Perhaps the greatest metaphor for Haier America, the U.S. operations
for Chinese-owned Haier Group, can be discovered by peeking inside its
pristine refrigerator facility in Camden, SC, U.S. The walls are white;
the floors are clean; and the equipment is brand new. But like newcomer
Haier, the plant is working itself to the bone, turning its untarnished
machines into a powerhouse that is quickly making its mark in the U.S.
magazine traveled to Camden, SC, U.S. to report on Haier America's
Known as one of China's most respected businessmen,
Haier Group CEO Zhang Ruimin says his company's current strategy
is to use differentiation and innovation to successfully penetrate
the western world markets.
Just a few years ago, manufacturers within the U.S. appliance industry
were still trying to figure out how to pronounce Haier's name, but today
it's a different story - they know it well. That may have something to
do with the fact that the company is currently the world's second largest
producer of refrigeration products, according to APPLIANCE magazine's
World Appliance Companies, 3rd Edition. Or maybe it's because APPLIANCE
statistics show that in 2002, Haier was the number three maker of room
air-conditioners in the U.S. when it was number five just 1 year before.
The company also claimed a 9-percent market share in the U.S. freezer
market in 2002 and a 2-percent market share in standard-sized refrigerators
- quite an accomplishment considering that in 2000 it posted a mere 3-percent
share in freezers and wasn't even on the U.S. market share radar for
The company has also made its mark in niche products, specifically
with its compact refrigerators, which are infiltrating the college dorm
rooms of next-generation consumers. It has also brought affordable compact
wine coolers to the average U.S. home.
Combine those successes with the company's bold March 2002 purchase
of the former Greenwich Savings Bank Building in Manhattan, NY, U.S.
for Haier America Trading LLC's North American headquarters, and the
question quickly becomes: what's in store for this company over the next
If operations over at the Camden facility are any indication of the
future, the answer is clear: much will be changing.
HTQ refrigerator is just one of the 400,000 refrigerators that
will come out of the company's Camden, SC, U.S. plant this
year. The HTQ model represents the "best" of the
company's good, better, and best approach. Features include
spill-proof glass shelves, humidity control in the crisper
bins, and a split-shelf design that allows the shelves to be
As part of its strategy to enter the U.S. appliance market, Haier invested
more than U.S. $40 million in a 300,000-sq-ft refrigerator plant in Camden,
SC, which, after breaking ground in 1999, produced its first products
in early 2001. Currently, the refrigerator plant represents the only
production Haier is doing in the U.S. The rest of its products are made
According to Allan Guberski, VP and general manager of Haier America
Refrigerators Co., one of the main focuses of the Camden plant is finding
the most effective way to balance its Chinese and U.S. operations.
One of the plant goals, for example, is establishing a supplier base
in the U.S., as opposed to using its parent company's Chinese connections. "We're
already sourcing several components domestically," says Mr. Guberski. "What
we would like to get to is where we have all of the main commodities
here [in the U.S.] - for instance, the glass shelving, angles, brackets,
and so on."
The company is off to a good start in terms of its materials supply
chain. It is currently getting pre-coated steel from a major U.S. steel
supplier, and Morton Custom Plastics, Inc. in St. Matthews, SC, U.S.
is doing most of Haier's injection molding work. Much of the company's
extruded plastic sheets are also supplied domestically, although it also
utilizes sources in Asia.
While many think there is a cost advantage to using Chinese-made components,
Mr. Guberski explains that in-bound freight costs can actually make U.S
suppliers more economical at times. "We've got some costs to deal with
like the sea-container transportation from China over to Charleston,
SC. Then the land transportation from Charleston to the plant in Camden
is another expense. As we team with some of these local suppliers, we
can start to decrease those expenses," Mr. Guberski says.
That doesn't mean the company won't research the most cost-effective
option. "We'll do what makes sense," notes Mr. Guberski. "If we can produce
a partÉmore economically in China than here [in the U.S.], of course
we'll probably go that route. If we can source it domestically, we will
certainly do that. We end up passing along this value to our customers,
which is what we ultimately want to do to be successful in the marketplace."
Larry Keefover, engineering director for Haier America Refrigerators
Co., adds that there are advantages to having an established supplier
base in China, specifically quick tooling turnaround. "I consider it
a luxury to work with China. We have our own tool development group there.
So if we want to make a change, we don't have to go to several U.S. suppliers
to figure out when they can work it into their schedules," says Mr. Keefover. "We've
made tool modifications and had small tools here in 6 to 8 weeks."
Adds, and Changes
Currently, the plant produces more than 800 full-size top-freezer refrigerators
a day. The 18-cu-ft models follow a good, better, best model, starting
with the entry-level HTE products, which are followed by the mid-range
HTP and the high-end HTQ models.
Utilizing a platform production technique, differences between the
refrigerator models tend to be more on the inside than out, according
to Mr. Keefover. The interior of the HTE model, for example, features
opaque and wire shelves, while the HTP features a glass shelf and the
HTQ features a glass shelf that is also spill-proof. The HTQ also includes
humidity control in the crisper bins and has a split-shelf design that
allows the shelves to be adjusted.
In an effort to upgrade its product line, the company also recently
started producing 21-cu-ft models under the HTE and HTQ model designations.
The two models will include the same features as its 18-cu-ft counterparts,
but will have a larger capacity and some aesthetic changes such as a
new handle design.
Over the last year, the plant has made several adjustments to its production
operations, mostly due to new product introductions. Less than a year
ago, the company was producing 14-cu-ft models at the Camden plant for
the U.S. market, but recently moved that production back to China to
make room for the new 21-cu-ft models. "It's more cost-effective to ship
the 14-cu-ft model because of how many refrigerators you can get in a
container as opposed to the 21-cu-ft," Mr. Guberski explains.
Just this past summer, the company started producing black and bisque
models in addition to its standard white models. As of press time, the
company also had plans to produce stainless steel products by the end
of the year.
And there's more changes to come, according to Mr. Guberski. By the
first quarter of 2004, the plant plans to reach its full capacity, which
amounts to 1,200 units a day. Although he wouldn't reveal details, Mr.
Guberski tells APPLIANCE the increase will be due to additional models
the company plans to release.
America's 300,000-sq-ft refrigerator plant, located in Camden,
SC, U.S., employs approximately 230 employees and represents
an investment of more than U.S. $40 million.
According to Mr. Guberski, plant management both expected and planned
for change, and, as a result, invested in advanced equipment and logistics
technologies to help ease any potential growing pains. Management has
also carefully chosen in-house operations. "You won't see a metal
stamping shop in this plant. You won't see a paint finishing shop. We
use all pre-coated steel," says Mr. Guberski. "This allows
us to basically operate permit free in the state of South Carolina."
Mr. Guberski says the plant was designed from back to front, starting
with the packaging and testing areas at the back-end of the facility,
and finishing with the plastics and metal operations at the front of
the facility. This meant the facility was often producing appliances
before the plant was completely finished, leaving Mr. Guberski and his
staff on their toes.
"It was kind of like trying to race a car around the track when
you still have people working on the engine and running very fast beside
it," he explains. In November 2001, for example, the company was
producing 100 to 125 units per day. The following May - just 6 months
later - the company was producing more than 700 units per day.
Now fully operational, the refrigerator plant is divided into two segments
- the door line and the cabinet line - until the two lines meet at final
assembly and go onto testing and packaging.
and Door Lines
The cabinet line uses metalforming equipment from Tao Koki of Japan.
The operations start with a metal blank of pre-painted and embossed steel
material, which varies in size according to the model. The blank automatically
goes through several die stations that punch out holes for hinge pins,
screws, and other hardware.
a helium test is complete, the refrigerator is evacuated at
one of the plant's 44 testing stations. Haier's computer-based
system records each unit's evacuation levels and informs material
handling robots of the percentage that has been evacuated.
Once all of the work is done on the flat pattern, the metal goes through
a roll-forming process, which forms flanges to accommodate mating parts,
as well as flanges to join the plastic cabinet liner. The metal is then
formed into a U-shape and becomes the outer wrapper of the refrigerator.
Adjacent to the forming operation is another line that forms the back
and bottom of the cabinet, which is then automatically mated to the U-shell. "We
have the folded back and bottom assembly, which is presented at a separate
insertion table, and as the U-shell comes by, it is detected by the sensors,
and the back and bottom are automatically assembled and locked into the
U-shell," explains Mr. Guberski.
The metal cabinet parts are assembled together using the Tox assembly
process, which allows the parts to be locked in place without using a
rivet or other fasteners.
For the cabinet's plastic liner, Haier uses an automated thermoforming
line from Italian company Comi srl. To start, the plastic sheet is moved
via conveyor to IR heaters that heat the sheet to its true plastic state.
From there, it is taken to the forming station where the "bubble" cabinet
liner is formed.
Mr. Guberski explains: "We bring the lower section of the tool
up and the top section down, and we seal off the outside air from that
sheet. Then we actually pull a vacuum above that sheet, which makes that
sheet rise up as if someone is blowing a bubble. When we do that, we
take a tool that is at a lower temperature than the plastic, and insert
it into this bubble so that we get a uniform wall thickness. If we didn't
blow the bubble, the tool would freeze the plastic at the top, which
would just stretch and break the sides of the bubble."
After the bubble is formed, a vacuum is pulled through the inside of
the tool so that the plastic forms around the tool. Cool water is then
run through the tool so that the plastic freezes and takes shape. After
the plastic is formed, its edges are trimmed, and an automatic press
punches holes for joining shelf supports and other interior parts.
The plastic liner is then assembled into the metal cabinet shell, and
the necessary wiring harnesses and copper tubing are manually attached.
The cabinet is then transported via conveyor to the foaming operation,
where isocyanate material is used to create the cabinet insulation. As
of press time, the company was using an R141 B blowing agent, but had
plans to shift to R245 FA.
Mr. Guberski says that the Camden facility uses a foam-in-place cabinet. "Some
manufacturers still use a design where the center mullion of the top-mount
refrigerator still has an expanded polystyrene design," he explains. "We
use the actual foam - the isocyanate foam - throughout the entire unit.
This gives us better energy efficiency because you don't have any air
gaps for leakage."
On the other side of the factory, the doors are constructed using Italian-made
metalforming equipment from Berretta. The door operations follow the
same pattern as the cabinet metalforming operations: the flat pattern
is taken through a series of dies that punch holes for hinges, reinforcements,
etc. The sheet is then folded into 7 bends to create the top, bottom,
and sides, and is fastened using the Tox system.
The plastic liners are formed using Comi equipment and are automatically
trimmed and moved via conveyor to a small sub-assembly area, where it
meets with the metal door shell. After foaming tape and reinforcements
are added, the foam is inserted, gaskets are attached, and the completed
doors move to final assembly as a set.
Assembly and End Operations
In final assembly, the cabinets and doors meet via a Galileo conveyor
system, although the assembly line itself is not a moving line. Instead,
each worker has a foot petal that controls the line movement. "That
way we can correct the problem at the earliest part of the process," says
Mr. Keefover. "We run things on a total cost to the business (basis)."
part of its branding strategy, Haier is familiarizing college-aged
U.S. consumers with its name by making compact refrigerators
often used in dormitories. The company hopes these next-generation
consumers will purchase Haier-brand full-sized refrigerators
in the years to come.
Mr. Guberski explains that the final assembly processes are standard
for the industry, although the plant does use a unique mix of automated
and manual operations. "We have a robot that automatically assembles
the machine compartment (the compressor assembly) to the unit. It drives
the screw, stands the unit back up, and presents it to the next operator.
That's unique from what I've seen in the industry," he says.
The company has also invested in some automated evacuation and leak
testing equipment. The helium leak testing is done via a testing system
from Inficon that sniffs or detects helium leaks.
Once the helium test is complete, the unit is evacuated at one of the
44 testing stations. According to Mr. Guberski, in order to be more efficient,
the plant does not use a timed evacuated system. "A lot of manufacturers
rely on a timed system, but if there is a problem with the pump, they
don't know exactly what the evacuation percentage was at that time and
have to start over," he explains.
Haier's computer-based system records the evacuation levels and informs
robots of the percentage that's been evacuated. "It's a tamper-proof
system," says Mr. Guberski. "The robot knows when the evacuation
is finished. The PLC, which is connected to the transporter boxes, knows
and directs two robots to pick up the unit and bring it to one of the
two final automatic refrigerant charging stations."
The unit is weighed before moving on to the refrigerant charging station,
where it is ultrasonically sealed. Workers then do another refrigerant
leak check, and the unit goes through the standard UL safety tests such
as voltage, hipot, and earth ground continuity testing. After UL testing
is complete, one person manually inspects the fresh food compartment,
while the another worker inspects the freezer. An automatic functional
test decides whether or not the unit can move onto packaging.
Packaging is also a combination of manual and automated processes. Using
Hirata packaging equipment and packaging materials from Sonoco, the appliance
is manually covered with the outer packaging carton, and four corner
posts are added. From there, the package is automatically closed and
Haier also invested in an advanced logistics system. An fire-walled
Ethernet spine runs through most of Haier's automated equipment, PLCs,
and servers, essentially enabling the factory machinery to "talk" to
each other. In fact, Mr. Guberski says that about 80 percent of the plant's
equipment is currently utilizing a modem, which means suppliers across
the globe can monitor Haier's equipment and data in real-time.
assembly line includes four brazers, who are responsible for
welding all of the remaining refrigerator connections before
the appliance is transported to testing.
Other recent improvements include the hiring of three full-time process
control technicians that focus solely on collecting data, inputting it
into a database, and monitoring the quality control. Future plans include
an advanced vibration analysis system to help with preventative maintenance.
" We do currently have people that come in on a regular basis to let us
know if there's any type of RAM vibration that's occurred so we can get a head
start on maintenance," notes Mr. Guberski. "We'd rather fix a small
problem than a big problem."
2002, Haier bought the landmark Greenwich Savings Bank Building
in Manhattan, NY, U.S. to use as its Haier America Trading
LLC's North American headquarters.
With all of the product and tooling changes the Camden facility has
made, Mr. Guberski says his 230 employees have been a key component to
the plant's succes.
"The biggest challenge I had was to come in and actually build
a team here and get the infrastructure together to have this business
functioning as a factory. We needed some engineering leadership and some
financial leadership; we needed a materials director; we needed to get
our business management infrastructure set up in terms of our MRP system,
our ordering system, our purchasing system, our financial modules, and
our general ledger modules," says Mr. Guberski. "That process
was completed in 10 weeks, probably in record time. I was lucky enough
to find some good team members, many of which I knew personally from
other associations, and we were able to recruit the right people to put
something together and move forward very rapidly."
Another challenge Haier was able to overcome was training people who
had never worked in a manufacturing environment. According to Mr. Guberski,
Camden and its surrounding communities were more experienced in the service
industry. "Of course there's a little bit of a learning curve," he
notes. "You have to train people in terms of safety, what to do
and what not to do, but we have probably one of the lowest incident rates
for safety than any plant that I've been at."
A fresh staff
also has its advantages. "You get an opportunity to train
people…in the way you want them to think about a job, how to approach
a job, how they set up their work flow in their work station, how they communicate
with other employees, and how they go about developing the skills to solve
problems on a daily basis," Mr. Guberski explains. "You don't have
to 'unlearn' any preconceived notions of what the factory's going to be and
what the goals and objectives are."
Mr. Guberski says his management style is based on active participation
between employees and management. "I spend several hours a day on
the shop floor myself, and our HR director spends several hours on the
shop floor. We want to be visible to employees; we want to be approachable
to employees; we want to listen to ideas; we want to implement ideas;
and we want to reward ideas," he says.
In fact, one of his major goals is to implement a Chinese management philosophy
called Strategic Business Units (SBU). Similar to decentralized management,
the philosophy encourages each employee to act as the manager of his or her
own business unit.
"For instance, on the thermoforming equipment, the operator has
the responsibility for the equipment in its entirety. We're trying to
get him to the point where he's actually going to run that as his own
small business," Mr. Guberski explains.
Long-term, the plant would like every department and every operator
to operate with the "bigger picture" in mind. Mr. Guberski
would even like to install electric power meters on the equipment so
the operator can monitor utility usage.
" We would even want the operators to look at things like how much maintenance
labor they need on their equipment and how much they can do themselves," Mr.
Guberski explains. "When an operator needs to call maintenance to service
his or her piece of equipment, maintenance is going to charge him or her a labor
charge for that. So, essentially, the operator has to make enough money to earn
his or her salary."
Because it is an evolving philosophy, Mr. Guberski doesn't expect the
SBU practices to be "fully implemented" any time soon. Currently,
the philosophy is at the early stages, but has been communicated to employees
as an ongoing effort.
"We're changing the target as well as what we're doing to work
toward that target," Mr. Guberski says. "We want to expand
the scope of what the operator can do and achieve. We have…to get
people thinking in terms of what it means to have complete ownership."
The plant is also working to develop a formal incentive plan that will
include metrics based on safety, quality, productivity, cost, and warranty.
This too, Mr. Guberski says, will take some time to develop. "We
don't want to just paper the factory with charts," he explains. "We
want to measure all the things that are important."
Paving the Way
While U.S. appliance makers may not know exactly how this newcomer plans
to reach the top, they can be sure that Haier is setting goals that are
nothing short of lofty.
CEO Zhang Ruimin was recently quoted as saying that Haier is on track
to reaching its goal of becoming the third largest appliance maker in
the world, moving up from its current fifth position. Mr. Ruimin confirmed
that reaching that goal will certainly mean some expansion at the Camden
facility. "To achieve our objective of a 10-percent market share
[of refrigerators] in 2005, we need an output of 500,000 units," he
said in a McKinsey Quarterly report. "The production of our factory
is 400,000 units a year, though we have plans to expand, so the difference
will be met by exports."
According to Mr. Guberski, in addition to the new products that will
be released early next year, there are also talks of the Camden facility
producing side-by-side models in the future. "We would have to look
at some of the constraints and make sure we have enough space to be able
to rotate objects of that size. It's a 36-in wide product, and the diagonal
is going to be even larger than that. Right now we work with 33-in wide
Mr. Guberski adds that one challenge in producing side-by-side models
would be the physical size constraints of the conveyor systems within
the plant that are utilized to automatically move finished materials. "As
the product moves around a curved section of the line, the diagonal becomes
the critical dimension as opposed to the length or width when moving
in a straight line. If enough of these constraints exist, you may find
that it is not economical to eliminate all of them in order to produce
a given size of product," he explains. "All that it takes is
one pinch point in a factory, and you don't have a viable plant."
As far as Haier opening up new U.S. factories or expanding beyond refrigerator
production, Mr. Guberski says only time will tell. "Our goal now
is to…maximize the number of refrigerators we can produce per day
over here, get the premium cost level down so it is at a very minimal
level, and then look at new opportunities. If those opportunities involve
new plants, certainly that would have to be part of the strategy between
Haier in New York as well as the Group in China. Personally, I'd like
to see growth," he says.
Until then, operations at Camden will most likely be a gauge for Haier's
position - and success - in the U.S. marketplace. It seems Mr. Guberski
is comfortable with that responsibility and only sees success in the
near future, at least for the Camden plant. "I think we've got the
executive management team in place here that has a common vision, that
works well together, and that can handle all the minutiae that has to
happen…to develop this plant as a whole and as a business," he
History of Haier
Haier Group's origin dates back to 1984, when Zhang
Ruimin was appointed CEO of the then government-owned Qingdao General
Refrigerator Company. In an effort to pull the company out of a bad
financial situation, Mr. Ruimin acquired several companies throughout
the rest of the 1980s, including the Qingdao Electroplating and Qingdao
Air Conditioner factories.
In 1991, all three companies merged to form Haier Group.
Just 5 years later, the company completed another round of purchases,
which included acquiring Qingdao Red Star Appliance Factory and the
controlling stake in the Wuhan Freezer Factory. That same year, it
also formed Shunde-Haier, a joint venture with Shunde company, making
Haier the top producer of electrical appliances in China.
In the ensuing years, the Chinese company made its way around the
globe. Haier's ventures include:
- 1998 - signed an agreement with California, U.S.-based Malloy,
Inc. to exclusively distribute washing machines under the "Universal
by Malloy" brand name
- 1998 - formed Haier-Philips Technology Appliance Company, a joint
venture with Philips of the Netherlands
- 2000 - opened a refrigerator manufacturing facility in Camden,
- 2000 - completed construction of an industrial park in Qingdao
City, China, which is involved in the manufacturing of major appliances
- 2001 - acquired the Meneghetti SpA factory, an Italian producer
- 2002 - purchased a landmark building in Manhattan, NY, U.S. to
serve as the headquarters for Haier America
- 2002 - moved into the Japanese appliance market using the sales
network of Japanese appliance maker Sanyo
- 2002 - entered into the Spanish appliance market under the Haier
and Hec brand names
- Today, the company markets a wide range of appliances within its
69 product lines. Among its extensive portfolio are refrigerators,
freezers, dishwashers, washing machines, air-conditioners, microwaves,
vacuum cleaners, irons, commercial refrigeration products, water
coolers, electric water heaters, televisions, MP3 players, computers,
and mobile telephones.
The company currently has approximately 40,000 sales representatives
worldwide and 12 overseas plants. Future plans include a continued
focus on the U.S. and Western European markets, with talks of expansion