GE Consumer & Industrial confirmed earlier media reports that it will manufacture energy efficient hybrid electric water heaters in Louisville, KY, at its Appliance Park manufacturing campus. The new production line will create about 400 jobs.
GE plans to leverage its patented hybrid technology to become the first manufacturer to introduce a water heater that will meet the 2009 Department of Energy (DOE) Energy Star standards for heat pump hot water heaters, and to put itself ahead of the competition.
What it took to make it happen
“We made the decision to build these products in Louisville because of the strong support from our state and local governments and the cooperative spirit of our Union leadership and our employees at Appliance Park,” said GE Consumer & Industrial President and CEO James Campbell.
He’s talking about the wage concessions made by the unions and incentives from the state of Kentucky and the city of Louisville.
“Leadership from Governor Steve Beshear, Mayor Jerry Abramson, IUE-CWA President Jerry Carney, and many others will help rebuild America’s manufacturing base, create jobs and enable innovative, energy-efficient American-made products to be competitive in the marketplace,” Campbell added.
Up to $17 million in incentives from state and city governments will be available for the hybrid electric water heater and for other investments, totaling over $69 million, that GE will make at Appliance Park over the next several years. But the concessions and incentives will be worth it if the new manufacturing facility lives up to its potential. GE said it could create up to 1600 incremental green jobs over time for suppliers and contract partners and have a positive financial impact on the area and, in fact, nationwide.
New addition to the old Park
Appliance Park began operation in 1952. It’s more than 900 acres, with 17 buildings, and has its own railroad, medical center, and zip code. At one point 25,000 GE employees worked in the Park making appliances – 185 million appliances since the park opened. It was the first facility to manufacture appliances that later became common, including the self-cleaning oven, the portable dishwasher, through-the-door ice and water dispensing refrigerators, and portable air-conditioners.
But the Park also saw contentious labor disputes, including an infamous 101-day strike in 1969-1970. In the 1970s GE began expanding manufacturing outside Louisville, and eventually outside the United States. These included a production venture with appliance maker Mabe in Mexico, formed in 1987, to make ranges, refrigerators, washers, and motors in Mexico, and a venture with Chinese laundry OEM Wuxi Little Swan to make front-load washers.
The appliance manufacturing operations in Louisville shrank. Between 1994 and 2007 no hourly workers were hired. 2007 saw the hiring of 576 assembly production workers, and at the end of 2007 the Park had about 5000 hourly and salaried employees – one-fifth of the former number.
But those jobs seemed to be in peril as well. In 2008 the appliance industry was suffering from the U.S. recession and housing crisis. OEMs like Whirlpool, Electrolux, Bosch, and Haier were benefiting from still-healthy sales in other global markets, but GE Appliances had never established a significant market presence outside North America. GE Appliances was a U.S.-centric business in a global conglomerate, and its parent, GE Corporation, decided to look at spin-off strategies for the appliance portion of its Consumer and Industrial Division.
“(GE Appliances) remains primarily a U.S. business, meaning its fortunes are tied to the rise and fall of a single market,” GE Corp. Chairman and CEO Jeff Immelt said in May 2008. “We want to make this good business great again by finding the right strategic solution – a solution that will give Appliances the global reach and investment required to compete more effectively.”
The expectation was that the appliance business would be sold to a non-U.S. company, and that just might doom Appliance Park. But the spin-off didn’t happen. The price tag was too high and the U.S. appliance market was looking less attractive to potential buyers. Even when GE Corp. sweetened the deal by offering to sell the entire Division – appliances and light bulbs – no buyer emerged. Eventually GE said it would keep the appliance business after all.
Which brings us back to May 2009. The hybrid water heater has the potential to be a huge seller for GE. It’s green, it’s high-tech, it can be a big energy-saver. It’s the kind of manufacturing that Washington wants more of in the United States.
State incentives were approved by the Kentucky Economic Development Finance Authority on May 28 and will be provided under the Kentucky Industrial Development Act (KIDA). The state will also provide funds to train employees for the new jobs and will give GE a sales tax break on some construction materials.
“We understood that GE had other U.S. locations where the company could make the new hybrid water heater,” said Kentucky Governor Steve Beshear.
It also took labor concessions to bring the production to Appliance Park. On May 27, GE’s local IUE-CWA union membership voted to approve a wage freeze until the current labor contract ends in 2011 and the implementation of new wage rates for new hires.
“The union leadership realized we were at the brink of a major, life-altering decision for our employees and the business.” said local IUE-CWA president Jerry Carney. “Decisions like these are not easy to make but as you look around the country, you can see that employees who make the right choices to compete in this global economy win.”
Is it a new era?
Louisville Mayor Jerry Abramson calls this “The beginning of a new era at Appliance Park.” He adds, “Not only does this announcement bring new green jobs to our city, it sets the stage for GE to grow and expand even further.”
Nothing wrong with being optimistic.