Thursday, June 03, 2010

Whirlpool -- Maytag Recall Legal Sham

Whirlpool (WHR) hid behind its Maytag brand and announced a major recall of some 1.7 million dishwashers because of a fire hazard. They have identified twelve units that have had such defects.

Most dishwashers are built in. The average home owner, even if he/she is a pretty good handy person cannot just take out the dishwasher and bring it into a local store. If you bought the house with the appliance already installed you probably would not know where to bring it.

The recall is a legal sham as it is not practically possible. Yet lawyers will be able to point to the recall and say we tried your honour.

The stock has sold off on the news. Yet no announcements on potential costs and what would be picked up by insurance. Actually no word on how much insurance if any. Uncertainty provides the legal smokescreen. What burdens do investors carry on this one?

Disclosure: No position in any stocks mentioned in this post.