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Engineered Systems: Mike, I was privileged to attend the Daikin Group Sales Meeting in October of 2019, where more than 1,300 reps met to see the company’s latest and greatest innovations. What’s occurred with the company between now and then?
Mike Schwartz: The business has evolved quite a bit. You can see that with a lot of the new platforms we have right here on the AHR Expo floor. We continue to concentrate on the continuation of new products with our new technology embedded with the IoT, which, for the most part, is included on all of our new platforms. We also made the announcement regarding the use of new, lower-GWP refrigerants in our equipment, and a great example of that would be with our chillers. These units will be compatible with R-32 as will our new large rebels. So, we’re focused on our product-related developments that are really pushing the envelope.
Engineered Systems: Where are you at regarding the release of the Rebel Applied Rooftop unit?
Schwartz: We’re at phase one of the release, and our plan is to introduce it in phases. We started with 30-50 tons, and the reaction, thus far, has been great. We’re focused on producing them faster and we’ve had to ramp up our production schedule because we’re completely outsold in the short term. So, we're challenging the production team to see what we can do to increase the output of that.
Engineered Systems: Daikin Applied recently added a level of connectivity to its chillers. Can you provide an update?
Schwartz: Absolutely. We started implementing our Intelligent Equipment strategy back with our rooftop product line. Now, it's evolved, and it's on all of our air-cooled chillers. It is scheduled to be on all of our water-cooled chillers by the end of this year. So, all of our major platforms will soon be wireless, capable, and Intelligent Equipment-embedded. We’re offering inherent analytics that we think are second-to-none in the industry.
Engineered Systems: The industry as a whole is faced with various legislative and regulatory challenges. Can you mention some of the most pressing for Daikin Applied?
Schwartz: Yeah, there are certainly some big, big challenges there. For example, look at California with the CARB [California Air Resources Board] legislation; they’ve kind of driven a stake in the ground. But what hasn't followed suit is the building codes, right? So, CARB is mandating lower-GWP refrigerants, but they don't have building codes that can support them. We're working with CARB, and we're working with some of the other NGOs [non-governmental organizations] to say, look, we can't operate in silos on this. It's got to be a concerted effort to educate the regulators and then get the codes up to speed. Otherwise, we're going to have to make some changes in direction if it's not done in a timely manner. They’ve put the cart ahead of the horse, so to speak.
Engineered Systems: And, of course, there is a lot of regulatory uncertainty regarding the refrigerant landscape, though it seems you guys are kind creating your own solutions there.
Schwartz: Yeah, we are. Last September, we announced R-32 as a replacement for R-410A. We believe data proves it's the best -410A alternative in terms of its efficiency, lower charge, and smaller footprint. So, it's a great story to share with the market. Additionally, I think there is a lack of understanding on this A2L flammability issue. How volatile is it? I think there's a lot of misinformation out there. Right now, we're trying to get the right information.
Engineered Systems: Is R-32 being widely accepted throughout the industry?
Schwartz: it's still early, and we're early in the process. Again, the fact remains that the codes haven’t been modified to accept these refrigerants. We're trying to educate as many people as we can and help them understand the benefits before we go and introduce all these products.
Engineered Systems: At the DGSM, Daikin alluded to a move toward a more manufacturer-direct model. Can you update us on that?
Schwartz: We are. We're not aiming to isolate our sales partners because that's not the intent, but we feel we can put more expertise and focus into facing the client. We believe we've got a more effective story to tell that customers can understand and really appreciate. We have to examine the value proposition that we're offering, and it's all about an increase in efficiency. It’s about part load, full load, inner-connectivity, having access to valuable data, and the ability to manage your assets. If you're going to invest $500,000 into a chiller, you surely want to know it’s operating properly. If you have a problem, you want to know what it is. We feel this is a big opportunity for us.
Engineered Systems: What are Daikin’s most pressing short- and long-term goals?
Schwartz: We've got a lot of investments that are going on. We just built a new plant to support the Rebel Applied product. We're putting over $55 million in our new R&D center in Minneapolis. We’re focused on getting all those investments active and working, particularly on the lab side, because those facilities are critical to support all the new low-GWP refrigerant strategies of the future. We need those facilities to be able to support those expansions.
Engineered Systems: Are expansions occurring at the Daikin Texas Technology Park (DTTP) as well?
Schwartz: They've gone through an office expansion there. We’re also further consolidating some of the people from other sites.
Engineered Systems: Five years from now, what will we be seeing from Daikin on this expo floor that we’re not seeing now?
Schwartz: That’s a great question. If I told you, I might have to hurt you [laughter].
I think we’re obviously going to see the maturation of this whole new lower GWP environment, and it will be interesting to see where that goes. I think you're also going to see a whole different level of IoT wireless capabilities. We think we're kind of on the front end of that, but it's going to be much more mature five years from now. And there could be a few other interesting new products, but we’re not quite ready to talk about those yet.
Engineered Systems: Final question… Our audience at Engineered Systems primarily consists of consulting and specifying engineers. If you could leave them with one thought from this interview, what would that be?
Schwartz: Daikin is on the forefront when it comes to investing in new technology. We’re focused on providing better outcomes for building owners and operators. We believe that providing a better environment inside the building has huge benefits in terms of efficiency for schools, test scores, and all things related to the indoor environment. So, the message we would give to them is, look, if you really want to ultimately satisfy your clients with better outcomes, then we should be talking with one another.