Credit: A Whirlpool

After a decade of struggle for survival in the turbulent appliance market, Chairman Elisha (“Bud”) Gray II, 56, of Whirlpool Corp., could sit back in his office at Benton Harbor, Mich., and comfortably feel the battle won. Sales —more than two-thirds from making Kenmore “white goods” for Sears (which owns 19% of Whirlpool)—hit a record $465 million last year. Earnings were rising smartly. Appliance Buyers Credit Corp., Whirlpool’s 80%-owned subsidiary to finance retail sales of its appliances, turned a profit for the first time in 1962. It earned $403,000.

Last week Gray’s confidence disintegrated into shock. A routine annual audit, somewhat more extensive than usual because of a change of command in the credit subsidiary’s hierarchy, turned up jarring discrepancies. Auditors from Ernst & Ernst, which had been examining the books for six years, found that $15 million to $18 million of the receivables consist of noncollectable bad paper. This will cut Whirlpool’s aftertax earnings as much as $10 million for the year in 1963. A loss of unknown dimensions also faces Carrier Corp., the Rochester, N.Y., air-conditioning manufacturer that owns the remaining 20% of the subsidiary.

Under the presidency of debonair and energetic Robert Finch, it appears that the credit unit accepted bad risks and then kept refinancing them, in the firm’s eagerness to expand business. The risks did not show on the audited statement, and Finch unfortunately will never be able to explain. On May 7, his private plane ran into engine trouble and crashed on an approach to the Benton Harbor airport, killing Finch and his immediate family.