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To Expand or Not To Expand:
An OEM Discusses The Issues
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 REpower U.S. Wind Farm
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Russ Germick is the Strategic Sourcing Manager for REpower, a Germany-based wind turbine OEM that has been very aggressively pursuing growth in the North American market. Russ spoke with us from REpower's Portland, Oregon office.
GLWN: Tell me about your current role at REpower.
Germick: As REpower evaluates the opportunity for domestic production, I'm focused on determining if there is an adequate supply chain to satisfy the needs of a North American production facility.
GLWN: And what are you finding?
Germick: The fundamentals are in place, but the expertise needs to be developed. Overall, we have the resources, the skills, and the capacity, but the development of the North American wind energy supply chains are very immature. There's a lot of work needed for domestic manufacturers to be able to compete in performance and price with what's coming out of Europe.
GLWN: Why do think that is?
Germick: The components themselves aren't that unique or difficult to produce, but there are significant differences between what's needed for wind compared to the products that are currently being produced for other industries. Time is going to be required for re-tooling and adapting our skills to these new applications, and for retraining to make components that are specific to the demands of the wind turbine industry.
GLWN: Can you give some examples?
Germick: Probably the biggest hurdle is the size of the components, especially for forges and foundries, to be capable of making parts for wind. New capital equipment is going to be needed.
GLWN: What else?
Germick: Next, wind requires much lower volume production that other industries, such as automotive. These two industries are almost opposite, with wind needing large parts at small volumes, and auto vice versa. Operationally, there are additional differences in the requirements for working capital, inventories, and raw materials supplies. Wind component manufacturing really requires a different business model than many companies are used to.
GLWN: What are some of the biggest challenges faced by a company like REpower in considering expanding operations to another continent?
Germick: A big one is the volatility of the market. The support from the U.S. government is not as consistent for wind energy as it is for fossil fuels. It's difficult for a business to commit to investing in a wind energy facility when the federal government won't make a similar policy commitment.
GLWN: But hasn't that changed in the last few months?
Germick: Yes, the passage of the Stimulus Act in February creates an improvement, because the Production Tax Credit is now in force through 2012. But from an investment standpoint, that timeframe is very short, which makes it difficult to justify the business case for the long-term investment required for a production plant.
GLWN: Speaking of new plants, what factors go into the selection of a plant site, and which comes first, the plant site or the supply chain?
Germick: They do come simultaneously. Regarding supply chain, quality is the #1 requirement. Without that a supplier gets no consideration. The high costs of replacement and repair of our components demand it. Right after that is transportation, because so much of what we do is logistics-sensitive. But probably the biggest impact on the site selection decision will be our projections of where the market for turbine sales will be.
GLWN: How will you determine that?
Germick: It's difficult, because most of North America with the exception of the U.S. Southeast, has good winds. It may be that we'll look for a central location to cost-effectively serve as much of the market as possible.
GLWN: If you were the president of a manufacturing company seeking to enter the wind industry as a supplier, what steps would you take?
Germick: That's a good question. To shorten the learning curve, I might partner with a European supplier that makes a similar product to what I want to produce. Here's why: the costs of component failure are high for OEMs, and there's often a reluctance to try someone new. So, there might be significant value for a manufacturer to partner with someone who is already known.
GLWN: Last question. What's the most surprising thing about the business of being an OEM that most people might not know?
Germick: It's that we're just another link in the supply chain. If we can't sell a wind turbine, we're not able to buy nuts, bolts, gears, etc. We're just another step along the way.
GLWN Announces New Field Services Director
The Great Lakes WIND Network has named Dale Reckman Director of Field Services, a new position created to support the network's expanding.
In this position, Dale will be responsible for developing the manufacturing capabilities of emerging wind-energy supply chain companies through onsite profiles, coaching, and referrals. He will continue to refine the network's assessment process.
"Dale's ability to build and sustain strong, productive relationships with OEMs, manufacturers, and other industry groups will benefit our organization and the companies registered with us," said Ed Weston, director of WIRE-Net's Great Lakes WIND Network. "Dale's high level of expertise and leadership will enhance our efforts to foster business expansion, investment, and new jobs in the global wind energy supply chain.
A seasoned manufacturing executive with extensive experience in the wind industry, Reckman brings to GLWN more than 25 years in operations, engineering and product development, estimating, sales and project management, procurement, and supply chain management.
Dale Reckman and his family live in the Cincinnati area. He can be reached at 513.497.5214.
Wind Means New Business for Wodin
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 Wodin shop forging wind turbine-size shafts.
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Penetrating new markets is a timely business strategy in this downturn, but it's nothing new to Wodin, Inc, a 40-year old producer of forged components. President Grant Murphy has been working to steer his company into the wind industry for several years, and this past month they achieved a major corporate goal with the announcement of his contract to provide main shafts for Northern Power, America's premier manufacturer of commercial-scale wind turbines.
"We're a forging job shop of 36 employees capable of small-to-medium sized runs, and this new order gives us the opportunity to expand employment," Murphy explained. "Wind enables us to be far more balanced between the industries we serve." Those currently include military, oil, and diesel electrical generators.
Operating in Bedford, Ohio, Wodin is an upset forge house specializing in shaft-type forgings from ½ to 7 inches in diameter and up to 1000 pounds. In addition to a variety of presses, it operates its own machine shop, including two Okuma machine tools, a Colchester CNC lathe, and a Mustang CNC mill.
As a result of this new order, Wodin has purchased a new forging furnace which will be installed later in July. Other recent investments realized include ISO 9001:2000 quality certification last year, as well as the AS 9100B certification, similar to ISO 9001 but oriented to aircraft industry requirements.
If your company is entering the wind supply chain and you would like to be featured in upcoming newsletters, please contact Mari-Elen Sammon at 216.588.1440 ext. 121.
GLWN Economic Survey
Great Lakes WIND Network is conducting an economic survey of member companies in July to identify current business trends among wind industry manufacturers. Information received back is confidential and will be reported only in aggregate, so participating companies and their individual responses will not be identified.
Copies of the report will be available upon request, and a summary of our findings will be featured in a future GLWNews.
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