FARIBAULT – The rat-a-tat-tat of pounded steel darted across the Daikin heating and cooling equipment factory in Faribault like machine-gun fire — and it made Will Fort smile.
“That hole puncher … is the sound of money!” the general manager said during a recent tour of the sprawling factory.
Throughout the space, teams of workers are busy assembling massive rooftop units that will heat, cool and vent skyscrapers, schools, factories and big box stores across the continent.
“Just in Minnesota, we are now producing $440 million in sales a year. Ten years ago, we were half that,” said Mike Schwartz, who as CEO of Daikin Applied Americas oversees 11 U.S. locations and offices at the U.S. headquarters in Plymouth. “Our goal is to drive to the Number 1 lead position in the Americas.”
The Faribault plant, which consumes 40 million pounds of steel a year, and its sister factory in Owatonna are fast growing and critical to the Japanese parent firm’s plans to make its Daikin Applied Americas a household name within the United States.
Daikin’s U.S. entities are actually the newest part of Daikin Industries, the world’s largest HVAC maker with $20 billion in sales and 90 plants worldwide.
The new emphasis on the Americas pits Daikin against entrenched competitors such as United Technologies, Trane, Johnson Controls and Lennox in the $47 billion HVAC manufacturing industry.
Schwartz said his growth goal is gaining traction thanks to a U.S. construction boom, replacement business and Daikin’s push toward more energy-saving products and new wireless monitors that let building crews check equipment remotely instead of having to climb to rooftops to physically inspect HVAC units.
“A lot of the core products we build here in Minnesota are ripe for growth,” Schwartz said.
Each HVAC unit weighs up to 140 tons, costs $10,000 to $80,000 and boasts industry energy-efficiency ratios of 20, when the U.S. government calls for at least 11, he said.
Customers include the new World Trade Center, General Motors, Honda, Bethel University, the University of Minnesota Alumni Center, the Sarasota-Bradenton International Airport, plus several Marriott and Hard Rock hotels.
Schwartz and Fort are determined to grow that list, but they acknowledge obstacles.
Worker shortages for one. U.S. trade tariffs on steel that are costing “millions.” Plus low name recognition stateside.
While Statistica.com ranked Daikin Applied Americas the second-largest commercial HVAC maker in North America (behind United Technologies Carrier), few Americans could pick the brand out of a lineup.
“People here just don’t know the Daikin brand name,” said strategic marketing Vice President Susan Kaufman.
Daikin’s poor name recognition stems from 12 years of U.S. acquisitions, name changes and products that go by different brand names, industry experts say.
It all started in 2006, when Osaka, Japan-based Daikin entered the U.S. market, buying McQuay International, with plants in Faribault and Owatonna. That entity became Daikin-McQuay.
After other deals, including the 2012 purchase of Goodman Global, it rebranded again, this time as Daikin Applied Americas.
In 2014, Daikin spent $9 million tripling the size of the old McQuay plant in Owatonna. In 2016, its American Air Filter subsidiary bought Flanders Holding LLC in North Carolina.
Francis Dietz, with the 315 member Air-Conditioning, Heating and Refrigeration Institute of manufacturers, said the company still uses other names besides Daikin, especially on residential products. So the branding can get confusing.
“Still, you could make the case that they are doing pretty well with name recognition, given that they’ve only been in the United States for 12 years,” Dietz said. “Some of its competitors have been here for 100 years.”
Plus, Daikin has worked on innovation and energy efficiency, which in this industry is “absolutely a big deal,” he said.
To boost brand awareness, Daikin is hitting U.S. trade shows, taking its Daikin mobile education trailer on the road and airing TV commercials.
It’s also investing millions in its U.S. plants, buying automated machinery and boosting the energy efficiency of its HVAC systems even more.
That’s paid off by bringing in new customers and spurring Daikin to expand again in Minnesota, Fort and Kaufman said.
In May, it bought a second building in Faribault that will open next summer with 200 new hires. Staffing in Faribault and Owatonna already has swelled from 500 in 2013 to 900.
Minnesota employees work in shifts 24 hours a day to churn out commercial heating and cooling systems that vary from the size of a dumpster to ones bigger than a semitrailer truck.
With customer orders growing, the company needs more room and staff, Schwartz said as he watched Faribault workers feed large sheets of metal through automatic hole punchers.
Nearby, others brazed copper pipes destined for giant cooling systems, while another team pounced with riveting guns to finish the last third of a 140-ton RoofPak HVAC system. The product was headed to a beef refrigeration plant in Idaho.
“This is the oldest product in the factory, but we keep adding new features” that keep it in demand, Schwartz said.
Today’s systems have dashboard panels that can monitor, sound alarms and recommend maintenance, communicating wirelessly with customers’ cellphones and laptops.
“Intelligent equipment” is the way of the future, Schwartz said. “Wireless controls now [represent about] 15 percent of installed equipment. But it’s like smart TVs. It’s the way the market is going. I really see the growth of intelligent equipment coming on even more in the next five to 10 years.”
Consumers are leading the charge.
“They are so used to getting [instant information] on cellphones, iPads and Alexa devices that they want instant data even when they are on the job,” said Kaufman. “So [demand] that started in the consumer world is moving into commercial.”
Scott Van Hove said he’s “pretty excited about” the new $70,000 Daikin chiller and $4,000 remote monitoring system his Prinsco Inc. employer bought for the corrugated drainpipe maker in Prinsburg, Minn. It’s the first “smart-chiller” software among Prinsco’s nine locations.
That chiller cools the steaming, corrugated piping made at the Minnesota factory.
“If that piece of equipment goes down, the whole plant goes down,” said Van Hove, the regional maintenance coordinator in charge of four plants.
The chiller’s importance is why Prinsco paid extra for Daikin’s wireless system, which tracks energy use, temperature, pressure and other conditions.
Anything “off spec” instantly alerts a Daikin technician, Van Hove and other managers with texts and alarms. Daikin can remotely alter the chiller’s controls or order a Daikin team to the plant, even if it’s 3 a.m., Van Hove said.
“It’s a little peace of mind knowing there is someone else out there monitoring this equipment,” he said.