www.theflyonthewall.com
Feb 13, 2011
Harman International Industries said it is expanding its manufacturing operations in Székesfehérvár, Hungary with the assistance of a development grant from the Hungarian government. The grant also provides for development tax credits over a five-year period to the Company’s local unit, Harman/Becker Automotive Systems Kft. The expansion includes construction of a new 12,000 sq. meter plant to produce acoustic and electronics modules for automotive use, with an expected 258 new jobs created at the site.
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Bright Spots in Economic Development
In Washington During 2010
Tuesday, January 18, 2011
By Ed Pruneau, Missourian Managing Editor
There were several bright spots, and one low point, in economic development and job-creating efforts in Washington during 2010.
"The really big thing was getting Valent (Aerostructures LLC) to build here," said Bill Miller Sr., president of the city's 353 Redevelopment Corporation which helps facilitate new and expanding industrial development projects.
The company, a major supplier of parts to the aircraft industry, broke ground last September on an 85,000-square-foot manufacturing facility, which should be "up and running" by July, said Darren Lamb, community and economic development director.
The city issued $17.5 million in tax exempt bonds to finance the facility on a 9-acre tract off Vossbrink Drive in the Heidmann Industrial Park. The company expects to create 100 new jobs and retain another 100-120 Missouri jobs.
Negotiations to get Valent to choose Washington over other communities that were competing for the plant was probably the "toughest" that the 353 Corporation has ever faced, Miller said.
"It was indeed a challenge," Lamb added. The city was competing with Kansas, where the leaders in the Legislature were actively involved in efforts to get the company to build there.
Without the benefit of offering Missouri state tax credits, "we wouldn't have gotten it done," Lamb said.
"The whole thing today is about job creation," Miller said. "We could not have done the Harman Becker or Valent projects without help from the state. They were really cooperative."
Another big thing in 2010 was completion of the $60 million Mercy Data Center in Heidmann Park, Miller said.
While the data center has added only 35 to 40 jobs, it is a "significant, high-tech" facility that "enhances Washington" and makes it a place to be for future data centers and high-tech facilities, Miller said. "All the infrastructure is in place."
The "downside" in 2010, Miller said, was the announcement that Harman Becker would be closing its state-of-the-art plant at the corner of Highway 100 and Vossbrink Drive and moving the facilities to other plants in the United States. The company is phasing in the closing over the next 12 to 18 months.
"It was totally unexpected. They (Harman officials) were talking about expansion," Miller said. "It's a great plant; a great facility. We're optimistic that another industry will locate there and that Harman Becker will help us market it."
"I don't think we'll have any problem marketing that building," Lamb said. He said while some Harman employees may move with the company to work at other plants, others possibly will be looking to apply for jobs at the new Valent plant.
Another high point in economic development in 2010 was completion of the second CG Power Systems plant, located in Heidmann Park behind the new Valent plant. That $15 million facility is expected to add 147 new jobs by the time it's fully staffed, Lamb said.
Also completed last year was a major addition to the Stork Fabricators plant and completion of an addition to the Trilogy Labs plant built in 2009.
The 353 Corporation also completed grading work on Lot 12 in the Heidmann park, creating a 9-acre "pad ready" lot capable of supporting a 90,000-square-foot industrial plant.
The 353 Corporation works closely with the Washington Civic Industrial Corporation (CIC) on industrial development projects, Miller noted. In some cases, the CIC has more flexibility. "It's important to have both organizations," he added.
Over the last year, the community worked with between 20 and 24 industrial prospects, down slightly from previous years. But just since last September "we've had 10 to 12 on top of those," said Dick Oldenburg, former economic development director who is now working part time assisting Lamb in the transition.
Many of the prospects Washington is seeing these days are companies focusing on alternative energy and high-tech applications, including companies that produce such things as wind turbines, fuel cells, solar power systems and synthetic fuels, Oldenburg said.
Lamb noted that all prospects "who come through the door" want incentives to come to a community. "The competition is very intense. We want to build on what we have here and assist our existing industries as well."
"We're optimistic about 2011 and 2012," Miller remarked. "With continued cooperation from the state, we will continue to advance in industrial development. You can never stop prospecting for industrial clients."
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COMPANY STATEMENT & History in Washington Missouri
In a move the company calls necessary for it to remain competitive, Harman Automotive will cease operations at its Washington plant, costing roughly 300 jobs. The automotive infotainment company announced the decision Tuesday.
The company will be transferring its Washington operations to other facilities, with the tranfer expected to be completed by June 2012, officials said. The move is part of global restructuring, according to officials.
The plant here has only been open about five years.
Tuesday Harman Automotive, a division of Harman, advised employees that the plant would close as a result of a global restructuring effort.
The company released a statement Tuesday afternoon, calling the move regrettable but essential. About 300 people work at the Washington plant. The plant will phase out those jobs over the next 18 months.
Harman's brief history in Washington was heavily backed by city and state officials. For the plant's groundbreaking, then-Gov. Matt Blunt, Lt. Gov. Peter Kinder, then-state Sen. John Griesheimer and others were on hand.
Before the plant was built, Washington City Council members approved a $30 million industrial revenue bond issue for the company to build its 86,000-square-foot plant at the corner of Highway 100 and Vossbrink Drive.
The city also agreed to abate 50 percent of the company's real estate and personal property taxes for 10 years and provide a $185,764 match to a $250,000 Missouri Community Development Block Grant.
The 50 percent abatement was the first in Washington's history.
The state's department of economic development also agreed to provide $1.5 million in tax credits through numerous programs.
Harman paid $45,000 per acre for the 23.3-acre site, or $1,051,650, to the 353 Corporation. The corporation used that money for site preparation and the installation of underground power lines for the plant.
In Washington, Harman employs about 300 people. The company makes high-tech automotive navigation and audio systems.
While the plant closure may be a surprise, it isn't the company's first.
Last year the company closed its Martinsville, Ind. facility, which employed 340 people. The company said at that time it was relocating jobs to Mexico and possibly China, according to the Martinsville Reporter-Times.
Later in the year, Harman/Becker closed a plant in Northridge, Calif., which employed 325 people.
The company made the identical statement at that time that it made Tuesday, saying "Harman regrets that it is compelled to take these actions, but believes the restructuring is an essential step to insure the long-term competitiveness of the business."
In 2007, the company was bought by Kravis Roberts & Co. L.P. and GS Capital Partners for about $8 billion.
Tuesday afternoon, Harman released the following information, as reported previously:
Harman Automotive, a division of Harman, has advised employees at its Washington, Missouri, plant that as the result of a global restructuring effort the company will be transferring operations from Washington to other facilities and will close the Washington Harman Automotive operations. The transfers will occur in phases and will be completed by June 2012.
The company will be providing severance packages and job search assistance to all employees affected by the reduction. Harman regrets that it is compelled to take these actions, but believes the restructuring is an essential step to ensure the long-term competitiveness of the business, according to a statement released by the company Tuesday afternoon.
The Harman Automotive facility in Washington now manufacturers automotive infotainment systems and employs approximately 300 people.
In addition to its automotive line, Harman manufactures electronic equipment that is marketed under Harman-Kardon, JBL, AKG and other brand names.
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Here's What's Really Been Happening to Harman Becker - The Back story
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When Jobs Leave By Aaron Rimstidt
Harman-Kardon Inc. was founded by Sidney Harman and his partner, Bernard Kardon, in 1953. The duo developed the world’s first stereo receiver while working for the Bogen Company. When the company showed little interest in the innovative ideas of its bright employees, Harman and Kardon founded their own company. The rest is history. The company hit it big and continued to grow through the decades.
In 1980, the company was incorporated and became Harman International Industries. The business underwent major expansion when it began to offer specialized sound systems for high-end automobiles. Like Munro Shoes, Harman’s product was considered high quality. The market was ripe for tremendous growth and profits, and Harman was at the forefront. In 1987, the company was worth roughly $250 million. Fast-forward to 2007 when Harman International was valued at approximately $8 billion, employing more than 11,000 people.
Recently the company expanded into “infotainment,” a multimedia platform that includes the installation of navigation, telephone, Internet, and Sirius Satellite Radio systems in automobiles. Harman also set up audio equipment for big names and big events, such as Bruce Springsteen, Neil Diamond, the Grammy Awards, and the Presidential Inauguration.
Sidney Harman was wary of outsourcing his manufacturing operations and valued input from employees, or as he calls it, the “bottom-up” approach. In his 2004 book, Mind Your Own Business, Harman wrote: “Offshore manufacturing might have been seductive if there were not other considerations. For me the most important of those considerations is the reality that many creative product leaps occur on the factory floor, and a significant percentage of those come from the people in the direct labor force.” In the book, he also questioned the financial benefits of offshore manufacturing because technological advances had lowered direct labor costs to less than 5 percent of material, labor, and overhead in his company and were still going down. He asked, “How much of a genius does it take to recognize that when it falls below 1 percent, it does not matter whether the manufacturing is done in Indiana or in Indonesia?”
However, as Sidney Harman considered retirement, no heir apparent emerged to lead his empire. On April 26, 2007, at the age of 89, Harman announced a merger with Kohlberg Kravis Roberts & Co. L.P. (KKR) and the GS Capitol Partners unit of Goldman Sachs Group Inc. in a deal valued at $8 billion. The merger underway, KKR and Harman decided it best to hire a new CEO from outside the company. Dinesh C. Paliwal, a promising 49-yearold businessman who made a name for himself with the global technology and engineering company ABB Limited, was named CEO on July 1, 2007.
Things changed quickly after the shift in leadership. Ten weeks after Paliwal’s hire, KKR backed out of the merger. As a result, the company’s stock value tumbled.
While the company worked to overcome challenges, it became increasingly clear that Paliwal’s style of leadership was far different than that of Sidney Harman’s. Within months, the company announced plans to close factories, drop unprofitable product lines, and slash new-product introductions. According to a press release, the restructuring was “an essential step to ensure the long-term competitiveness of the business, and the company is committed to implementing a series of strategic initiatives to optimize its global footprint in manufacturing.”
To date, the company has cut 900 jobs and anticipates 1,100 more layoffs by July 2009. At the same time, Harman began to outsource its technology.
“We are strengthening our foothold in the emerging markets, shifting some of the manufacturing and engineering activities to our newly established operations in China, India, Hungary, and Mexico,” Paliwal noted in the December 2008 quarterly report.
But while shutting down U.S. facilities, Harman was simultaneously opening factories in China and India, as well as massive multimedia outlets in Dubai and New Delhi.
Engineer Rick Herold was employed at Harman-Becker in Martinsville, Indiana, for more than 20 years, until the company closed the plant in early 2009.
Engineer Rick Herold was employed at Harman-Becker in Martinsville, Indiana, for more than 20 years, until the company closed the plant in early 2009. At one point, Harman was the community's largest employer.
The Harman-Becker plant, a division of Harman Industries in Martinsville, Indiana, was one of the factories shut down. At one point, Harman-Becker was Martinsville’s largest employer. Engineer Rick Herold began working for the company in the late 1980s. He remembers the ingenuity that made Harman International a big name in the audio business. “We would design and install systems that were equalized specifically for the car’s interior,” Herold explained. “They were high-end sound systems for luxury cars. We made money, and they made more money when they sold it.”
Business boomed.
In fact, growth was so explosive that demand outpaced production. Eventually, there was too much work in Martinsville, so they began to outsource some of the manufacturing duties. Harman acquired a factory in Juarez, Mexico, to focus specifically on Chrysler speakers, while another factory opened in Franklin, Kentucky, to tackle growing business from Toyota.
However, after outsourcing began, it didn’t stop.
Many businesses recognize the economic benefits of outsourcing to other countries. Labor costs are a major consideration.
When the company was opening its new plant near Shanghai, Herold was chosen to assist with the transition. He had serious concerns. “I wondered, ‘What are we doing? We’re going to build this factory, and then you’re going to put us out of business?’” His fears soon proved true. The Martinsville plant was completely shut down by January 2009. As is true of many small towns throughout the country, the factory closing crippled the local economy. After losing its largest employer, Martinsville has little to attract new business.
Herold is also concerned about the exportation of U.S. technology and ingenuity. After training the foreign employees, Herold realized that they “learned our latest, most advanced technology. What they didn’t learn is what drives the next generation of product development.”
Times are tough. Businesses are forced to make economic and unpopular decisions. However, the case of Harman illustrates a strategy that may be used more often in the future. When the plant near Shanghai opened, Mr. Paliwal said that the factory “is a key element of our strategy for growth, while leveraging the attractive infrastructure, talented work force, and new business opportunities in the Asian markets.” China’s labor and environmental laws are more relaxed, the labor is much cheaper, and the Asian market has indeed expanded, so Paliwal’s statement makes sense from a financial perspective.
However, Herold believes other factors should be considered.
“They figure out the cost of labor, the cost of a building, and other costs associated with running the business,” he explains. “Eventually, those costs are broken down into cost per piece. They should also factor in executive salaries. If we weren’t giving CEOs ‘superstar’ salaries, would we have had to go to China? All that money affects the bottom line, and like any other expense such as hourly wages and overhead, they should be figured in the cost containment/reduction formula.”
Despite the company’s plummeting stock value, Paliwal received more than $16.8 million in 2008 and in the future could earn up to $75 million based on stock performance. With this incentive, it is in Paliwal’s best interest to stay focused on the market value of Harman Industries.
In the meantime, Rick Herold has moved on and is working in a new field, but others who have been laid off face the challenge of finding a job, and that is not easy. Herold could have stayed with Harman but would have had to relocate, which did not make sense for his personal situation. He did get an offer from a company in Wisconsin, but it was not feasible for his wife to leave her business. “It was a good offer,” he admitted, “but if I’m going to be away from home, my wife needs her support system, and that’s not in Wisconsin. That’s here. If she’s not happy, I’m not going to be happy.”http://www.saturdayeveningpost.com/2009/05/04/lifestyle/features/jobs-leave-harman-international-industries-munro-shoes.html
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Reciprocal links:
http://HermannHearsay.blogspot.com/(Hermann Area News, Commentary & Discussion)
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