Rheem Purchases Property In Mexico

July 23, 2007

By Tara Muck
TIMES RECORD
FORT SMITH -- The allure of outsourcing has gotten the best of many manufacturing companies. Maintaining global competitiveness has caused U.S. industries to shift production from American soil to other countries like Mexico and China.

So when Rheem Manufacturing Co. announced Friday that its Heating & Cooling Division had purchased land in Nuevo Laredo, Mexico, to build a new production facility, it got the attention of the Fort Smith Regional Chamber of Commerce.

Fort Smith is home to Rheem's Heating & Cooling Division, employing about 1,620 area residents. It's one of Sebastian County's top manufacturing employers, behind Whirlpool Corp., OK Foods Inc. and Baldor Electric Co., according to the Arkansas Department of Economic Development.

Although there was no mention of moving jobs from Fort Smith or the Milledgeville, Ga., air conditioning plant to the new Mexico location, Rheem instead focused the announcement on "continued global market expansion."

Ed Raniszeski, director of market development and communications for Rheem's Heating & Cooling Division in Fort Smith, said the future facility isn't expected to have any effects on the Fort Smith or Milledgeville plants.

"This essentially is a news release that we've made a land purchase and to give everyone a heads up," Raniszeski said. "And yet at the same time, we definitely see a continuing, major role for Fort Smith and Milledgeville."

A heads up was given to Fort Smith's chamber President Tom Manskey Friday as well.

"The only thing we've heard is that they're (Rheem) doing an expansion in Mexico, and currently that doesn't have any bearing on Fort Smith," Manskey said.

About two months ago, the city's business retention task force met with Rheem regarding any issues that the company may be facing at the plant in Fort Smith, Manskey said. It's one of many different manufacturing locations the task force plans to visit. According to Rheem, the company was happy with its situation.

"At least right now, I don't anticipate anything major happening with Fort Smith (Rheem plant)," Manskey said. "In talking with Rheem, that's how they feel."

But outsourcing is a part of industry life, said Jeff Hammond, an analyst with Key Banc in Cleveland, Ohio, who follows Rheem.

Hammond said many of Rheem's competitors are already in Mexico, and that's where the company needs to be to stay competitive. What that means for Fort Smith and Milledgeville plants, he's not sure.

"Where there's a plus, there's got to be a minus somewhere else," Hammond said.

It might not mean job cuts, but perhaps employment shifts to Mexico through attrition at the U.S. plants, Hammond said. That way a company that doesn't want to disrupt a workforce can slowly move production to a more cost-effective area. Rheem already has a water heater manufacturing facility in Nuevo Laredo, Mexico.

According to the Nuevo Laredo Industrial Development Committee Web site, the city is located on the U.S./Mexico border, across from Laredo, Texas. The two cities form the United States' largest inland port with 700 of the Fortune 1,000 companies transshipping finished goods and raw materials. About 40 percent of all trade between Mexico and the United States moves through Nuevo Laredo.

Raniszeski said Rheem has been retraining employees, as well as introducing new processes and adding more technology to the company's Fort Smith and Milledgeville plants so they can be as efficient as possible to meet standards of the market and remain competitive.

"You have to look at every plant through a global microscope," Raniszeski said.

While the future of Rheem's Fort Smith plant isn't crystal clear, Manskey said, it's an issue that the task force will continue to monitor.

"We're going to do anything we can so that any other capacity increases they (Rheem) do somewhere else doesn't have a decrease in Fort Smith," Manskey said.

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So far one comment left:

3744 wrote on Jul 23, 2007 7:42 PM:

" When all of the companies move to Mexico, India or China and no one in America has a job or any money to buy things with, who is going to buy your Heating and Air conditioning units? Certainly not the poor people in the countries you are moving manufacturing too, you have to pay a decent wage or NO ONE will have money to buy all the products you are making so cheaply. Think about it! Remember, the bible says... "It is easier for a camel to fit through the eye of a needle than for a rich man to enter the kingdom of heaven." I don't understand this kind of greed. You can't take it with you when you die. How much money do you need? How many homes, yachts, cars...etc., do you need? My little family is happy with a three bedroom house and an above ground pool, but pretty soon we won't even be able to keep that...you see, the cost of living keeps going up...but, our paychecks don't. I have nothing against Capitalism, but I think greed has gotten totally out of control in this country. "