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RHEEM WATER HEATING


NUMBER OF EMPLOYEES

1,200-plus

PRODUCTS
Water heaters and heating products

LOCATIONS
Three in Montgomery with a combined 700,000-plus square feet

INVESTOR PROFILES

RHEEM WATER HEATING

GETTING INTO HOT WATER

Rheem Water Heating develops, designs and manufactures products in Montgomery

Summer 2012

By David Zaslawsky

Photography by Robert Fouts

Rheem Water Heating is one of the larger companies in Montgomery and is well known in these circles.

Most people know that Rheem manufactures water heaters. Fewer people may know that Rheem supplies 100 percent of Home Depot’s water heaters and 100 percent of the water heaters for Menard’s, which is a home improvement chain in the Midwest.

Even fewer people may know that Rheem has invested $25 million the past five years in Alabama, including $7 million of that total just last year. Rheem is also planning to spend millions more in the future.

It is not widespread knowledge that Rheem designs and develops its products here and even designs its own manufacturing equipment right here in Montgomery.

There are an estimated 100 to 150 employees in the research and development division in Montgomery, according to Peter Reynolds, vice president and general manager of Rheem Water Heating.

“For other companies, R&D is being done in India or China so they don’t have the ready access to the engineers who are making design decisions,” Reynolds said. “It makes us more efficient; it helps us stay connected; and it also helps us to understand the opportunities.”

Just last year the company won a prestigious industry award for its Rheem XR90 gas water heater that was designed, developed and manufactured in Montgomery. The company also has two manufacturing plants in Mexico.

The award-winning 29-gallon water heater is faster and more efficient than the standard 50-gallon unit and costs 17 percent less to operate annually. It fits any place that has an existing 30-, 40- or 50-gallon water heater. The new unit delivers more hot water and heats the water faster than standard units and Reynolds can vouch for it.

“This product was one that I was so impressed with that I put the first one that came off the assembly line in my house,” Reynolds said. “I was a perfect candidate for it because while I’m not a plumber, I am the son of a plumber and I was able to do 90 percent of the (installation) myself.”

He did call a contractor to inspect his work and wanted to get feedback for the engineers.

Now, the company will offer a new product between June and September. Reynolds said the unit is not only new to Rheem, but new to the industry. He said the company spent $6 million on the project last year and this year.

“It will be the most energy-efficient of its type in the market,” Reynolds said, “and built right here in Montgomery; designed in Montgomery by our engineers; and very much a key part of our long-term plan to continue to invest in this plant for the next generation of consumers. Energy efficiency is something we embrace.”

Products such as those help make the company successful, but “continuity of vision” is the key, according to Reynolds. He said that Rheem has been in Montgomery for 40 years and the division head office has been in Montgomery for a little more than 20 years. “We then brought all our brain power that runs the water heating division in one place in Montgomery. We most recently established our customer care center – a standalone call center just off of Carmichael.

“Having all of our assets here – all three of those key disciplines, which are division head office; sales and marketing; our customer care capability; engineering; research and development; plus a very well-established manufacturing footprint – is probably the key to our success.”

He credits the growth of the business organically – as opposed to buying other companies – as another factor in Rheem’s success. “We grew our business from the ground up as Rheem for over 100 years making water-heating products,” Reynolds said. “We haven’t had to integrate secondary manufacturing or other companies to do it.”

Reynolds said that the success of being Home Depot’s lone water heater supplier “is the biggest single event in the most recent 20- to 30-year history of Rheem that made us who we are today.”

There is no inventory kept to fill orders for Home Depot – for the thousands of stores it has other than a day’s production at best. “Our commitment to Home Depot is receipt of order to receipt of goods is 10 days,” Reynolds said. “Typically, from the day we get the order, we are building it and putting it on a truck within three days.”

Those water heaters are being built in Montgomery and at the company’s two plants in Mexico.

“We keep our investments where they are most advantageous,” Reynolds said, “and tying up our dollars in raw material or work in process doesn’t help our customers. It doesn’t help us because it just ties up capital. We would rather tie up our capital in plant, people and equipment that can help generate income.”