Whirlpool Corp., the world’s largest maker of appliances, sank the most since 1987 after saying it will cut 5,000 jobs and lowering an annual profit forecast by as much as 36 percent with demand in the U.S. falling back to recessionary levels.

The shares dropped 14 percent to $51.80 at 4:15 p.m. in New York for the largest decline since the so-called Black Monday stock market crash on Oct. 19, 1987. The stock has declined 42 percent this year.

The plan, which also includes reducing factory capacity by 6 million units, will cost $500 million, Whirlpool said in a statement Friday. Profit this year will be in a range of $4.75 to $5.25 a share, down from a previous forecast of $7.25 to $8.25, the company said.

“They are on fragile ground financially, and they’ve clearly got to do something to try to lower their cost structure to operate in this really tough consumer environment,” Jeffrey Sprague, an analyst for Vertical Research Partners in New York, said in an interview. Sprague recommends selling Whirlpool shares.

Whirlpool, which generates about half its revenue outside North America, shipped fewer appliances to every region except Asia in the third quarter. Demand declined as U.S. consumer confidence fell, the sovereign debt crisis accelerated in Europe and inflation slowed growth in emerging markets, Chief Executive Officer Jeff M. Fettig said Friday in a conference call with analysts.

Demand for major appliances in the U.S., Whirlpool’s largest market, has fallen back to the “recessionary levels” of 2009, Fettig said. Whirlpool’s shipments in North America may drop as much as 5 percent this year, down from an original forecast of as much as a 2 percent gain, the company said.

“Consumers are trading down to lower price points, housing is still dead, and the consumer is still stressed,” Sprague said, adding that reduced demand is affecting a range of big- ticket appliances, from air conditioners to fridges. “That has had an adverse effect.”

That drop in demand has hurt Whirlpool’s profit, which along with pension contributions, a legal settlement and Friday’s added restructuring costs, prompted the company to flip its forecast for free cash flow. The company had expected a gain of as much as $260 million in cash from operations after capital expenditures this year and now expects to consume as much as $200 million of cash by that measure. 

(Bloomberg)