Hoover maker Techtronic looks to US and Vietnam for manufacturing as trade war looms and China costs rise

The Hong Kong company is adding a sixth facility at its Mississippi plant and sees Vietnam as a long-term production base

PUBLISHED : Thursday, 16 August, 2018, 9:30pm
UPDATED : Thursday, 16 August, 2018, 10:18pm

Hong Kong’s Techtronic Industries (TTI), the maker of Hoover vacuum cleaners and Milwaukee power tools, is expanding a US manufacturing site and has opened a new one in Vietnam as it looks to mitigate potential trade war tariffs and rising costs in China.

The company makes most of its products in Guangdong province, southern China, but they would fall under the tariffs on US$50 billion worth of Chinese goods announced by the US in June as part of its efforts to curb a trade deficit, and under the next potential round that the US has threatened to impose on US$200 billion worth of goods.

“We have always said we won’t want all our eggs in one basket, but have a flexible supply chain,” CEO Joe Galli told the company’s first-half earnings results briefing on Wednesday. “We believe we can offset all the potential tariff impact and will continue to have the strong results we have demonstrated.”

“While China will remain an important part of our global manufacturing platform for the next decade, we will have an accelerated ramp up in other low-cost countries, or within a market like the US,” he said.

The company will add a sixth facility at its Mississippi plant, while the new Vietnam plant will be in operation soon, it said. North America accounts for 76 per cent of TTI’s revenue, Europe makes up 16 per cent and the rest of the world 8.1 per cent, mostly from Australia and South Korea.

On Tuesday the company reported record sales for the ninth consecutive first half, at US$3.4 billion, a 19 per cent increase from the same period a year earlier.

The company also noted that it sees growth in the US, which was another factor in the decision to expand the plant there.

“Even before the topic of tariffs we were already expanding operations in the US, so we are not expanding just because of that, it was part of our plan a while back,” said vice-chairman Stephan Horst Pudwill. “You expand where growth is in the future.”

He added that setting up a plant in Vietnam had the twin advantages of keeping the company out of the trade war while offering a production base with lower costs than China. Galli added that the company planned to grow production in Vietnam significantly in the long term.

A number of Hong Kong manufacturers have been moving production to Southeast Asia recently, as costs rise in China and regulations get tougher. The US-China trade war has quickened the pace of these moves.