Samsung Executives Testify at USITC Section 201 Remedy Hearing

Today, John Herrington, Senior Vice President and General Manager of Home Appliances for Samsung Electronics America, and Tony Fraley, Plant Manager for Samsung Electronics’ South Carolina home appliance facility, testified in front of the U.S. International Trade Commission (USITC) in Washington D.C. on the commission’s global safeguard (Section 201) investigation into imports of large residential washers. Below is the full text of their testimonies.

Testimony of John Herrington, Senior Vice President of Home Appliances at Samsung Electronics America

Thank you for the opportunity to testify today.  I am John Herrington, Senior Vice President of Home Appliances at Samsung.  I hope my testimony today will help you understand the dire impact of import restrictions on our new U.S.  facility, retailers and consumers.

Whirlpool’s petition welcomed Samsung to locate washer production in the U.S., saying it would be a clear win for the U.S. manufacturing sector, and would support the intent and purpose of the safeguard law.  Well we are here, hard at work getting ready to manufacture washers in the United States.

Samsung has been selling washers in the U.S. since 2006.  It was only a matter of time before our success here justified our investment in a local appliance manufacturing facility. Our plans to establish this facility have been in the works for some time.  As my colleague, Mr. Fraley has testified, we are making a huge investment in Newberry and hope that you can visit.

Samsung’s South Carolina Home Appliance Manufacturing Facility, Aerial View

Like Whirlpool, GE/Haier, and LG, we’re a global company. We all make washers and other appliances at factories around the world. It is typical to locally manufacture and import products to serve the needs of a market. GE/Haier and Whirlpool both serve the U.S. market in this way.

In 2010, Whirlpool was shifting its production of front-load washers from Germany to the U.S. It took Whirlpool several years to fully transition. While it was ramping up production, Whirlpool continued to import front-load washers from Germany. We need the same ability to import as we transition the majority of our production to the U.S.

No one should doubt our commitment to creating jobs in the U.S.  We have been marketing our products here for nearly 40 years and have more than 18,000 workers. We know what it means to be an American manufacturer, we are an American manufacturer, and we are in it for the long run.

As Mr. Fraley described, we are building a great factory in South Carolina.  I just visited earlier this month and can personally tell you it is going to be a state-of-the-art manufacturing facility, employing 1,000 people and eventually producing more than 1,000,000 washers a year. We will source parts and material in the U.S. and create the same kind of jobs that you heard about this morning from Whirlpool’s suppliers.

Manufacturing Floor, Foundation Pit Excavation (Photo #1)

Commerce Secretary Ross was able to participate in the opening of the Newberry plant and noted that these were just the kind of jobs the Administration is trying to create in the U.S. We have also enjoyed the strong support of South Carolina Governor McMaster, who said our investment will usher in “an unprecedented period of economic growth and prosperity” in the state.

I’m here today to ask you to support our South Carolina investment and not put the jobs we are creating in South Carolina at risk.

We intend to supply the vast majority of our local market needs from our new South Carolina factory, but we can’t supply all of those needs immediately in January. We will need to import washers so that we can supply a full range of products to our retailers and consumers during the ramp up period.

If we are unable to offer our full range of products to retailers and consumers, we will lose floor space and sales, impacting the success of our South Carolina operation. So the ultimate impact of the proposed tariff is a lose-lose scenario for U.S. production, U.S. employment, and U.S. consumers.

Manufacturing Floor, Foundation Pit Excavation (Photo #2)

Blocking imports would give Whirlpool enormous market power and control. Prices would increase significantly and consumers would have less choice. Any tariff would halt the healthy growth we are seeing in the category. This would have serious consequences for retailers who are benefiting from an expanding market, and can also slow job creation at our South Carolina facility.

The proposed tariff also dramatically impacts the success of FlexWash – a unique product that represents a whole new category of washers. Since nothing like it is made in the U.S., FlexWash should be excluded from the remedy.

It is the only washer on the market that combines two independent wash baskets, powered by two different motors. It can run two distinct wash loads at the same time, at different speeds, with different temperatures. There is no other washer in the market like this.

For a variety of reasons, Samsung does not have immediate plans to produce FlexWash in the United States.  If import restrictions are imposed, U.S. consumers would not have access to this new innovation. Retailers seeking to offer consumers new ways of washing their clothes will be unable to do so. And, again, our South Carolina facility would be impacted by our inability to offer the full line of Samsung products in the market.

In closing, as a member of the domestic industry, we hope to be treated equally. Give us a chance to succeed as a U.S. manufacturer. We are here. We are part of the U.S. industry, so no remedy is necessary. But, if you must recommend a remedy, please recommend a fair TRQ that supports a reasonable transition to U.S. production. Thank you.  I look forward to answer any questions you might have.

Testimony of Tony Fraley, Plant Manager for Samsung Electronics’ South Carolina Home Appliance Facility

Good afternoon, my name is Tony Fraley, I am the plant manager for Samsung’s Newberry South Carolina appliance plant.  I joined Samsung in August and I am very excited to be part of launching this new plant.

I have dedicated my career to appliance manufacturing. Before joining Samsung I worked at Electrolux for 19 years, most recently as the Senior Director of Operations and Operational Excellence.  I like making consumer products. I love seeing the product come off the line, knowing we created it, and ultimately thinking about the consumer who will buy it.

Newberry is a great town. All the people I work with and that I’ve met and talked with in the community, are excited about Samsung’s appliance facility.  Everybody working to build the plant is excited to help Samsung. They want to help us be successful.  Whether it is local hotels, restaurants, grocery stores, when you tell people you are working at Samsung, they smile.

Manufacturing Equipment Delivery to Samsung’s South Carolina Home Appliance Manufacturing Facility

I joined in August, but Samsung has been planning for a US Appliance production facility for several years.  That helped us get a running start once the location was finalized.  We have done a tremendous amount in a few short months.   Essentially, this old Caterpillar plant was an empty building with a slab of concrete when we started.  By January, we plan to be up and running the first production line.

I heard a lot this morning about this being a “screw driver operation” or “kit assembly” plant —  I can assure you it is not.  How do I know?  I’ve been in many washer factories in the United States and elsewhere, and I’ve seen what goes into manufacturing washers.

We are very proud of this facility and would welcome you or your staff to come see it in the next couple of weeks.  Seeing is believing.

Let me tell you a little bit about what we have done and what we will be doing in the coming weeks and months.

Starting with an existing facility has certainly helped us to speed up our process.

But, don’t be fooled, we had to make significant investments to build out the facility for the kind of manufacturing we will be doing.   We are reconfiguring to accommodate large injection molding equipment that will soon be installed.  We plan to have several bays of injection molding machines producing key washer components, such as front & back tubs, outer tubs, top covers and other components.  Another important early step was preparing the facility to handle the heavy duty metal stamping presses.  We are installing presses to bend and form metal for the wrapper, cabinet, drum, front, back, top and other components.  To make the building ready for those presses, we had to dig down more than 30 feet in some places to install the foundations for presses.  If you’d seen the facility last week you would have seen massive pits in the ground.

But now, it’s really starting to look like a factory.  Production equipment is being delivered and installed as we speak, and we are recruiting and training new workers.  In addition to production associates, I am hiring tool and die makers, machine operators, technicians to program presses and robots, maintenance technicians and of course a salaried support workforce.

One of the things I enjoy about manufacturing is working with  and leading people.  At Samsung, we invest in our people.  We have a number of training initiatives underway.  This includes sending people to Korea to be trained and bringing other experienced workers from across the company to train us in South Carolina.  In addition, we are working with Ready SC and Piedmont Technical College for other core skills training.

Soon we’ll start testing equipment and building washers. We’ll be assembling, disassembling and assembling washers over and over again.  We have already hired hundreds of workers.  We are on-boarding groups of workers every two weeks.

In January we’ll begin making parts for washers right there in Newberry.  We will be converting steel into the  cabinet with the press lines of stamping equipment I mentioned. When you look inside the washing machine, you see a shiny drum inside. That starts as a piece of steel and we’ll produce that drum on site in Newberry as well.  A lot of the other parts are injection molded, including the tub, which is why the injection molding equipment is important.

Press Installation at Samsung’s South Carolina Home Appliance Manufacturing Facility

We’ll be stamping and forming parts, injection molding parts and building subassemblies in Newberry.   It will be really cool to watch resin pellets and  raw steel come together inside the factory to go out the back doors as one of our fantastic washing machines.  I’m looking forward to seeing the first production roll off the line in January.

This facility is going to be state of the art.  When all is said and done, we are investing more than $380 million.  As I noted before, it will be the most efficient and modern washer factory that Samsung has anywhere in the world.  When fully operational it will have two washer production lines, one for front load, and another for top load machines.

Like Whirlpool, we will import some components, such as motors.  A number of components will be imported initially but then shift to domestic supply, either in-house production or third party suppliers.   We are committed to developing a U.S. supply base.  At this time, we are actively qualifying U.S. suppliers to produce some components, including additional injection molding of smaller items.  There are a lot of injection molded parts in a washer! Before a supplier can be brought on, we need to be sure that they can produce quality parts, that they can produce the required quantity, and that they can provide them on schedule. This is a time consuming and thorough process. Through this process, we expect to develop an ecosystem of suppliers in South Carolina and nationwide. In fact, we anticipate some suppliers may locate alongside our facility or nearby.

Manufacturing Floor, Foundation Pit Excavation (Photo #3)

This new supply base has a significant impact to the local community. Once we are fully up and operational, obviously there will be local employees that generate income and revenue associated with their activities, as well as a supplier base. There will be a significant multiplier effect to the city of Newberry as well as Newberry County, and ultimately, I think the state of South Carolina.

We are working to launch this factory and create these jobs early next year.  But, the ramp up will not be immediate.  It can’t be. You can’t just open up a factory at full capacity.  A huge facility like this needs to start up in an orderly and deliberate fashion.  We plan on bringing one production line up at a time.  We will need to gradually ramp up production.  We will start each line with one model and build up to producing multiple models. We are invested in quality and safety and we are committed to doing this right.

By the end of 2018, when both lines are running, we anticipate having almost 1000 employees, working two shifts.  Until we get up and running, however, some washers will have to be produced abroad and imported to meet demand.   As our production takes off, the volume will shift to US production, but that will not happen immediately.

In addition, while we are installing production equipment and committed to producing the major parts in-house, there will be a transition period during which importing parts will be necessary to the successful launch of this facility.

If this Commission imposes import restrictions now, it could really cut us off at the knees, particularly the draconian tariff that Whirlpool is requesting.

A tariff that cuts off Samsung’s imports will undermine our competitive position in the marketplace, and will have a negative impact on our ramp-up and transition strategy for South Carolina.

I’m not a trade or marketing expert, I’m a manufacturing expert, but the way I see it, all that these import restrictions will do is cause market disruption in the short term and give Whirlpool and GE  a way to undermine my South Carolina facility. And, that is just taking jobs away from the workers we would have hired in South Carolina.

I ask that you don’t recommend import restrictions that jeopardize South Carolina jobs.  Come and see this factory.  Give us a chance to get up and running, and then let our US production compete on a level playing field with other US producers.  Don’t handicap us while our facility is getting off the ground.