story by Michael Tilley
mtilley@thecitywire.com
Retooling, river traffic, regulations and refrigerator manufacturers were part of the discussion Thursday (Sept. 10) when Rheem Air Conditioning’s General Manager Mike Branson met with the media as part of the company’s celebration of operating 45 years in Fort Smith.
Rheem rolled its first air conditioning unit off a Fort Smith manufacturing line on Aug. 5, 1970. In July of this year, the company produced its last natural gas unit and is shifting all plant work to commercial air conditioning production for the entire Rheem system.
During a morning visit with local media, Branson said in those 45 years “a lot of innovations, a lot of firsts (came) out of this factory.” He said that is continuing as the company spends “many millions” of dollars on retooling and reconfiguring the plant for a new “vision” for commercial units. Branson would not provide investment details, but did say “it’s a significant number” beyond $2 million.
“The company is overhauling its commercial offerings using its 360°+1 product development philosophy, which tasks the product development team to reimagine its offerings and find ways to make next-generation products easier to install and service, and perform better,” noted a company statement.
MANUFACTURING CHANGES, CONCERNS
Changes at Rheem’s Fort Smith plant have been closely watched by the community now that it is likely the largest manufacturing operation in the region following the June 2012 closure of Whirlpool’s refrigerator production plant in Fort Smith and the around 1,000 jobs it provided. Whirlpool had just completed 45 years of operations in Fort Smith when the plant closed, and at one point employed more than 4,500 in Fort Smith.
It was learned in May that Rheem was planning to reduce Fort Smith employment by 150 jobs as the company transferred some production to a plant in Nuevo Laredo, Mexico, so that Fort Smith could be the “primary production site” for large commercial air conditioning units. While Rheem officials have declined in recent years to discuss employment levels in Fort Smith, several sources in May and June told The City Wire that the changes would push salaried and hourly employment at the plant below 1,000, and possibly below 800. In June 2011 the plant had around 300 salaried and 1,100 hourly jobs.
When it was noted that Fort Smith area residents are concerned about manufacturing operations following the closure of Whirlpool, Branson said it was “very unfortunate” the plant closes but said Rheem officials have learned a lot from Whirlpool’s U.S. operations that remain open. He said Whirlpool took many actions to remain competitive with its U.S. facilities, and he has toured some of those plants.
“We are learning a lot from that in a positive way,” Branson said.
The Fort Smith area manufacturing sector employed an estimated 18,100 in July, up from 17,800 in June, and unchanged from July 2014. Sector employment is down 34.6% from a decade ago when July 2005 manufacturing employment in the metro area stood at 27,700. Annual average monthly employment in manufacturing has fallen from 27,900 in 2005, to 20,700 in 2010, and to 18,100 in 2014.
BENEFIT OF GEOGRAPHY
While noting that the Fort Smith plant will have to meet expectations to have a secure future, Branson sounded optimistic that the facility was well-positioned to meet the commercial market demand. Part of that is with geography. Branson said “Fort Smith is a good location” from which to “distribute quickly” to most major markets.
However, that distribution was recently challenged by high water levels on the Arkansas River. Tonnage shipped on the McClellan-Kerr Arkansas River Navigation System between January and July totaled 5.135 million in July, down 23% compared to the same period in 2014, according to a monthly report from the U.S. Army Corps of Engineers.
An unusually wet end of winter and spring season resulted in river flooding that shut down a majority of lock and dam operations. Just when the cycle of wet weather from the west was ending, Tropical Storm Bill moved out of the Gulf of Mexico and dropped more than 12 inches of rain during mid-June on many areas of Oklahoma, including Arkansas River watershed areas. According to the Corps, river flows reached 180,000 cubic feet per second, well above the typical 20,000 cubic feet per second.
Branson said not being able to use the river for the extended period caused “supply issues.”
“It impacted our ability to serve the global market,” he said.
REGULATIONS
Part of the innovation Branson expects will come of out Fort Smith is related to changes in U.S. energy efficiency requirements. Branson said government regulations have been and will likely continue to be a “major driver” in product and production changes. He said the ever-changing federal rules “makes products more complicated.”
Branson said Rheem is active in monitoring federal legislation and in driving changes for energy efficient products. Indeed, the company is active.
Based on information from Opensecrets.org, the company has spent at least $1.5 million in the last 30 months to lobby Members of Congress and federal agency officials on energy efficiency laws and rules. Karen Meyers, corporate director of governmental relations for Rheem, is based in Fort Smith. Atlanta-based Alston & Bird law firm provides support for Rheem’s lobbying activities in Washington, D.C. Former U.S. Senate Majority Leader Robert Dole serves as special counsel in the firm’s Legislative & Public Policy Group. (As an aside, one of the early partners in Alston & Bird was golfer Bobby Jones, founder of the Augusta National Golf Club.)