Japan enters as quality competitor in hot US air-conditioner market
Boston — There's nothing the air-conditioner industry likes more than a long, hot summer -- just like this one. After enduring a cold, recession-smothered season last year, room air-conditioner manufacturers are now selling out.
But no resting in the shade for these American manufacturers. Startling data gathered by David Garvin, a Harvard Business School associate professor, show a wide quality gap between US and Japanese makers of room air conditioners. Garvin found that US manufacturers were producing a median of 63.5 defects per 100 units coming down the assembly line; the Japanese median was less than one defect per 100 units. Also, Japan's service-call rate in the first year of warranty was almost 17 times better than the average rate in the US.
This is of particular interest to the industry now, because the Japanese just this year entered the US room air-conditioner market.
''There's a wide-open market'' and Japan knows it, Garvin says.
The Japanese firms are going after the quality niche. Already three Japanese companies, Daikin Industries, Panasonic, and Sanyo have begun test-marketing here.
''We consider (Japan) a threat,'' says James Yund, director of refrigerator products at Whirlpool, but ''there is no technology that the Japanese have or are developing that we in the US don't already have. They don't have a leg up on us anywhere.''
But after extensive visits during 1981 and 1982 to almost all US air-conditioning plants and to Japan, Garvin disagrees. Though a few of the US firms are in pretty good shape, Mr. Garvin commented in an interview here, ''the US companies have a lot of catching up to do.''
Both countries have similar assembly-line layouts, Garvin said, adding that the advantage isn't in technology or culture, but ''in doing the little things right.''
In an upcoming Harvard Business Review article, Garvin lists dozens of areas where the Japanese seem to be doing it better. For instance, they review defect data daily (at the best US company, the defect data was reviewed 10 times a month). At most Japanese plants, assembly-line supervisors believed quality was the top priority (most US supervisors said it was meeting the production schedule). Japanese repair people have to submit detailed reports on product problems, and reports took between a week and a month to get from the field to the factory (Garvin found US reports vague, and says they took a month to a year to reach the factory).
But US manufacturers say they have improved a lot in the last year. At Belding Products Company, which makes room air conditioners for Gibson, Kelvinator, and Frigidaire, some new positions have been created in the last year and a half. One is Ben Covey's job. He is responsible for setting up and running quality circles.
''Last summer there was an intense move to new quality features in the plant, '' he says. Covey has direct access to the president of Belding, and states that the company has now established clear quality goals. This year, the goal is to ''cut absenteeism, and repair rates, and rejects down to under 5 percent. So far , we're on target.'' And before, ''we used to collect and file'' reject data, he says, now it goes right into a computer and is reviewed every day. Since getting his job, Covey has also instituted a system that rates suppliers according to the percentage of rejected parts. One supplier has been dropped so far.
Irwin Hersh, vice-president of operations for Emerson Quiet Kool, says one reason US defect numbers are so high is because ''it varies widely on how US companies define defects.'' At Emerson, paint dots or crooked labels count as defects, Hersh says. He adds that assembly line defects are down to around 50 per 100 units at Emerson now, from 70 a couple of years ago.
''I don't believe the Japanese have any higher quality than the domestic industry. We're not afraid of their product,'' says Charles Marino, vice-president marketing for Friedrich Air Conditioning and Refrigerator Company. The San Antonio company makes air conditioners for the high end of the market -- the one being targeted by the Japanese.
Mr. Marino thinks Japan is entering the market, not because of a quality edge , but because the US is the biggest market in the world and because the Japanese have been so successful selling their air-conditioner compressors to US manufacturers.
The hot weather has gotten the Japanese off to a good start though. Sanyo products have been selling out in their East Coast test market, says Steven Sherman, national sales manager for major appliances at Sanyo.
Most of the volume comes from Sanyo's room air conditioners, but Mr. Sherman hopes that in another five years, many Americans will be buying the company's split air conditioners -- the product it wants to push.
In a split air conditioner, the noisy condensor is put outside, while the evaporator is left inside. It doesn't go in a window, but instead, pipes behind the evaporator feed out to the condensor -- which can be anywhere outside. And a condensor can support more than one evaporator -- giving you cool air in more than one room. Right now, Sanyo's split air conditioners are selling between $1, 100 and $1,200 says Sherman, and dealer response is good.
The challenge is to educate the consumer about this kind of air conditioner, Sherman adds. He believes ''the split system will eventually become the major part of the market.''
Garvin is giving the US manufacturers ''a window of a year or two'' to catch up in quality if the Japanese enter the market with a full range of products. If they stick to the high end, US manufacturers may have a little more time, he says.