Haier: Taking A Brand Name Higher

It's "High-er," explains Michael Jemal, for what one assumes is the umpteenth time. "As in higher and higher." To Jemal, president of giant Chinese appliance maker Haier Group's American operations, the pronunciation is vital. In China as well as the U.S., Haier tends to come out more like "hair." And studies show most Americans associate Chinese brands with shoddy quality.

That's a perception Jemal is fighting mightily in his bid to make Haier the next premier name in white goods. Haier follows a playbook borrowed from the Japanese and Koreans: First, build a huge base at home that gives you economy of scale and a market where you can test products and perfect your manufacturing. Then go on the offensive overseas and race up the value chain.

Thanks largely to its leadership in China, Haier is the world's fourth-largest home appliance maker, with 2005 sales of $12.8 billion. Since entering the U.S. in 1999, it has become the top-selling brand of compact refrigerators, a market leader in home wine coolers, and No. 3 in freezers. U.S. sales last year: $750 million. But Haier is still known in the U.S. mainly for commodity goods. "When I look across the major appliance categories, I've not yet seen [Haier] have any perceivable position," sniffs David L. Swift, Whirlpool Corp.'s (WHR ) boss for North America.

To change that, Haier is unveiling a line of eco-friendly, tech-rich appliances priced at $600 to $1,500, compared with the $200-to-$300 range it's known for. There's the Genesis top-loading washing machine, starting at around $725, and a dishwasher with food particle sensors to determine when plates are clean. "They won't be able to transform their image quickly, but it can be done," says Bob Walsh, chief operating officer of Fairfield (N.J.) Karl's Sales & Service, which stocks the Genesis washer.

Sharp competition in China has sliced into Haier's margins. But there's still reason to think the company has a shot. It has 50,000 workers in 46 factories, including a plant in Camden, S.C., and a massive complex in the coastal city of Qingdao, turning out more than 43 million products, from full-size fridges to digital TVs. This base gives Haier the heft to get new products to market quickly to fill any niche. "We used all our resources to get into the market at the low end, then we creeped into the midrange," says Jemal. "Now we are entering a new strategic phase."

By Pete Engardio in New York with Michael Arndt in Chicago

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