HVAC Residential Market

Daikin, Goodman Executives Discuss Acquisition

HOUSTON — An acquisition that brings together two of the world’s strongest players in the global HVAC marketplace — exactly what does that mean?

During the press conference held by Takeshi Ebisu, Daikin senior executive officer, and Dave Swift, Goodman Global Group Inc. president and CEO, the answer was simple.

“In one word, complementary,” said Swift. “If you think about it, Daikin is a $14.5 billion company with relatively little presence in the United States. On the flip side, Goodman is a $2 billion company, with hardly anything outside of North America. So, we are very complementary with our business footprints,” said Swift.

On Aug. 29, Daikin Industries announced that it had a signed a definitive agreement to acquire Goodman Global Group Inc. from affiliates of Hellman & Friedman LLC for $3.7 billion. On Nov. 7, the two companies were in a position to hold their first joint press conference on the subject. The acquisition officially closed on Nov. 1.

Ebisu said through an interpreter that during the acquisition courtship and exploration, Daikin was most interested in Goodman’s strong management team. “Over a longer horizon we believe that Goodman’s business management style is very responsive and flexible, and we really respect it. It is, perhaps, the foundation in terms of their world-class manufacturing production capabilities, highly managed global supply chain system, and the outstanding distribution network that has made Goodman a success in the HVAC marketplace. Daikin would like to introduce this same knowledge to the Daikin group operations in Europe, Japan, and the rest of the world.”

Swift said, “We are very excited about the attitude that Daikin had in terms of wanting the Goodman team to help not only run operations here, but also to take some of our expertise and approaches, that Mr. Ebisu was describing, and seed that in other parts of the world.”

“From a Goodman point of view we see the opportunity to get access to terrific Daikin engineering and product technology. Daikin gives us the opportunity to take leadership technology from around the world and infuse it with Goodman’s lean manufacturing capabilities,” added Swift.

In addition to admiring the Goodman management style, an environmental focus connected the two companies. “In America people are getting a stronger awareness of the environment. That is a very key word for Daikin because our technologies and our business strategies offer energy saving solutions, through high efficiency HVAC systems. We have been doing this successfully in Europe and the rest of the world, and now we see that opportunity developing in America,” said Ebisu.

Mixing Cultures

Daikin published a booklet in 2002 called “Our Group Philosophy,” which depicts the fundamental mindset of company management which all employees are encouraged to hold in common. The group philosophy is comprised of 10 points, which are concisely defined. Swift said that he had been very impressed with the company’s focus on people, which is also stressed in the Daikin philosophy.

“I think most Americans have perceptions that Asian-based companies are somewhat selfless and there is not a lot of focus on people. What struck me about Daikin is that they will do things to reach out to the people of those communities in which they have operations. For example, they will conduct frequent festivals in those communities, and have even done so here in the United States in order to share the richness of Japanese culture.

“That was one of the things that impressed me in terms of their forward thinking, and led me to believe that there was a high degree of compatibility between our companies,” said Swift.

Daikin chairman and CEO Noriyuki Inoue wrote a book in 2008, A Commitment To People-Centered Management, that further explains the premises that Swift talked about. The book stemmed from a series of articles Inoue had written for a daily newspaper column. According to Ebisu, Inoue has been implementing and executing this successful people-centered management for years.

“In Daikin we value people very much and we place people at the very front — at the top — when we think of anything. So, we have dedicated many pages in “The Group Philosophy” booklet to explain our philosophy regarding people-centered management. We wanted to explain Daikin’s traditional philosophy and thinking in a manner so that anyone in the world can understand,” said Ebisu.

More to Come

Regarding contractor perceptions, and potential changes in market channel strategies, Ebisu and Swift both suggested that the marriage of the two companies was indeed a process that is ongoing. In fact, as of the date of the press conference, the two companies had only been allowed to begin comingling discussions four days prior.

Swift said, “Tomorrow [Nov. 8] is the start of a regular meeting with independent distributors to discuss plans for the coming years. The following day we have internal working sessions planned to maximize the combined strengths that the two companies can offer. We want to make sure that legacy distributors, both Daikin and Goodman, have an opportunity to benefit from this acquisition.

“Not every single distributor or contractor is going to be well-suited to carry the full range of products and systems. Just as today there are many contractors that may not participate with the full breadth of our Goodman and Amana brand lines, similarly, there will be some contractors that won’t have an interest in all the high-efficiency solutions. But, our goal is that as we communicate the benefits of high-efficiency products and systems, we will get a majority of distributors and dealers to increase their current level of interest.”

Swift also said that a lot of the technology that Daikin has today can be easily integrated into the existing portfolio of Goodman and Amana brand products. Three years ago Goodman began making an air handler for Daikin by using its own technology to create a component that could be used in variable refrigerant volume (VRV) Daikin systems.

“Even three years ago we were able to identify some things that we could leverage fairly easily. It is now time for us to envision how technologies can be married in a way that can be a potential game changer for the way builders and homeowners think about split systems today in the United States,” said Swift.

Ebisu said the plan for the immediate future is to utilize the existing manufacturing operations of Goodman. “Our aim is to grow our business, and to be firmly rooted and anchored here in the American market. In order to do that we believe it is important that we increase the employment of the local people and contribute to the local community as we achieve our business goals.”

“As Mr. Ebisu has just described, there is a potential to create more manufacturing jobs in the United States because of the product technology that we are moving from Asia. That is really a very positive message; the governing officials in the areas where have our plants, Tennessee and Texas, are quite excited about that,” said Swift.

For more information about the Daikin and Goodman discussions, go to www.goodmanmfg.com or www.daikin.com.

Publication date: 11/30/2012

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