Whirlpool ‘misled to dump thousands of faulty goods’

Whirlpool dumped more than 3000 faulty ovens, refrigerators and washing machines in Australia, a court has heard.

 

US whitegoods giant Whirlpool offloaded more than 3000 faulty products in Australia, including ovens, refrigerators and washing machines, by misleading its local distributor about how often they failed, a court has heard.

Australian company Castel Electronics claims Whirlpool lied about how often products broke down in negotiations over distribution because executives knew the truth was a “deal breaker”.

The lies were part of a plan, Project Phoenix, to revitalise Whirl­pool’s ailing Oceania division, which was losing $1 million a month, the Federal Court heard.

Court documents show that among poor-quality goods transferred to Castel after it became Whirlpool’s Australian distributor three years ago were the Cabrio washing machine, which used twice as much water as ­advertised, “sometimes emitted smoke from the underside”, and had a failure rate of 84 per cent, as well as faulty ovens and fridges.

Despite consumer anger, no safety issues have been raised and Whirlpool has not conducted a product recall since 1998, according to Australian Competition & Consumer Commission records, although subsidiary Indesit ­recalled a line of dryers in January because they can catch fire. An ACCC spokesman said the consumer watchdog had not investigated Whirlpool failure rates.

Whirlpool has hit back, telling the court Castel made misleading statements about its ability to move the brand up-market and breached the distribution deal.

Whirlpool says Cabrio wash­­ers were transferred for “storage” to Castel, which sold about 1000 “without authorisation”. The sides deny each other’s claims.

Whirlpool USA spokeswoman Kristine Sherman said the company could not comment on allegations before the court, but said it would dispute them.

Whirlpool last year sold goods worth more than $US20 billion globally under its own brand, as well as under Maytag, Indesit, KitchenAid, Consul, Brastemp, Jenn-Air, Amana and Bauknecht.

However, court documents show it struggled in Australia in 2012. It hired consultants McKinsey to review local operations.

In April 2012 McKinsey reported “a high service and return rate”, with 13.2 per cent of goods sold in 2011 needing service and 7.6 per cent exchanged or returned. It recom­mended Whirlpool appoint a local distributor.

In October Whirlpool formed a Project Phoenix committee comprising some of its most senior executives, which chose Castel as the distributor. But emails tendered to the court show the committee became alarmed when Castel demanded details about Whirlpool failure rates.

“ ... We are well aware that sharing historical fault rates as is will be a deal breaker,” Whirlpool Australia’s Saurabh Agarwal said in an email. Whirlpool fiddled the books to “withhold from Castel damaging costs experienced by Whirlpool in relation to its faulty products”, it is alleged.

In its Federal Court claim, Castel says the episode cost it ­almost $13m. It wants that back, plus unspecified damages for conspiracy and exemplary damages to punish Whirlpool.