As Housing Cools, BSH Tweaks

BSH Home Appliances Corp. is big in its native Europe. It has a sizable chunk of China’s kitchen appliance market. It’s no slouch in the Middle East or South Africa either.

But when it comes to $5,000 ovens, you haven’t really made it until you’re big in the U.S.

BSH,a unit of BSH Bosch und Siemens Hausger & #228;te GMBH, itself a venture of Germany’s Robert Bosch GMBH and Siemens AG,had U.S. sales of $500 million last year.

The company, with its North American headquarters in Huntington Beach, employs 1,500 U.S. workers, including 185 in Surf City.

But BSH, which makes ovens, refrigerators, washers and dryers, wants more. North America makes up just 6% of BSH’s $8 billion in yearly sales.

Revenue growth here fell 10 percentage points short of BSH’s 2004 goal of 60%.

“We are too big to be a niche player,” said Franz Bosshard, chief executive for North American operations. “We are at the very beginning of a business.”

BSH knows about building up in new markets, Bosshard said. The company is tweaking its distribution and tailoring its marketing and production to U.S. tastes, he said.

The company surpassed its goals for the first quarter, Bosshard said, a trend he expects to hold for the year.

This year, Bosshard said he wants 30% to 40% sales growth. The target is tempered from 2004’s with an expected slowdown in home improvement sales amid the cooling housing market.

BSH has to take business away from rivals. The appliance market isn’t expected to expand much in 2005 after three years of 10% or better annual growth, said Alan Wolf, senior editor of New York trade publication This Week in Consumer Electronics.

“The industry overall is kind of hitting a brick wall this year,” Wolf said.

Competition is fierce. BSH faces off with mainstream players such as Maytag Corp. and General Electric Co.’s GE Consumer & Industrial unit, as well as niche players including Sub-Zero Freezer Co. and Viking Range Corp.

And BSH has a really close rival, literally: Huntington Beach’s Dynamic Cooking Systems Inc., part of New Zealand’s Fisher & Paykel Appliance Holdings Ltd.

After years of brisk homes sales and the mortgage refinancing boom, the market for upscale appliances is nearing the saturation point, according to Wolf.

“There are only so many kitchens in the country,” he said.

A key part of Bosshard’s strategy lies with distributors of BSH’s products. This year, the company has bought two large distributors serving regional stores and homebuilders.

One distributor covered the lucrative East Coast, from Georgia to Maine. The other covered much of the Southwest.

BSH also sells through Home Depot Inc. and Lowe’s Cos.

The company makes appliances under four brand names:

n Gaggenau is sort of the Porsche of kitchen gear with its fancy technology and sleek designs.

n Bosch is geared toward upper middle-class homebuyers with the ability to spend a little more and get a name brand with the cachet of a BMW.

n Siemens is similar to Bosch, though slightly higher end and with a more urban feel.

n Thermodor is an upscale U.S.-based brand acquired by BSH a few years back. It’s been around for 50 years and has a traditional approach to design.

BSH entered the U.S. in 1991 when it set up shop in Chicago and sold dishwashers from Germany. It built its own U.S. plant in 1996.

A big turning point for BSH came in 1998, when it bought Huntington Beach-based Thermodor, giving it one of the most well-known appliance brands.

In 2002, the company tapped Bosshard, who made BSH big in China, to head up the Huntington Beach operation.

For a European company, tailoring products to U.S. tastes means making stuff bigger. Here, washing machines and dryers are 50% larger than they are in other parts of the world.

“You have more space here,” Bosshard said.

Refrigerators? They’re twice the size of European and Asian models, largely because Americans shop weekly for groceries, not daily.

BSH has looked to expand its brands. It’s added a refrigerator and dishwasher to the Thermodor line and a stove, washer and dryer to Bosch.

The move goes over well with retailers and shoppers who might like to fill their kitchens with the same brand of appliances.

To make new products, BSH is expanding a plant in New Bern, N.C. It’s undertaking a $20 million addition there that’s set to double dishwasher production.

The products’ higher prices give BSH some wiggle room to produce in the U.S., Bosshard said. And making products here saves money on shipping the bulky items.

“Our philosophy is to manufacture where our customers are,” Bosshard said.

Keeping up product quality also is a concern, according to Bosshard.

“Their products live up to the hype from a technology standpoint,” said Richard Babyak, editor of Appliance Design in Troy, Mich. “They are innovative.”

One BSH stovetop only gets hot in the area the pan touches, Babyak said. Some dishwashers BSH sells are among the quietest, he said.

But BSH doesn’t have a lock on cool technology and design.

South Korea’s LG Electronics Inc., another company vying for the U.S. appliance market, sells refrigerators with a TV screen in the door.

Samsung Electronics Co., an equally ambitious South Korean player, has a fridge with four doors and separate temperature controls for each section.

“There’s a lot of competition for the high-end dollars,” Wolf said.

Bosshard is undaunted. He said the company could expand U.S. employment by 30% in the next few years and is considering whether to increase manufacturing.

The company added around 1,200 workers with manufacturing expansions in the past couple of years.

The workforce in Huntington Beach has tripled from 60 people two years ago.

Whether the headquarters will stay in Surf City isn’t a given. Bosshard said he one day might move the base to BSH’s growing Carolina facilities.

But Bosshard concedes his people like it here and would rather stay.