Maker of Upscale Appliances Shifting Production to Mexico

Orange County Business Journal, Apr 28-May 4, 2008 by Beighley, Dan

MANUFACTURING: Huntington Beach factory of Dynamic Cooking Systems closing to cut costs

Huntington Beach-based Dynamic Cooking Systems Inc., a maker of upscale barbecues and stoves that's part of New Zealand's Fisher & Paykel Appliances Holdings Ltd., is moving its local manufacturing to Mexico.

About 330 factory jobs are set to be cut from Huntington Beach.

"The costs of California are prohibiting," said Michael Goadby, president of North American operations for Fisher & Paykel.

California's rising salaries and transportation costs have made the operation nearly impossible to sustain, Goadby said.

After the company lost a contract with a big retailer-which it declined to name-Fisher & Paykel realized 10 months ago that it had to move, he said.

"If we kept it here, we'd eventually go out of business," he said.

Huntington Beach is set to stay as the headquarters for Dynamic Cooking, with about 100 administrative workers, accountants, engineers, sales people and executives.

"There's no need for us to leave," Goadby said. "This is where our high-end customers are."

The company makes upscale barbecues and stoves for homes. Its barbecues run from $2,000 to $7,000. Stoves can cost as much as $10,000.

The U.S. market sees about $300 million in yearly revenue for Fisher & Paykel, with the bulk of sales here stemming from Dynamic Cooking. The U.S. is about 35% of the company's $1.1 billion in worldwide yearly sales.

Fisher & Paykel also makes dishwashers, refrigerators, washing machines and dryers.

Its other North American factory is in Clyde, Ohio, which is set to stay open. About 1OO employees make motors for washers there.

The company also has 10 warehouses and service centers throughout the country. Fisher & Payke! counts about 800 U.S. workers in all.

Competition from China, higher steel prices and a strong New Zealand dollar have forced Fisher & Paykel to make changes to its global operation.

"We're competing with manufacturers who have an endless bank they call the government," Goadby said.

Housing Fallout

Dynamic Cooking also has seen sales suffer from the country's housing slowdown, which in turn has affected sales of household products. The unit's seen revenue fall 10% to 11%, according to Goadby.

The Dynamic Cooking move is part of larger operational shifts. Fisher & Paykel also said it plans to move some New Zealand and Australian operations to Italy, Mexico and Thailand.

The company estimates the move will cost about $80 million and bring yearly savings of $40 million.

About 1,000 employees across the company will lose their jobs from the restructuring.

The company's Mexico plant-in Reynosa, across the border from Texas-previously was owned by Benton Harbor, Mich.-based Whirlpool Corp. Fisher & Paykel recently bought the facility from Whirlpool for $33 million.

In addition to Dynamic Cooking's products, the factory also will make dishwashers and refrigerators, helping to cut inventory costs from New Zealand and Australia, according to Goadby.

About 400 Mexican workers, many of whom are expected to be former Whirlpool workers, will be employed there.

The more central location is set to save on transportation costs, with about 75% of Dynamic Cooking's business shipped east of the Mississippi, Goadby said.

"At first we weren't considering a border town because of crime rate and absenteeism," Goadby said. "But in taking a closer look we were able to glean it wasn't so bad."

The company's research found only 2% of the workers quit each month, he said.

Goadby, an Australian who became an American citizen a month age has been in the U.S. with Fisher & Paykel for 10 years.

He moved to Huntington Beach in 2004 when Fisher & Paykel bought Dynamic Cooking from a Florida-based private equity firm for $33 million.

Fisher & Paykel then sold off Dynamic Cooking's commercial story business and invested $10 million into the business to save it from going under, according to Goadby.

"In a short time it became a difference of night and day," he said.

Company History

Randy Rummel, Surjit Kalsi and Roberto Bemal founded the company in 1989. They made the first barbecues out of Rummel's garage

Rummel owns the company's 150,000-square-foot factory building and 100,000-square-foot office in Huntington Beach. Dynamic Cooking now is looking to sublease the factory space.

Rummel also has been a consultant and engineer for the company since he sold it.

Dynamic Cooking competes with other high-end appli ance makers such as France's Thermador Groupe SA which also has a facility in Huntington Beach; Madison Wis.-based Sub-Zero Freezer Co.'s Wolf Appliance Co. and Greenwood, Miss.-based Viking Range Corp.

Local competitors include Brea-based Jade Product Co., another maker of high-end appliances that was sol by the Maytag unit of Whirlpool last year to Elgin, Ill based Middleby Corp.

BSH Home Appliances Corp., also based in Huntington Beach, is another local competitor. Fisher & Paykel was founded in 1934. In 2001, the company split into Fisher & Paykel Appliances and Fisher & Paykel Healthcare Com.