Rheem, through a 100%-owned-and operated business, called Rheem MEA Manufacturing LLC, on November 10 opened a manufacturing facility in Dubai Investments Park, in the vicinity of the bustling World Expo, for the production of commercial air conditioning units. As a first phase of activity, the company, which has had a presence in the region since the 1980s, will manufacture the Renaissance Xcede line of commercial rooftop units in the 10-30 refrigerated tons (RT) range.
The inauguration signalled Rheem’s next step in the region, of adding manufacturing of region-specific products to its portfolio of engagement in the GCC region. In 2012, Rheem opened an office in one of Dubai’s free trade zones. In 2020, it opened the Rheem Innovation Centre in Dubai Silicon Oasis. In the words of the company, being in the market was the first step, and local manufacturing represents the next.
Mike Branson, President, Global Air, Rheem, who inaugurated the facility, said: “Manufacturing in the GCC [region] will allow us to better serve the needs of our customers. The products built at this factory will be designed in the USA to Rheem’s standard of quality and reliability, while meeting the specific market and climate requirements of the GCC [region].”
Branson spoke of how it’s a global strategy for Rheem to make things local, when it can, considering it has a commitment to serving the local market. Some products, he said, are designed specific for the market, like the Renaissance Xcede, which is designed for this market. Rheem sees the Xcede as a product that among other places in the region, is ideal for Saudi Arabia, with its large population and development of mega projects. With this in mind, the facility will also produce 60 Hz units.
To begin with, the facility, organised into multiple workstations, will roll out three Xcede units a day. Revealing the way forward, Santosh Devassy, Project Director, Rheem MEA Manufacturing, who was present at the factory floor during the inauguration, said the company will aim to double production by 2024. For now, the supply, he added, will start from January 2022.
The facility will conduct four leak tests, in all. Workstation 3, for instance, will focus on helium recovery and QC inspection, after which the units will be passed to Workstation 4, where they will be charged with R410A. Workstation 5’s remit will be the Run Test, where all information will be gathered and sent to the data station. Luis Portilla, Director of Operations, Mexico AC plant, who spoke at the workstation during the November 10 inauguration ceremony, said: “We test all vitals and compare with the design.
And once passed, it goes forward.” Branson, referring to the test stations, said they stand for the company’s commitment to reducing greenhouse emissions from the factories. “We are capturing and re-using helium,” he said. “These are scarce resources, and the refrigerants can hurt the environment, so we need to make sure that we can do that.”
An equally important workstation in the facility is the Quality Assurance Metrology Lab, which will receive components from manufacturers and suppliers, including from Emerson, which supplies the compressors. “If happy, we start buying from the manufacturers,” said Jaime Trejo, QA Manager. “We store approximately three months of inventory.”
Rheem hinted of a deeper engagement in the region in terms of applications it wants to serve. Already, hand in hand with the air conditioning units, the company is eyeing an expansion of its water heating business, which includes point-of-use, commercial, central and solar solutions. Speaking during the inauguration, Rich Bendure, President, Rheem Global Water business, said: “We will consistently introduce a first-class product portfolio in the MEA. This affirms our commitment to serve customers around the world with the latest and most innovative products.”
Speaking of Saudi Arabia, Bendure said Rheem is optimistic about the Kingdom and sees a substantial opportunity for the water heating business. “With the air and water connection, we talk to contractors and consultants in Saudi Arabia,” he said. And leveraging that together, when designing a villa or a building, we have 60% of the energy consumption across these two product categories, it makes sense.”
Speaking on the expansion and deeper engagement, Branson said the targets the company sets for itself are underpinned by its organisational structure. “This is a private company and is rich and has pretty much unrestricted capital,” he said. “Our short-term plan is a five-year plan, and then we also do our long-term plan, and our manufacturing roadmap is a two-decade roadmap.
One of the things we are proud of is that we tend to invest very consistently through all market cycles, long term or short term. The other part is that when we come up with the 10-year plan, we stick to it. We put our plan together, and we go execute. And when there are unplanned opportunities, we evaluate those and put them into context, but we are going to do what we said we are going to do.”
‘IT’S ABOUT BEING HERE AND DESIGNING SPECIFIC TO THE MARKET’
Mike Branson, President, Global Air, Rheem, in conversation with Surendar Balakrishnan
Is the Renaissance Xcede initially going to be available only in 60 Hz?
It’s available for both 50 and 60 Hz. We’ve designed the product line in US specifically for the full GCC region market, and we have a very specific launch sequence, releasing one model at a time, based on market volumes. But over a span of a couple of months, we will have the complete line of 50 and 60 Hz models in the market.
But is the leaning more towards 60 Hz?
I wouldn’t want the market to read in that we see one market more important than the other. Over the next three months, one model at a time is going to be launched. It’s just the sequence. We will be doing 50 Hz models, then the 60 Hz models, then the 50 Hz. It’s all interwoven, so it’s not that one is preferred over the other.
Is your focus shifting more towards Saudi at this time, though? I ask because the Kingdom is seen as a capital equipment market, while the UAE is more of an aftermarket at this juncture.
See, they are both really important, and so we are not applying additional energy, and we are not displacing focus. It’s an interesting point that you bring up about replacement markets – New Construction is very important, because there’s a lot of volume. Replacement is critically important, as well, and because you are providing value – and that’s a decision to make, and by helping our customers have a good relationship with those building owners and homeowners, we can help them make the right decisions.
They can make the right decision at the right time and then assess how important is comfort, how important is energy efficiency and how important is IAQ. So, for the first couple of decades here, we were 100% focused on New Construction, in whatever market it is. But now, you are seeing our strategy – significant energy on the aftermarket.
You spoke of how Rheem is well capitalised as a company. Are you looking to introduce a new model of ESCO engagement?
Many ESCOs working in a retrofit ecosystem are struggling to raise capital when it comes to buying capital equipment, and banks are not supporting large projects in the absence of collaterals. From that perspective, would Rheem step in and say, ‘You are Mr ESCO, and I will support you in improving the performance of a building, and there will be a new financial model aligned to it?’ It could be if the opportunity was appropriate.
So, I wouldn’t rule that out. That is not an immediate strategic initiative. In some markets around the world, we participate in leasing products, and typically that is done from a capital perspective than from an ESCO perspective. In this market, capital hasn’t been a limitation, but if the model does open up, we certainly are open to exploring it.
You have R32 equipment in other markets, but not necessarily here. You have R410A here, right?
Correct, all of the products that we sell to this market are R410A, and that is correct.
Any reason why you are not introducing R32?
Oh, we will at the right time! So, we will have a subset of products… maybe R32 is more optimal, but we prefer R454B, because it has an even low GWP (global warming potential) than R32. We pick the right refrigerant for the right application. And when you switch to the next step, in the past few years, we converted to R410A, and when we go to the next step of low-GWP refrigerants, we are adding another complication – and that is all of them are A2Ls, or mildly flammable refrigerants.
So, there’s a whole another step to prepare the market for that and prepare installers. And the governments may need to absorb what their expectations are and what are the requirements for building codes. Are the requirements that if there’s a leak, then it has to be diluted? Is there a requirement for extra controls to detect if there is a leak of the refrigerant?
Those things need to be worked out before we introduce the refrigerants. And even in the United States of America, it is just now becoming… it will be 2025 when the next step in GWP must take place for products we make. And it’s just now that we and other manufacturers are releasing these products, not because we weren’t ready with them, but the market did not know what to do with them. There’s transportation things to think about, storage to think about.
We can leverage on these. We have done successfully as long as we have been here is that we take this expertise that we have applied around the world in air conditioning, particularly in North America, and Middle East becomes the next market to extend that to in an optimised way.
Could you talk us through IT-enabled devices. What progress are you able to report? Especially with regard to predictive maintenance, machine learning, or AI? I have been at Rheem for 11 years, and we have always been industry leaders, but one thing at that time is that we put a group of people together about a decade ago to see where is this advancing. A key enablement to provide the solutions is connectivity. You have got to be connected to the devices to get the data out. So, we developed an architecture, and we have launched it in several markets around the world. And in air and in water products, one of the names we used for this is Econet, and it’s a way to have this connectivity with the products we produce – and within those how can we learn from the input. Now, we have Econet expanded into residential and commercial air conditioners, residential and commercial water heaters, commercial refrigeration equipment. All the technology we have has elements of that connectivity into it that then drives this solution. What’s interesting, as well, is that the air conditioner in the house is connected to the thermostat. And in most systems today, that brain is the thermostat on the wall that is controlling the system. Why does it have to be the thermostat? In reality, no one is going to touch the thermostat. What you really need to do is that you need to sense temperature, humidity and other parameters, where they need to be sensed. You need something to interface as a user, and where that computation takes place could be anywhere. It could be in the air conditioner, it could be in the air-moving device, it could be in the cloud.
You spoke about the Pro Partner program, which is about working with contractors. Here, in the GCC region, we are seeing a lot of manufacturers who say, ‘Okay, I have a good piece of equipment, but at the end of the day it’s about what the sub-contracting community does with the equipment. If they are not qualified enough and if they are not specialised MEP contractors, there is a problem. There was a time when there was a steadiness to the whole thing, but nowadays some of these specialised people are being let go. So, you still have the legacy reputations of some of those large contracting companies, but are they still qualified enough to handle sophisticated equipment?
Having qualified people is extremely important, but we have solutions for that. The team’s leadership here has introduced a certification programme for technicians to this market that never existed before. It’s called NATE – North America Technician Excellence.
I just rotated off the board of directors for NATE recently. And the whole idea is to… it’s not the training, but the certification. So, there are different elements around refrigeration and around electrical and around service and around heat pump technologies. If a person is NATE-certified, it is saying this person has quality. There is a logo to go with it, and there is a certificate to go with it. And there is continuing educational requirement, but it’s not difficult. So even if we are bringing in technicians from other countries to serve as technicians, it can be a part of an indoctrination programme to be a part of that.
So that’s very important to have the discipline of that and for us to recognise our pro partners. Give them something. They should appreciate the value organically but also give them an incentive to adopt the programme, so that they can see the value of having certified technicians. It is doable. The test can be taken online, as well. You can have a remote proctor. There is training that can be done online, and every technician is connected, so we have made it accessible to them to be a part of it.