Why GE Appliances will make more washing machines in Kentucky instead of China. It's not what you think

Yahoo

8 hours ago

Some of President Donald Trump's steepest tariffs are on products like washing machines, and on Thursday, GE Appliances said it would spend a half a billion dollars to make even more of them in the United States.
Tariffs, however, weren't the driving factor behind the decision, the company's CEO says, but they did serve as an accelerant.
GE Appliances announced it would spend $490 million to move some washing machine production from China and build a high-tech clothes care operation at its massive industrial park and headquarters in Louisville, Kentucky, where it already churns out washers and dryers for the US market.
The move of more than a dozen front-load washer models comes as US trade policy uncertainty has reached a high-stakes fever pitch as Trump's July 9 tariffs deadline approaches.
GE Appliances move that is expected to be complete in 2027 and add 800 jobs, has been in the works for six years — shortly after a new line of front-load washers launched in 2019 — and follows a several-year stretch of high-dollar investments made to bolster the company's US manufacturing footprint, CEO Kevin Nolan told CNN.
'We've had a strategy that making appliances in America makes sense; it's an economic thing, and it's also how we can serve our customers in a better, more efficient way,' Nolan said, adding that GE appliances is 'not a company that was saying, 'Hey, we're going to outsource everything, and oh my God, now we've got to bring it back.''
'[The trade policy] makes the payback for these things much, much greater,' Nolan added. 'And with that, of course it's going to accelerate (plans), because the quicker we can do these things, the quicker we can realize those benefits.'
The emergence and threat of tariffs also are influencing future decisions, Nolan said, noting that plans to reshore other components and parts are moving up the pecking order.
Earlier this week, an expansion of Trump's 50% tariffs on steel extended to 'derivative products,' including consumer appliances such as dryers, washing machines, refrigerators, ovens and garbage disposals. The US currently has a minimum 30% tariff on Chinese exports; however, it has soared as high as 145% in recent months.
'The current trade policy is the most dynamic thing anyone's ever seen in their business career; I mean, it can change in a day, it can change in a week, it can change in a month,' Nolan said. 'These investments are strategic, and you've got to look at the long term and what makes sense. You can't do these just for trade policies.'
The move follows similar reshoring efforts made by GE Appliances in recent years, Nolan said. The company, which has been a subsidiary of China-based Haier Group since 2016, has invested $3.5 billion in its US manufacturing facilities during the past decade, he said.
Still, in recent months, the dramatic shifts in US trade policy and the Trump administration's tumultuous tariff rates have loomed large over manufacturers like GE Appliances and its parent company's appliance-making affiliate Haier Smart Home.
Earlier this month, Haier Smart Home executives told investors that the company's localized supply chain in North America could help reduce its tariff exposure, according to translated company filings from June 4. Haier also flagged opportunities in 'tariff-driven competitor weakness,' according to the filing.
In 2019, GE Appliances wanted to move quickly to market after developing what it believed was an innovation in the clothes care space: Making a less stinky front-load washer.
'To get this washer out fast, we said we're going to tackle building the dryer plant (in Louisville) to make those and we'll share the load and have the washer made in China,' he said. 'We always had a forward-looking view that this thing was going to come back to America, but to get the things in the market quick, we did it that way in China first.'
The high-tariff environment 'definitely made the numbers on this look very good; so, we said, 'OK, let's pull this thing in; let's get this thing done now,' because it just makes sense. The engineering work's been going on; there's a reason we can move fast on this,' he said. 'But these tariffs could go away tomorrow, and once we make these decisions, we don't back off. So that's where you've got to make sure it's the right thing to do.'
The half-a-billion-dollar investment announced Thursday will bring over more than 15 models of front-load washing machines, including a washer-dryer combo, to the 750-acre, multi-plant Appliance Park, where the company already manufactures top-load washers and clothes dryers.
The latest addition — which is expected to heavily feature automation, including robotics, automated guided vehicles and autonomous mobile robots — is expected to bring the company's clothes care production at the site to 33 football fields in size.
Still, when it's complete in 2027, the new production lines are expected to result in the addition of 800 full-time jobs to the 8,000-person campus.
'It'll definitely be our flagship plant from a technology standpoint, so a lot of opportunities for upskilling employees,' Nolan said, referring to efforts for employees to learn new skills. 'In order to be able to successfully manufacture in the United States, we have to be efficient.'
In recent years GE Appliances has touted a 'zero distance' strategy to be closer to customers from a physical and design standpoint. To that end, the company's 11 US plants include maker spaces and microfactories aimed at innovation and small-batch production.
The approach is a far cry from that taken in the 1980s and 1990s, when then-General Electric CEO Jack Welch leaned heavily into outsourcing and offshoring.
GE Appliances declined to share specifics as to what percentage of its manufacturing is now domestic versus overseas; however, the intent is to continue the reshoring efforts and expanding US manufacturing operations, Nolan said.
Trump, like presidents Obama and Biden before (and after) him, has long stated a desire to revive the US manufacturing industry and sought to wield tariffs to make that happen. However, economists and supply chain efforts have questioned the effectiveness in broad-based tariffs to that approach.
Several companies in recent months have announced plans to make investments in US manufacturing in recent months — with the White House taking credit — however, not only were these decisions already longer term in nature, any kind of large-scale rebound in domestic manufacturing will take time, said Jason Miller, a professor of supply chain management at Michigan State University.
'Right now, given all the profound uncertainty about tariffs, folks are not going to take action until some clarity emerges,' he said.
Companies that are able to announce or make moves now, he added, likely have existing capacity currently in place. To build a factory from scratch not only would take many months, if not many years, and then companies would run up against another challenge: finding enough skilled workers, he said.
About 22% of US plants have cited a lack of labor or labor skills as a key reason for their facilities running below full capacity, Miller said, citing his analysis of recent Census Bureau data.
GE Appliances has a waitlist of folks for jobs at its plants, but there's still a huge need for a stronger pipeline of skilled workers, Nolan said.
'That's just a national shortage,' he said. 'When you look at us versus other countries, how many engineers are graduated, we're way underrepresented. And then when you look at out of those engineers who are skilled in the art of manufacturing, it's even worse. That's the thing as a nation we've got to really grapple with.'