In its first manufacturing move outside of the United States, Life Fitness has entered an agreement with a Hungarian metal fabricator to begin production for the company, initially on its new Signature strength line.
â€œShipping steel outside of a U.S.-based plant is a long, arduous process,â€ Life Fitness President Kevin Grodzki told SNEWS about the decision that was two years in the making. â€œThe time on the water was time-consuming and expensive.
â€œThis also gives us the opportunity to get closer to our (growing European) marketplace and to serve it better and be competitive,â€ he added, noting that 40 percent of the company's business is now outside of the United States with most of that in Europe.
Protokon, based in Kiskoros, Hungary, began construction of a 25,000-square-foot addition to its current plant a few weeks ago and is expected to begin manufacturing the 18-piece Signature selectorized strength line by about the third quarter of this year. The company will hire approximately 30 Hungarian employees and a local manager, Grodzki said from Germany after attending the FIBO show there.
He will head to Hungary for a local press conference May 6, to be attended not only by Hungarian press but also by European media such as the Financial Times, he said. â€œThe investment in Hungary is a big thing,â€ he said. â€œI've already been contacted by the Hungarian ambassador.â€
When Grodzki arrived at Life Fitness some two years ago, he began the search to move some manufacturing outside the United States, but he said the company found the supply chain in other countries wasn't as advanced or mature as Life Fitness wanted to guarantee its quality standards. So Life Fitness instead focused on grooming suppliers.
â€œWe knew what the end game was -- to establish a manufacturing presence on the European continent,â€ he said, and Eastern Europe became the focus about a year ago, with searches through the likes of Croatia and Poland.
â€œThere is a growing entrepreneurial spirit among the people (in Eastern Europe), and that's very exciting,â€ he said. Protokon, he said, is a â€œsmall but progressive companyâ€ with advanced paint lines and technologies, such as laser equipment, that can ensure Life Fitness maintains its quality and keeps lead times short.
Late last month, Life Fitness also announced it was closing its Paso Robles, Calif., facility -- laying off 158 employees but giving them the opportunity to apply for openings at its other facilities in Ramsey, Minn.; Franklin Park, Ill.; or Falmouth, Ky.
With the company's first step outside of the United States now done, Grodzki says that additional steps are not out of the question. Although not searching yet, he said he would expect to add cardio equipment manufacturing, perhaps also in Eastern Europe, by about 2005.
SNEWS View: Maintaining strictly U.S.-based manufacturing is an expensive proposition these days. Flag-waving may be politically correct, but it may not always bolster the bottom line, and without a bottom line there may be no business. Having visited some Eastern European countries as well as having seen some manufacturing there, it is clear to SNEWS those areas are advancing quickly and do have an educated and disciplined workforce --- but still one that can mean lower costs for U.S. companies while being more â€œwesternizedâ€ than some Asian areas and yet closer to Europe for better management and shipping. In fact, there is a regular commute going on these days between central Europe, such as Italy and Germany, to Eastern Europe, such as Romania and Hungary, with small commuter airlines expanding as quickly as they can to accommodate all the business. But as those countries advance toward full European Union membership -- many are today called â€œcandidate membersâ€ -- the cost of doing business there will also go up since part of that EU membership hinges on increased salaries, advanced economic situations, employment, and the introduction of the Euro as currency. That means that U.S. and Western European countries that get in now have a better chance of establishing facilities, setting up networks, and training staff to be able to maintain some lower overhead down the road. Life Fitness may be dinged by a few for its non-U.S. move, but it makes all-around sense from an economic standpoint.