EXECUTIVE OVERVIEW

Whirlpool Corporation is the world's leading manufacturer of major home appliances and a leading producer of major home appliances in North America, Latin America and Europe and has a significant presence in markets throughout India and China. We have received worldwide recognition for accomplishments in a variety of business and social efforts, including leadership, diversity, innovative product design, business ethics, social responsibility and community involvement. We conduct our business through four reportable segments, which we define based on geography. For additional information about our segments, see Note 11 of the Notes to the Consolidated Condensed Financial Statements.

Our global branded consumer products strategy over the past several years has been to introduce innovative new products, increase brand customer loyalty, expand our presence in foreign markets, enhance our trade management platform, improve total cost and quality by expanding and leveraging our global operating platform and where appropriate, make strategic acquisitions and investments.

We monitor country-specific economic factors such as gross domestic product, consumer confidence, retail trends, housing starts and completions, sales of existing homes and mortgage interest rates as key indicators of industry demand. In addition to profitability, we also focus on country, brand, product and channel sales when assessing and forecasting financial results.

We continue to experience significant macroeconomic challenges including the recent instability in the financial markets. These challenges have impacted the global economy, the capital markets, our operating costs and global demand for our products. The results of these challenges include continued higher material and oil-related costs, liquidity strain on our suppliers, decreased consumer confidence and reduced consumer discretionary spending. We expect these conditions to continue in the foreseeable future. See Update: Forward Looking Perspective for revised estimates of our 2008 outlook and other forward looking statements.

RESULTS OF OPERATIONS

Our results reflect strong performance within our Latin America operations. These results were more than offset by declines in gross margin and operating profit in North America and Europe, caused by the combination of material and oil-related cost increases and lower demand.

Consolidated Net Sales

Consolidated net sales increased 1.3% for the September quarter and 3.6% year to date compared to the same periods in 2007. These increases are due mainly to increases in the average unit selling price, primarily due to favorable impacts of foreign currency, partially offset by lower units sold. Excluding the impact of foreign currency, consolidated net sales decreased 2.3% for the quarter and 2.0% year to date compared to the same periods in 2007. We define the average unit selling price as the amount that results from dividing consolidated net sales by units sold.

The table below summarizes consolidated net sales by region:

                                                Three Months Ended September 30,                     Nine Months Ended September 30,
Millions of dollars                         2008                2007            Change            2008                2007           Change
North America                           $       2,741       $       2,947           (7.0 )%   $       8,282       $      8,690          (4.7 )%
Europe                                          1,087                 998            8.9              3,077              2,727          12.9
Latin America                                     989                 813           21.7              2,927              2,389          22.5
Asia                                              137                 123           11.3                453                402          12.7
Other/eliminations                                (52 )               (41 )        (26.8 )             (147 )             (125 )       (17.6 )

Consolidated                            $       4,902       $       4,840           1.3  %    $      14,592       $     14,083          3.6  %

Significant regional trends were as follows:

• North America net sales decreased 7.0% for the three months ended September 30, 2008 compared to the same period in 2007, primarily due to a 10.9% decrease in units sold. The decline in units sold is primarily due to decreased industry demand resulting from a continued weak U.S. economy in 2008. Partially offsetting the decrease in units sold is a 4.4% increase in the average unit selling price primarily due to better product price/mix, new product introductions and product innovation in 2008 compared to 2007. For the nine month period, net sales decreased 4.7% compared to the same period in 2007, primarily due to a 6.9% decrease in units sold. Partially offsetting the decrease in units sold is a 2.3% increase in the average unit selling price due to the same factors affecting the three month comparison.

• Europe net sales increased 8.9% for the three months ended September 30, 2008 compared to the same period in 2007. The increase in sales is primarily due to a higher average unit selling price in 2008, which increased 11.0% due primarily to the impact of favorable foreign currency as well as better product price/mix, partially offset by a lower number of units sold due to decreased demand in Europe. For the nine month period, net sales increased 12.9% compared to the same period in 2007. Sales increases for the nine month period were due primarily to a 13.4% higher average unit selling price resulting from favorable foreign currency and better product price/mix compared to 2007. Excluding the impact of foreign currency, Europe net sales decreased 0.4% and 1.6% for the three and nine months ended September 30, 2008, respectively, compared to the same periods in 2007.

• Latin America net sales increased 21.7% for the three months ended September 30, 2008 compared to the same period in 2007, primarily due to a 6.8% increase in average unit selling price and a 14.0% increase in units sold. The increase in sales due to a higher average unit selling price is the result of the favorable impact of foreign currency, new product introductions and product innovation and improved product price/mix. The increase in volume is due to continued strong growth in the appliance industry, increased market share and favorable economic conditions throughout the region. For the nine month period, net sales increased 22.5% as a result of an increase in volume of 11.6% and an increase in the average unit selling price of 9.7%, due primarily to the impact of foreign currency and the other factors affecting the three month comparison. Contributing to higher sales in both the three and nine month period, compared to 2007, is an increase in BEFIEX credits monetized in 2008 as a result of higher volume. During the three months ended September 30, 2008 and 2007, we monetized $43 million and $25 million of BEFIEX credits, respectively. During the nine months ended September 30, 2008 and 2007, we monetized $131 million and $82 million of BEFIEX credits, respectively. We expect to continue recognizing credits as they are monetized. As of September 30, 2008, $790 million of BEFIEX credits remain. Excluding the impact of foreign currency, Latin America net sales increased 11.2% and 8.5% for the three and nine months ended September 30, 2008, respectively, compared to the same periods in 2007.

• Asia net sales increased 11.3% for the three months ended September 30, 2008 compared to the same period in 2007, primarily due to a 13.1% increase in units sold as a result of strong growth in China and continued strong growth in India. For the nine month period, net sales increased 12.7% compared to the same period in 2007, primarily due to a 7.6% increase in units sold. The increase in volume for the nine month period is due to continued strong growth in the appliance industry, increased market share and favorable economic conditions throughout the region during the first nine months of the year. Also contributing to higher sales is a 4.7% increase in the average unit selling price. Factors affecting a higher average unit selling price include the impact of favorable foreign currency, successful new product introductions and improved product price/mix. Excluding the impact of foreign currency, Asia net sales increased 16.2% and 10.7% from the three and nine months ended September 30, 2008, respectively, compared to the same periods in 2007.

Gross Margin

The consolidated gross margin percentage for the three months and nine months ended September 30, 2008 decreased as compared to the same periods in 2007 due primarily to higher material and oil-related costs. The decreases were partially offset by productivity improvements and improved product price/mix.

The table below summarizes percentages by region:

                                    Three Months Ended September 30,              Nine Months Ended September 30,
                                  2008            2007           Change         2008            2007           Change
North America                        10.9 %          11.5 %      (0.6)pts          10.9 %          12.5 %      (1.6)pts
Europe                               15.5            18.5        (3.0)             15.1            15.9        (0.8)
Latin America                        19.7            19.2         0.5              20.8            20.1         0.7
Asia                                 18.0            13.5         4.5              18.1            15.4         2.7
Consolidated                         14.0            14.3        (0.3)             14.1            14.6        (0.5)

Significant regional trends were as follows:

• North America gross margin decreased for the three month period ended September 30, 2008 compared to 2007 primarily due to higher material and oil-related costs and lower industry demand. We expect gross margin to continue to be challenged by a continued slowing U.S. economy and a difficult cost environment in the foreseeable future. These decreases were partially offset by productivity improvements and improved product price/mix. For the nine month period ended September 30, 2008, the decline in gross margin was primarily due to higher material and oil-related costs and lower industry demand. These decreases were partially offset by productivity improvements and better product price/mix.

• Europe gross margin decreased for both the three and nine month periods in 2008 as compared to 2007 due primarily to lower productivity, industry demand and higher material and oil-related costs, which were partially offset by improved product price/mix. Contributing to lower gross margin in both the three and nine month period compared to 2007 were gains from asset sales of $9 million compared with $32 million recognized in 2007. Lower gains in 2008 associated with asset sales were partially offset by higher gains of $5 million from insurance proceeds that are not in the comparable period in 2007.

• Latin America gross margin increased for both the three and nine month periods in 2008 compared to 2007 due primarily to productivity improvements, improvements in product price/mix and regional tax incentives associated primarily with BEFIEX, which combined to more than offset higher material and oil-related costs.

• Asia gross margin increased for both the three and nine month periods in 2008 as compared to 2007 due to improvements in product price/mix and productivity, which more than offset higher material and oil related costs.

Selling, General and Administrative

The table below summarizes selling, general and administrative expenses as a
percentage of sales by region:



                                                 Three Months Ended September 30,                                    Nine Months Ended September 30,
                                                     As a %                           As a %                            As a %                            As a %
Millions of dollars                   2008          of Sales           2007          of Sales            2008          of Sales            2007          of Sales
Selling, general and
administrative expenses
North America                       $     218              8.0 %     $     198              6.7 %     $      662              8.0 %     $      593              6.8 %
Europe                                    116             10.7             101             10.1              318             10.3              260              9.5
Latin America                              78              7.9              53              6.5              241              8.2              198              8.3
Asia                                       24             17.5              22             17.9               75             16.6               65             16.2
Corporate/Other                            41                -              40                -              123                -              136                -

Consolidated                        $     477              9.7 %     $     414              8.6 %     $    1,419              9.7 %     $    1,252              8.9 %

For the three and nine months ended September 30, 2008, consolidated selling, general and administrative expenses, as a percent of consolidated net sales, increased as compared to the prior year period, primarily due to higher brand investment and higher infrastructure costs. Additionally, this increase was impacted by a $12 million operating tax credit recorded by our Latin America region during the third quarter of 2007.

Restructuring

Restructuring initiatives resulted in charges of $24 million for the three months ended September 30, 2008 and $72 million for the nine months ended September 30, 2008, reflecting ongoing efforts to optimize our global operating platform. This amount has been identified as a separate component of operating profit and primarily relates to anticipated charges to shift refrigeration capacity within North America and Laundry capacity to North America, reorganize certain portions of the salaried workforce in Europe, and restructure portions of our global operating platform.

On October 27, 2008, management committed to a workforce reduction plan whereby we will reduce our employee base worldwide between the fourth quarter of 2008 and the third quarter of 2009. For additional information about restructuring activities see Note 8 to the Condensed Consolidated Financial Statements.

Interest and Sundry Income (Expense)

Interest and sundry expense decreased $14 million for the three months ended September 30, 2008 when compared to the same period one year ago primarily due to higher interest income. The $14 million increase in net expense for the nine months ended September 30, 2008 when compared to the same prior year period is primarily due to the impact of foreign currency and legal settlement costs, which were partially offset by the same factors affecting the three month comparison.

Interest Expense

Interest expense was consistent for the three and nine months ended September 30, 2008 when compared to the same periods one year ago as higher debt levels were offset by lower interest rates.

Income Taxes

The effective income tax rate for the three and nine months ended September 30, 2008 was (37.8) % and (11.6) % compared to 4.2% and 13.8% for the three and nine months ended September 30, 2007. The decrease from prior periods is primarily due to a decline in the expected 2008 profitability in the U.S. during the quarter ended September 30, 2008, the impact of a shift in earnings dispersion to our international locations and the impact of discrete items primarily associated with strategic tax planning and an agreement with foreign tax authorities. The decrease in the effective tax rate for the three months ended September 30, 2008 resulted in an increase in earnings per share of $.68 as compared to the prior year. For additional information about Income Taxes see Note 9 to the Condensed Consolidated Financial Statements.

Earnings from Continuing Operations

Earnings from continuing operations for the current quarter were $163 million or $2.15 per diluted share, versus $175 million, or $2.20 per diluted share in the comparable prior period, respectively, due to the factors described above. Earnings from continuing operations for the nine months ended September 30, 2008 were $374 million or $4.89 per diluted share, versus $460 million, or $5.72 per diluted share in the comparable prior period, respectively, due to the factors described above.

Net Earnings

Net earnings for the current quarter were $163 million or $2.15 per diluted share, versus $175 million, or $2.20 per diluted share in the comparable prior period, respectively due to the factors described above. Net earnings for the nine months ended September 30, 2008 were $374 million or $4.89 per diluted share, versus $453 million, or $5.63 per diluted share in the comparable prior period, respectively, due to the factors described above.

UPDATE: FORWARD-LOOKING PERSPECTIVE

We have continued to experience intensified macroeconomic challenges in North America and are now experiencing similar macroeconomic challenges in the European market. These conditions are primarily related to higher than expected material and oil-related costs and decreased demand. As a result, we are reducing our full year outlook for diluted earnings per share and free cash flow for 2008. We estimate that our earnings per diluted share will be in the range of $5.75 to $6.00 and our free cash flow will be in the range of $0 to $50 million for the year ended December 31, 2008. We are also updating our outlook for demand within North America and Europe which we expect to decline 10% and 3 to 4% respectively for 2008, as compared to 2007. We expect these conditions to continue in the foreseeable future. We have continued to pursue actions to mitigate the impact of these challenges including implementing previously announced cost-based price increases, accelerating productivity and implementing cost control initiatives including certain restructuring initiatives discussed in Item 5 Other Information in this Form 10-Q. We continue to invest in our brands to bring new innovative products to consumers around the world.

The table below reconciles projected 2008 cash provided by continuing operations determined in accordance with generally accepted accounting principles (GAAP) in the United States to free cash flow, a non-GAAP measure. Management believes that free cash flow provides shareholders with a relevant measure of liquidity and a useful basis for assessing Whirlpool's ability to fund its activities and obligations. There are limitations to using non-GAAP financial measures, including the difficulty associated with comparing companies that use similarly named non-GAAP measures whose calculations may differ from our calculations. We define free cash flow as cash provided by continuing operations after capital expenditures and proceeds from the sale of assets/businesses. The projections shown here are based upon many estimates and are inherently subject to change based on future decisions made by management and the board of directors of Whirlpool, and significant economic, competitive and other uncertainties and contingencies.

        Millions of dollars
        Cash provided by continuing operating activities   $   500 - $ 525
        Capital expenditures                                 (535) -  (550 )

Free cash flow $ - - $ 50

Agreements with Trade Customers

We enter into agreements with our trade customers from time to time in the ordinary course of business. Most of our products are not sold through long-term agreements. Most trade customers have the ability to change volume among suppliers.

We regularly negotiate with major trade customers and manufacturers regarding supply arrangements for future periods beyond the current year. Sears is a major trade customer for both our OEM and Whirlpool branded products, which accounted for approximately 12%, 14% and 16% of our consolidated net sales for 2007, 2006 and 2005, respectively. The products and volumes we supply and the revenues we obtain may be significantly different in the future than those which currently exist and there is the potential for such sales to be less than 10% of our consolidated net sales for the full year 2008 and beyond. In the past, when faced with a potential volume reduction from any one particular segment of our trade distribution network, we generally have been able to offset such decline through increased sales to other parts of our distribution network. We are continuing our efforts to grow our distribution channels by strengthening our brands though innovation and execution of our brand-focused value creation strategy.

FINANCIAL CONDITION AND LIQUIDITY

Our objective is to finance our business through operating cash flow and the appropriate mix of long-term and short-term debt. By diversifying the maturity structure, we avoid concentrations of debt, reducing liquidity risk. We have varying needs for short-term working capital financing as a result of the nature of our business. The volume and timing of refrigeration and air conditioning production impacts our cash flows and consists of increased production in the first half of the year to meet increased demand in the summer months. We finance working capital fluctuations primarily through the commercial paper markets in the U.S. and Europe.

The funding markets have been volatile in the recent quarter and we have experienced negative global economic trends. Despite this volatility and disruption, we have continued to have access to the commercial paper market. In the event that global volatility and challenging economic trends prevent us from accessing the commercial paper market, we continue to have available a $2.2 billion undrawn committed bank line of credit, provided by a syndicate of highly-rated banks. This facility matures in December 2010. Outside the U.S., short-term funding is provided by bank borrowings on uncommitted lines of credit. We believe that our operating cash flow, together with access to sufficient sources of liquidity, will be adequate to meet our ongoing funding requirements. We are in compliance with the financial covenants of debt agreements with lenders for all periods presented. For a description of financing arrangements that had an effect on our liquidity, see Note 4 of the Notes to the Consolidated Condensed Financial Statements.

Defined Benefit Plans

On August 1, 2008, we amended certain retiree medical benefits associated with our Newton, Iowa manufacturing facility to be consistent with those benefits provided by the Whirlpool Corporation Group Benefit Plan, resulting in a reduction in the postretirement benefit obligation $229 million with a corresponding increase to other comprehensive income, net of tax, within equity of our Consolidated Condensed Balance Sheet at September 30, 2008. For additional information, see Note 10 of the Notes to the Consolidated Condensed Financial Statements.

Share Repurchase Program

In June 2004, our Board of Directors authorized a share repurchase program of up to $500 million. During 2007, we repurchased 3.8 million shares at an aggregate purchase price of $368 million and during the three months ended March 31, 2008, we repurchased 1.1 million shares at an aggregate purchase price of $97 million under this program. At March 31, 2008, there were no remaining funds authorized under this program.

On April 23, 2008, our Board of Directors authorized a new share repurchase program of up to $500 million. Share repurchases are made from time to time on the open market as conditions warrant. During the nine months ended September 30, 2008, we repurchased 1.9 million shares at an aggregate purchase price of $150 million under this program. At September 30, 2008, there were $350 million remaining funds authorized under this program. Given the challenging macroeconomic conditions and volatility in the funding markets we have suspended our share repurchase program.

Sources and Uses of Cash

We expect to meet our cash needs for 2008 from cash flows from continuing operations, cash and equivalents and financing arrangements. Our cash and equivalents were $425 million at September 30, 2008, as compared to $258 million at September 30, 2007.

Cash Flows from Operating Activities of Continuing Operations

Cash used in continuing operating activities in 2008 was $6 million, a decrease of $134 million compared to the nine months ended September 30, 2007. Cash used in continuing operations reflects lower earnings primarily from our North America and Europe segments as compared to 2007. Cash used in continuing operations also reflects an increase in accounts receivable due primarily to higher vendor payment terms, higher pension contributions, and lower accounts payable. The above decreases in cash flows were partially offset by lower restructuring spending.

Cash Flows from Investing Activities of Continuing Operations

Cash used in investing activities from continuing operations was an outflow of $343 million in 2008 compared to an outflow of $111 million for the same period last year. The increase in cash used in investing activities was primarily due to the prior year receipt of proceeds from the sale of certain Maytag discontinued businesses of $100 million, higher capital spending, and lower proceeds from the sale of assets in 2008.

Cash Flows from Financing Activities of Continuing Operations

Cash provided by financing activities from continuing operations was $607 million in the nine months ended September 30, 2008 compared to an outflow of $51 million for the comparable period in the prior year. Net proceeds of short-term borrowings were $561 million for the nine months ended September 30, 2008 compared to $242 million for the comparable period in the prior year. The current year period also reflects proceeds received related to the issuance of $500 million of 5.5% notes due March 1, 2013 and the repayment of $125 million of 9.1% debentures. During 2008, we repurchased stock totaling $247 million, paid dividends to common stockholders totaling $98 million and received proceeds from the issuance of common stock related to option exercises of $21 million. During 2007, we repurchased stock totaling $251 million, paid dividends to common stockholders totaling $101 million and received proceeds from the issuance of common stock related to option exercises of $63 million.