Beginning late this fall, the program authorizes rebates of $50 to $200 for purchases of high-efficiency household appliances. The money is part of the broader economic stimulus bill passed earlier this year. Program details will vary by state, and the Energy Dept. has set a deadline of Oct. 15 for states to file formal applications. The Energy Dept. expects the bulk of the $300 million to be awarded by the end of November. No need to worry you won’t have to hook up a U-Haul to drag in your old appliances – trade ins are not required for this program. "These rebates will help families make the transition to more efficient appliances, making purchases that will directly stimulate the economy," Energy Secretary Steven Chu said in a statement announcing the plan. Only appliances covered by the Energy Star seal will qualify. In 2008, about 55% of newly produced major household appliances met those standards, which are set by the Energy Dept. and Environmental Protection Agency.
The money can't come soon enough for the home appliance industry, which is mired in an unprecedented sales slump that began when the housing market cooled in 2006. Since then that slump has worsened considerably. Shipments of washers, dryers, refrigerators, and ovens dropped 10% in 2008 and are down 15% through July, according to the Association of Home Appliance Manufacturers. "It's brutal," says Raymond James (NYSE:RJF - News) analyst Sam Darkatsh.
The leading appliance makers have felt the pinch. Whirlpool of
Not surprisingly, appliance makers cheered the news. Electrolux spokesman Tony Evans calls the federal program a "great opportunity to encourage consumers to replace their old appliances." Lately, cash-strapped consumers have chosen to repair, rather than replace, hobbled dishwashers and other water-intensive appliances, according to industry analysts. Electrolux says it is readying "aggressive" marketing programs that will run parallel with the rebates, and it's reasonable to expect appliance makers and retailers will devise additional discounts to amplify the rebates' appeal. "We will be ready to go when the new incentive programs hit the market," Evans said.
Unlike the popular, $3 billion cash-for-clunkers vehicle program, which ends on Aug. 24, there's no guarantee that hard-hit consumers are prepared to plump for new washers, stoves, and fridges. The federal outlay will piggyback on rebate programs for energy-saving appliances that have existed for years in more than 25 states, but which have largely failed to spur demand. Home improvement retailers like Home Depot (NYSE:HD - News) and Lowe's (NYSE:LOW - News) have also offered deep discounts on big-ticket appliances lately, with little impact.
"The cash-for-clunkers (program) had a discernible value proposition for the consumer, because he knows how much his (clunker) is worth," says Darkatsh, the Raymond James analyst. "With appliances, there is no trade-in. You can walk into Home Depot and get a great deal on a home appliance any time you want one. Why would it drum up sales now?" Laura Champine, an analyst with Cowen & Co. (NasdaqGS:COWN - News), agrees. "I'm not sure if it will be as powerful as cash for clunkers because there is something compelling about that $4,500 discount," she says. "Also, a new car is more fun than a new dishwasher. So I'm not sure if it will be as much of a driver, but any driver is welcome right now."
The recession's ability to blunt the program's impact was underscored by a call made on Friday to the California Energy Commission to discuss its approach to the rebate program. The entire state office is on unpaid furlough each Friday in August; no one picked up the telephone.
Are you planning to purchase new appliances? Will the Cash for Refrigerators program entice you into the showrooms?
This post was inspired by a recent article in NewsWeek by Matthew Boyle http://tinyurl.com/qp7zjk