Electrolux’s Orange plant to close in 2016; factory to be sold?

This story is a ‘stub’. As the story develops we will add more content to this webpage, so all the information is in one place for our readers. Start from the bottom to read the story in chronological order.

What becomes of the actual factory now that Electrolux has chosen to move its refrigeration production to Rayong in Thailand? This was a question posed by a reader. 

As Electrolux owns the actual plant in Orange, in central western New South Wales, it must make a decision as to whether it will sell the factory or lease it. We passed this question on to Electrolux:

“The board has just made its decision to close the plant and final closure won’t occur until 2016. It’s too early at this stage for the company to have considered any options,” said a company spokesperson.

Appliance Retailer understands that Electrolux plans on maintaining a research and development team at the Orange facility for at least two years after the assembly line closes.

Electrolux’s Orange factory to close in 2016; over 500 jobs ‘terminated’
(Patrick Avenell, 25 October 2013)

Electrolux Australia has issued the following statement regarding the imminent closure of its manufacturing plant in Orange, in central-west New South Wales:

Electrolux has decided to consolidate its Asia-Pacific refrigeration production and, as a consequence, to close the Electrolux Refrigeration Plant at Orange, 250 kilometres west of Sydney.

Announcing this today in Orange, Managing Director of Electrolux Home Products Australia and New Zealand, Dr John Brown, said the plant there would continue to manufacture large family-sized fridges and chest freezers, under the Electrolux, Westinghouse and Kelvinator brands, until it closed in mid-to-late 2016.

Dr Brown said that Electrolux appreciated the sensitivity of its decision, particularly in Orange where the factory has been a major employer since its construction as a small arms munitions factory in 1942.

“But the company’s exhaustive investment study, announced earlier this year, concluded that Electrolux is able to manufacture refrigerators currently made here more cost effectively in other factories in Asia and Eastern Europe,” Dr Brown added.

Dr Brown said plant manager Mark O’Kane had encouraged suggestions from employees and led a team of professionals with skills in engineering, logistics, finance and manufacturing at the Orange plant in formulating its own productivity improvement plan in an effort to reduce costs and present the best economic case for the plant’s continuation.

“We also talked to the relevant people at all levels of government and on both sides of politics, before and after September’s federal election,” Dr Brown said.

“And while these talks were very positive and helpful, in the end a compelling business case could not be made for investing the necessary funds to upgrade the Orange plant for the company’s future manufacturing needs in the Asia-Pacific region.”

Dr Brown said that a consultative process between management and the workforce would be established immediately and that the 544 Electrolux employees, whose full-time or part-time employment is terminated by the company because of the Orange plant closure, would receive their full entitlements under existing workplace agreements for the site.

He added that the manufacturing operations will be wound down “in a gradual and orderly manner” starting late 2015 and through 2016. The research and development centre would continue for up to a further two years after that.

Dr Brown said that after the Orange plant closure, Electrolux would still employ more than 1100 people throughout Australia and New Zealand and continue to operate the Electrolux Cooking Products plant in Dudley Park, Adelaide.

Electrolux chooses Thailand over Orange for refrigeration manufacturing
(Patrick Avenell; 25 October 2013)

Electrolux’s head office in Stockholm, Sweden has chosen Rayong in Thailand over Orange in New South Wales to manufacture its Westinghouse, Kelvinator and Electrolux branded refrigerators. The local plant could close by 2015.

Details are still light at this time, however, local state MP Andrew Gee is being quoted in the Central Western Daily lamenting the decision:

“This is one of the saddest and darkest days in Orange’s history,” Gee is quoted saying. “If the decision stands, it’s also the tragic end of an era for Australia. This was the last fridge manufacturing facility in the country.

“The community will find it hard to come to terms with the fact that the Orange plant, which makes a healthy profit of millions of dollars each year, could be closed.”

Cool Heads: The fight to save Electrolux’s Orange refrigerator plant
(Patrick Avenell; 27 September 2013)

“I think it’s a toss of the coin job,” says Stephen Brakenridge as we drive down Orange’s high street, cross the bridge over the railway lines and head towards the Electrolux refrigeration plant. You can sense the nervous tension in his voice; in the voices of all the employees at the factory that has been central to Orange’s economy since World War II.

Brakenridge is the supply chain manager at the plant, which currently assembles upright refrigerators and freezers for the Electrolux, Westinghouse and Kelvinator brands, and Simpson chest freezers. It is his job to make the plant as efficient as possible, a task that took on much greater importance in February 2013 when Electrolux’s Swedish board confirmed it was reviewing its Orange facilities.

Electrolux corporate calls it “an investment study”. Essentially it boils down to this: Electrolux has a large sum of money earmarked for its Asia-Pacific refrigeration manufacturing. There are two options: Orange, in central west New South Wales, and Rayong, in eastern Thailand.

The board began its study at the start of the year and will hand down its decision during a fourth quarter board meeting, which could be as early as 24 October 2013.

“It wouldn’t be the end of the world because we are a very resilient community, but it would be an enormous challenge for the employees and the community.”
– John Davis, Mayor of Orange

The feeling is eerily similar to Sydney in 1993, when a byzantine organisation in Europe weighed up whether it or Beijing should host the 2000 Summer Olympics. Although on a macro level it seems nowhere near as important, Electrolux’s decision will be a defining moment in the history of Orange.

“Irrespective of the outcome,” said a company statement, “the plant will continue to build fridges and freezers under the Electrolux, Westinghouse and Kelvinator brands until at least the end of 2015.”

This two years’ grace is providing scant comfort to the people of Orange, a quaint regional centre with pristine gardens, fantastically wide streets, a beautifully maintained train station and a hillside emerging from the Electrolux plant populated with cheap accommodation — called ‘Duration Houses’ in the local vernacular — that is a constant reminder of the town’s migrant roots.

Although Orange was a major trading centre during the 1850s Gold Rush — the Cobb and Co station is now a tourist destination — it wasn’t until war broke out in the Pacific that the town started swelling.

Having sent all our existing arms to emergency stricken Britain, the Commonwealth Army needed rifles quickly, leading to a rush to build smalls arms factories throughout country New South Wales. Work began on the factory in 1941 and the first .303 was produced a year later. By the time the War was won, the workers in the factory had grown accustomed to industrial life and were not keen to return to their bucolic roots.

“Orange had changed from a prosperous but small rural town based on orchards and farms to become a manufacturing centre employing hundreds of people and, as far as the workers were concerned, there was no going back,” wrote historian Elisabeth Edwards in Weapons to Whitegoods, a publication celebrating the plant’s 50th anniversary.

The town found a lessee for the plant in Email, which owned the license to manufacture and distribute Westinghouse refrigerators. Email would eventually buy the plant from the Commonwealth, and then Email was acquired by Electrolux, the publicly listed global appliance company headquartered in Stockholm, Sweden.

During the Email days, the plant had a history of workplace sentimentality. Edwards writes that during the great coal strike of 1949, which crippled production for two months, managing director Joseph Carroll paid for workers’ meals out of his own pocket.

Management at the plant tell me that kind of sentimentality will not play a role in this decision. Whichever operation provides the best financial case for being maintained will win. I asked plant manager Mark O’Kane what advantages Orange has over Rayong and he rattles off a list:

“Updating Orange to best practice manufacturing is not as big an investment as updating Rayong, we have a flexible production line that can respond quickly to the market, having no stock on the water provides logistics benefits and we have reduced back order inventory,” he says.

I ask O’Kane about Rayong’s advantages and he does not hesitate in response: “Labour costs”.

Cheap labour, however, comes with its own drawbacks. Electrolux’s current Rayong facility has been plagued with industrial action throughout 2013, including a mass strike, a sit-in on the company lawn and the firing and re-hiring of almost 100 workers.

So serious was this disruption to production, Electrolux was forced to explain its actions to IndustriALL, a Swiss based global union of 50 million workers in developing nations.

“While it is unfortunate that these dismissals became necessary in Rayong, this decision was not taken lightly,” wrote Electrolux senior vice president Michele Marcheson. “Rather the situation escalated over the course of recent weeks. Discussions took place for more than a month. During this time there were several disruptions in production. The unlawful strike was the second in two days.”

The last time there was serious industrial action at the Orange plant was in 2003, according to human resources manager Geoff Drummond.

Another issue is quality control. In an industry dominated by appliances manufactured by cheap labour and plagued by product recalls, descriptions like ‘Made in Australia’, along with German and Italian manufacturing, are becoming more and more important.The service call rate on refrigerators manufactured at Orange has been reduced from an unprofitable high of 25 per cent a decade ago to just over 4 per cent today, placing it in the top echelon of all Electrolux factories worldwide.

O’Kane said that it was a mistake for Electrolux to transfer the manufacturing of small-footprint refrigerators — bar fridges — off the plant and onto OEM providers. This category had become commoditised and the change was made to increase profitability. He hinted at but did not say that production quality reduced significantly.

Electrolux houses its research and development on-site at factories. Although not a major metropolis, Orange has proven attractive in the recruitment of refrigeration experts, such as engineer Andy Daugherty, who moved with his wife and young family from Missouri, in the United States, to work at the plant and enjoy the country lifestyle.

Daugherty and his colleagues in R&D recently came up with a more efficient way to cool the drinking water in Electrolux’s new Inspiration range. Instead of it being a large reservoir that is constantly being refilled with room temperature water, the refrigerators uses coils to maintain a chill throughout the supply.

If Rayong wins the bidding war, some of this R&D may continue past the 2015 wind down date.

“There is an intention to keep the R&D department functioning for a period of time after 2015, until the full project is up and running in Rayong, and then, if the worst comes for us, it would be relocated then to Thailand,” O’Kane said.

“The question then becomes, ‘what percentage of the people will relocate?’”

Is it hard to recruit R&D staff to Orange?

“In recent years it has been difficult; the mining boom has really stripped us, both of tradesmen and engineers,” O’Kane replied. “Today, things have settled down and it is not too difficult.”

Do you think it will be hard to recruit R&D staff to Thailand?

“Yes, very.”

I asked Daugherty if he would relocate to Thailand and he said “no”.

The Orange plants currently employs around 520 staff making 300,000 units per year. Brett Ballard is the Occupational Health and Safety manager and my guide for the tour. During his watch, severe incidents — those that mean a person misses work — have reduced annually from 32 in 2010, to 26, to 8, and finally to 6 so far in 2013.

The most common unit being assembled is 400-litre Westinghouse top-mounts, which have been a market-leader in Australia for years.

A pie-chart showing market share reveals Electrolux’s several brands have slipped over the past decade, from total domination to merely very strong. Amongst staff, there is a wariness of the Korean brands, a healthy respect for Fisher & Paykel and a dismissal of the tumultuous Whirlpool.

Ballard explains that this factory has been designed for flexibility instead of large volumes. At Electrolux’s plant in Anderson, South Carolina, it takes weeks to switch over the ‘batching’ system to change from, say, side-by-sides to bottom mounts. At extremes, Orange can make up to 64 different models in a day.

On a line that passes, I see top mounts and bottom mounts, different brands and different handles. Some have controls on the door, some inside the cavity. A bespoke computer program organises the line and can respond to large orders almost immediately.

Stephen Brakenridge joined the old Email company straight from the local high school in 1970 as a fitting and turning apprentice. He has slowly but methodically worked his way up to be supply chain manager and has for the past 24 months been working on a new materials handling system to improve efficiencies.

Instead of refrigerators being delivered with the drawers, crispers and bins in place, refrigerators assembled at Orange will include all the drawers in a cardboard box in the cavity.

“When my wife bought a new refrigerator,” he says, recalling the inspiration for this change, “the first thing she did was take the drawers out and wash them. I thought ‘why are we spending time installing them only for them to be immediately removed?’”

It may seem small, but this and other changes to process will make 16 roles redundant and can be implemented almost immediately should Orange prove successful.

Although the 520 is a long way down from its peak of 3,000 workers, Orange Mayor, Councillor John Davis, said the closure of the plant would be a “major crisis” for the town.

“Not only would it be disappointing, it would certainly be a major hurdle economically for our community, as well as the personal challenges [facing] the employees,” Davis said in a telephone interview. “It wouldn’t be the end of the world because we are a very resilient community, but it would be an enormous challenge for the employees and the community.”

As an incentive to retain Electrolux’s business, the Council has pledged to give the company $200 per employee per year over the next decade, up to $1.1 million. Davis insists this is not a subsidy and made it clear that this was the Council’s idea; “Electrolux did not approach us”, he said.

Although seven of the eight submissions to the Council regarding these payments were in opposition, Davis claims he has the support of the “silent majority” of the town’s 40,000 residents.

The opposition to the incentive payment, Davis says, is from outlying small businesses saying ‘what about us?’. What they fail to see is how closing the plant will have a flow-on effect throughout the town’s hospitality and retail sectors.

One store following the situation closely is Weily’s Betta Home Living, on William Street in the town centre. This outlet has an incandescent yellow glow that comes from the fresh paint job to plaster the Betta livery over the old Retravision shingle.

The Weilys have been in Orange since policeman George was posted to the goldfields in the 1850s. His grandson Doug was an electrician that opened a combination retail/repairs shop, which became a Retravision in 1974 when his son Brant joined the team.

Now it’s his son Drew’s turn at the helm of this store, which is an exemplar of regional retailing: great personal service from people you know and trust.

Drew said it would be a great shame for Electrolux to close the plant, which has always provided the store, through its Retravision and Betta days, with great service. He also noted that if the plant were to close, it would mean 500 fewer regular pay cheques — money that could be spent in his store.

Interestingly, not all retailers in the local area are as passionate about Electrolux as one might assume. Insiders told me that because Electrolux holds staff sales, and everyone in Orange is related to an employee one way or another, the company is in-effect competing with the local appliance retailers.

Mayor John Davis is currently lobbying the State MP, Andrew Gee, and the Federal MP, John Cobb — both members of Coalition Governments — to provide financial assistance to swing the decision in Orange’s favour.

“We cannot make wild promises about grants or whatever until we see the books,” said Cobb in a pre-election interview with the local newspaper, the Central Western Daily. “Of course I would do anything I could to keep them going. We can’t afford to lose our biggest employer.”

Cobb has been reported saying that scrapping the Carbon Tax will help the company though experts disagree on this point. Andrew Gee was on leave when contacted for an interview.

In the excitement of the 2000 Sydney Olympics, it was easy to forget how perilously close the city came to losing that bid: Beijing led every round of voting until the final head-to-head, when Manchester’s supporters pushed Sydney ahead by 2 votes out of 88. The general consensus among Electrolux staff and the people of Orange is that this decision will also come down to the wire.

OHS manager Brett Ballard summed up the mood:

“If we don’t win it won’t be because of lack of effort — Orange has provided a lot of innovation.”

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