GE Opens Hybrid Electric Water Heater Plant, Says 'Lean' Helps Make U.S. Manufacturing Competitive

GE Opens Hybrid Electric Water Heater Plant, Says 'Lean' Helps Make U.S. Manufacturing Competitive

General Electric's Appliance Park celebrates first new manufacturing operation at Louisville site in more than 50 years.

It was not very long ago -- 2008, to be exact -- that General Electric announced plans that included possibly selling off its appliances business. Fairfield, Conn.-based GE at the time said the option was being considered as part of the company's strategy to focus on long-term growth.

Nearly four years later, GE's appliances division is again in the spotlight, but for the opposite reason -- significant reinvestment by GE in its appliances business and U.S.-based manufacturing.

The first full week of February began with a national GE commercial that aired during Super Bowl XLVI and featured employees from GE's appliances business. The business week concluded Friday with the official opening of GE's GeoSpring electric hybrid water heater manufacturing facility at the company's Appliance Park in Louisville, Ky.

The hybrid electric water heater operation is the first new manufacturing operation to open in Appliance Park in more than 50 years.

"That's a hell of a week," said GE's Steve Downer, product general manager, water products, during Friday's opening celebration, which was held in the water heater facility. He spoke to a crowd that included GE company officials and employees; local, state and national dignitaries; customers, invited media and other guests.

GeoSpring's assembly line is shaped somewhat "like Churchill Downs," notes Steve Downer, product general manager.

The event included tours of the new hybrid electric water heater plant, which was developed in a long-vacant facility on the Louisville site and is expected to generate about 400 new jobs. Currently one production line is operating in the brightly gleaming building, where fabrication and paint operations support the assembly process. Renovations to the building, which had stood vacant for about 12 years, included removing and recycling "hundreds of tons" of steel, according to Tom Zimmer, water heaters product manager. The money received from the recycling was reinvested into the building, he said.

The $38 million investment in the new facility is the "first payback" in the commitments General Electric has made to invest some $1 billion and create 1,300 hundred American jobs by 2014, said GE Appliances President and CEO Charles "Chip" Blankenship, who spoke at Friday's event.

"This had to with hourly and salaried [employees] working together," added Jerry Carney, president of IUE-CWA Local 83761, which represents GE hourly workers in Louisville.

Carney also acknowledged the investments made by state and local governments, which provided up to $17 million in incentives, as well as other investments.

"It's hard to get these jobs; it's easy to lose them," he told the assembled crowd.

'Lean' Helps Drive Return of U.S. Jobs

Lean manufacturing and a more competitive wage structure for new employees were keys to bringing GeoSpring hybrid electric water heater production back to the United States and to Appliance Park, said General Electric officials. An earlier version of the water heater was produced in Asia.

"We were not competitive in Appliance Park," said a GE spokesperson during a primarily-media event held Thursday. She answered in response to a journalist's question about why no new operations had opened in Appliance Park during the past half-century. "We lost money here."

In 2005 GE implemented a two-tier wage structure for hourly workers in Appliance Park. Under the current two-tier wage structure, new employees earn a starting wage of $13 plus benefits.

The new wage structure was "not a silver bullet" to inviting GE investment, said the GE spokesperson. The culture, she said, "wasn't right to invest."

The introduction of lean, whose aim is to maximize customer value while minimizing waste, helped change the culture, GE says.

Developing a 'One Team' Mentality

Lean is relatively new to GE Appliances, having been introduced about two years ago, explained Rich Calvaruso, lean leader for GE's Appliances business. The new GeoSpring hybrid water heater is the first appliance product line the company has developed using lean principles from the start.

What does that mean, practically speaking? The product development process transitioned from teams operating in functional silos to a mentality of one team with one goal, Calvaruso said.

The team employed a cross-functional approach from the start. It included representatives from engineering and design to quality and production, including the hourly workforce, the lean leader said.

The company provided dedicated space for the team to meet, and the team used visual tools to make the development process and metrics very apparent to everyone.

"It really created this neat team environment," Calvaruso said.

The team focused on removing non-value-added work from product development to production. Using the lean approach, GE said it eliminated 20% of the parts included in GeoSpring final assembly, cut the program cycle time in half and reduced equipment investment by 30%.

"We grew a new factory from the ground up," Calvaruso says, "and we developed the capability of the people." The workforce "go out and improve processes every day."

Improved Responsiveness: A Lean Tenet

GE has identified hybrid water heaters as a growth opportunity in the United States as government energy-efficiency standards become more stringent. Keith Burkhardt, marketing manager, water products, pointed to new U.S. regulations that take effect in 2015 make hybrid electric water heaters basically the only option for electric water heaters in the over 55-gallon capacity.

Building the water heaters in the United States will allow the company to be more responsive to demand fluctuations by its core customers, the company says.

"There is a cost to stocking out," added Downer.

He also pointed out that local market knowledge is invaluable in the design process "and we've been ignoring it."

Evidence suggests the company is ignoring it no longer in its appliances business. GE is taking its lean approach to several additional investments still to come at Appliance Park, including a new dishwasher product line.

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