same time, it is signalling to the broader market that it is giving the necessary autonomy to the Indian management to grow the business.”
financialexpress.com
Sources
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