The Chinese have landed in South Carolina. While America's appliance makers are acutely aware that a low-key giant is in their midst, few others thus far appear to have taken much notice.
Haier America Refrigerators Co. Ltd., whose Camden-made products already grace the shelves of Wal-Mart, Home Depot, Lowe's, Best Buy and other big-box retailers, has invested more than $45 million in a 300,000-square-foot manufacturing plant that it opened in late 2000. In this quiet Southern town better known for its horse farms, Haier Boulevard leads visitors to the front door of a 230-employee plant that sits on a 110-acre tract in Steeplechase Industrial Park.
Inside, two automated thermoforming lines process nearly 7 million pounds' worth per year of extruded plastic sheet into cabinets and door liners used in the company's refrigerators, and polyurethane processing machines inject structural insulating foam into each unit. Banners in Chinese and English drape the factory walls, offering such philosophical nuggets as ``Innovation is the soul of Haier culture'' and ``The destruction of all obstacles results in creation.''
Meanwhile, further north, the firm also has shelled out more than $15 million to buy a 1924 landmark, the 52,000-square-foot former Greenwich Bank Building in Manhattan, to serve both as its U.S. sales headquarters and as a clear symbol that it is in this market to stay.
At a time when much of U.S. manufacturing is wringing its collective hands about losing business abroad, especially to China, Haier is bringing the battle to these shores. Fortune magazine last fall called Haier ``the first significant Chinese employer in the U.S.''
This is not just any Asian competitor. A young, well-connected Chinese entrepreneur, Zhang Ruimin, took over a nearly bankrupt refrigerator factory in Qingdao, on China's east coast, in 1985 and rebuilt it with the help of a German construction company called Haier, from which the reborn firm took its name. Today the government-owned Chinese company is a $9 billion behemoth that employs more than 30,000 worldwide and, at least in appliance terms, has been described by some as the General Electric of China.
Haier Group ranks as the world's No. 2 refrigerator maker, behind Whirlpool Corp., and now also makes a range of televisions, cell phones, air conditioners, washing machines, computers and virtually every type of small appliance. It operates no less than 12 plants and eight design centers outside China. Ruimin, still chairman and chief executive officer, has been quoted as saying he wants to capture 10 percent of the U.S. full-size refrigerator market by 2005. The firm is targeting $1 billion in U.S. sales by that time.
During an early-April visit by Plastics News, Allan Guberski, Haier America vice president and general manager, proudly showed off his facility and shared some insights into the Camden plant's operations. The Lowell, Mass., native, who joined Haier in October 2001 from Amana Appliances, is comfortable around plastics, having started his career with Amsterdam, N.Y., toy maker Coleco Industries Inc., which did thermoforming and blow molding.
In his Spartan office, where a wall banner exhorts one to ``Never say `no' to the market,'' Guberski explained that Haier strives to focus on its core competencies, which include ``agility, a good sense of markets and the ability to quickly execute a product.'' That means there is not a lot of vertical integration in the Camden facility.
``We do no metal stamping, painting or coating,'' he said. ``We use domestically sourced, pre-painted steel ... and we do no toolmaking here,'' though the plant is capable of doing some modest reworking of tools in-house. The company claims it is close to fully qualifying under North American Free Trade Agreement local-content rules, and slaps ``Made in America'' labels on its products.
Yet, while it purchases some injection molded plastic components and extruded plastic sheet domestically, and buys all of its painted steel and its polyurethane foam raw materials from U.S. suppliers, Guberski said there are some items that it makes more sense to source from abroad.
``We have no plans to source tooling domestically. We can get better prices and even better delivery from China,'' he said. Lead time for tool delivery from China is 120 days, he said. Haier Group's equipment division in China has a very large facility that makes all of the tools the company uses worldwide. That automated plant features solid-modeling and rapid-prototyping equipment and runs unattended most of the time, according to Guberski.
The company imports from China some of its door bins as well as small, injection molded parts made in multicavity tools.
``At some point, I'd hope to be sourcing [plastic] handles locally'' - perhaps made using the gas-assisted injection molding process, he said. ``But we can get what we need now out of one set of tools in China.''
Guberski said the Camden plant consumes 5.15 million pounds a year of high-impact polystyrene sheet for its cabinet liners, and 1.67 million pounds of ABS sheet for its door liners.
``We buy about 12,000 extruded plastic sheets per month. Some of the extruded sheet is domestically sourced, and the rest is from South Korea,'' he said.
Haier uses two Italian-made Comi srl thermoforming lines. The larger of the two machines uses a large aluminum tool to produce a ``double bubble'' liner with a deep draw that exceeds 24 inches. In one motion, the $3.5 million machine forms both the freezer and fresh-food boxes for a family-sized refrigerator out of a single sheet. A conveyor then moves the formed liner to an automated station where all sides of the boxes are trimmed by robots and pre-drilled for accepting the screws that bolt the liner to the outer steel frame.
Telephone modems run into the programmable-logic controllers on the computerized control panels of the thermoforming presses, and allow Comi engineers in Italy to monitor the machines' operation in real time.
Elsewhere in the plant, metal-forming machines bend, trim and drill the painted steel sheets, and robots pick up the subassembly and automatically drive screws that bolt it into the frame with the condensor and motor. Workers also do helium leak testing on each product, both before and after final assembly.
``We keep the work-in-process inventory on the shop floor to about four hours,'' said Guberski, noting that the company has perhaps 350 fridge boxes on the factory floor at any one time. It takes roughly 21/2 hours to make and assemble an entire product, including bending the steel.
``We do complete foam-in-place'' by injecting the PU foam into the center of the back of the cabinet, he explained. ``We don't use slide-in polystyrene foam inserts, which can cause problems. We use foam to insulate the door and for structural support, to allow us to use thinner plastic liners on the doors.''
As of early April, the Camden factory had been running at the rate of 1 1/3 daily shifts, producing about 500 units a day. That's in part because the plant then was scaling back output to allow it to do production tryouts for a pending, new, 21-cubic-foot model. It currently makes only 14- and 18-cubic-foot models in Camden - all with top-mounted freezers. The plant could more than triple its output if it ran flat-out, around the clock, Guberski said.
``We're focused right now on trying to get this refrigerator plant running at utmost efficiency. We have to tune the software and the tooling, and we want to be able to switch models on the production line in a 10- to 15-minute changeover.''
Other likely new products include one featuring a vinyl-clad-metal exterior that offers a stainless-steel look while minimizing the greasy-fingerprint problem inherent with steel. Haier plans a stainless-steel model, as well.
``We may expand to higher-end products, maybe even side-by-side models,'' he said. The firm will be testing market opinion at trade shows this year. The general manager contends that the ability to assess and react quickly to market preferences is one of his company's strengths.
``Haier's aware of what fuels the interest of the American consumer,'' and the firm touts its design and product innovation capabilities. ``We build to order, basically ... and can go from customer request to finished product within 90 days. We usually can fast-track a model within eight to 12 weeks.''
While the firm runs only a modest, three-person design department in Camden, Guberski wants to expand that function. Haier Group, meantime, has a very substantial design division worldwide.
He feels that Haier's innovation, customer responsiveness and speed-to-market skills will help it become one of the first Chinese companies to build a global, quality brand image. He points to how its creation of a small, upscale wine cooler helped it to win shelf space in major U.S. retail chains. The firm also is a U.S. market leader for the type of mini-refrigerators popular in hotel rooms and school dorms.
Shariff Kan, Haier America's New York-based vice president of merchandising, said in a written response to questions about the firm's future product focus: ``Haier future growth will be looked to from the beverage category, including water coolers and wine cellars. The dishwasher category, for built-in units, is an area we are looking to for exciting launches coming up.''
As regards distribution, Kan indicated the company plans to ``widen and deepen the channels where Haier products are available,'' but offered no further details. As for design, he referred to his company's ``resources and alliances globally with firms and consultants around the world, including in the U.S.,'' but again provided no specifics.
The name game
The challenges facing Haier remain substantial.
In North America, it has nowhere near the brand recognition of a GE, Whirlpool, Frigidaire or Maytag, for example, and cannot yet offer as comprehensive a nationwide service network as those firms.
Moving up-market appears to be key to Haier's future. Profit margins tend to be higher on larger and more-upscale models.
``Being a low-cost producer is good,'' according to Guberski, ``as long as you can make money doing it.''