GE Appliances will outsource warehousing operations to cut costs and cease productions of an unpopular high-tech water heater at Appliance Park. The company said it expects that all of the 300 affected hourly workers and nearly all of the 23 salaried employees will remain with GE Appliances.

General Electric GE Appliances

A company official told IL Friday that the company had to take the steps to remain relevant in the highly competitive appliance market.

The IUE-CWA Local 83761, which represents the park’s hourly workers, could not be reached immediately for comment.

GE Appliances had announced plans in April to outsource work being done at a 47-acre warehouse, but the union opposed the move.

The warehouse, which employs about 200, handles finished appliances, made locally, elsewhere in the U.S. and internationally, before they are shipped to customers including retailers or distribution centers closer to customers.

GE Appliances had said that despite investments of $5 million, the operation continues to be less efficient than other similar distribution centers in the company’s network. However, Glenn Hagan, the union’s vice president, had told IL that the inefficiencies were a result of scheduling problems caused by a third party, error-prone software and the company’s slow response to employees’ improvement suggestions.

Union leaders had suggested that they would work with the company to improve the distribution operation, but GE Appliances said Friday that it is moving forward with the outsourcing.

“We have not seen any improvement in the key performance metrics,” a spokeswoman, Kim Freeman, told IL.

She said the move would cut costs, but it would also better serve customers, such as big box retailers.

GE Appliances has to get its products to customers on time and without damage, Freeman said.

“If we can’t do that, our competitors will,” she said.

Freeman also said that the cost savings would be “significant,” though she would not reveal details. She declined to identify the vendor that will be handling the distribution operation.

In hot water

A hybrid water heater being assembled at General Electric Appliance Park | Photo by Boris Ladwig

GE Appliances will cease production of this hybrid water heater at the end of the year. | Photo by Boris Ladwig

Freeman also said the company is losing millions of dollars annually because the GeoSpring heat pump water heaters being made at Appliance Park are not selling well enough.

Production of the device will cease by the end of the year, and the company will exit the market, she said.

The move will affect about 100 hourly and six salaried employees, though Freeman said the company expects to find other work for the employees at Appliance Park.

The water heater is a “tremendous product” that saves the average consumer about $300 per year, Freeman said, but sales have been sluggish because of the product’s higher up-front cost.

A 50-gallon GeoSpring retails for about $1,000, whereas competing products sell for about a third of that.

With energy prices remaining low, most consumers are unwilling to pay more on the front-end even though they would generate significant savings in the long term, Freeman said.

“The market never materialized,” she said. “The country doesn’t seem to be ready for the product.”

The water heater had served as a symbol of reshoring and a resurgence of American manufacturing. The Reshoring Institute had counted GE’s Appliance Park and the water heater as a reshoring success.

The park’s employment, once at about 9,000, had fallen below 2,000 when GE leaders started a lean manufacturing program that brought manufacturing from China back to the U.S. One of the items that effort returned was the water heater.

GE Appliances, formerly part of General Electric, was sold in January to China-based Qingdao Haier for $5.4 billion.

Freeman said that the sale has renewed GE Appliances’s focus to make sure that every plant and every product is profitable, in part because the operations in the high-volume, low-margin appliance industry are no longer being supported by the more profitable divisions of the corporate parent.

Freeman said recently that among GE Appliances North American operations, only Appliance Park is not profitable — though union leaders said the company was trying to scare employees into concessions during contract talks.

When people open up their Labor Day fliers, she said, they will see lots of appliance products available from multiple vendors, some of which can sell the machines for less than it costs GE Appliances to make them.

“That’s what we have to compete against,” Freeman said.