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Mr. Kosei Uematsu
CEO of Daikin U.S. Corporation

We interviewed Mr. Kosei Uematsu, CEO of Daikin U.S. Corporation, about the company's business strategy in the U.S. Mr. Uematsu has been CEO for the past 5 years.

Achieving true global excellence and aiming for active contribution to global environmental issues

Daikin is a worldwide air conditioning equipment manufacturer with markets in Japan and other Asian countries and in Europe. Twice in the past, Daikin made efforts to expand its business to the United States, but was unable to do so as planned. Then, in 2005, the company established a sales office for Daikin products in Texas, and in 2006, acquired one of a major U.S. AC equipment manufacturer, McQuay, building momentum for expanding into the U.S. AC equipment market. The U.S. AC market has over a 100-year history since Dr. Carrier invented the world's first air conditioner.

Daikin's Applied Development Center in Minnesota

Encounter with McQuay: "Three strikes and you're out”

Q. We understand that it was difficult to expand your business into the U.S. AC market.

A. You could say it was almost like "Three strikes and you're out.” Twice in the past, we tried to expand our business into the U.S. AC market, once in the 1980s and a second time in the 1990s, but were not very successful. This is our third attempt, and we are trying hard to make this a successful effort to expand business into the U.S. market.

In the 1980s, we tried to market ductless room air conditioning units and package AC units, which were popular in Japan, but it was not easy to sell such types of AC equipment that were not familiar to Americans. In addition, we were affected by the appreciating yen following the Plaza Accord, and were forced to pull out of the market. In the 1990s, we tried again, by establishing a joint venture with a U.S. company to market high-performance rooftop AC units, but since it was a niche market for high price products, the business did not really take off.

In the 2000s, however, we felt that the American market was gradually changing. That is, people began to look for features such as energy conservation, comfort, and silence in AC units, and these are the things that Daikin does the best. So we decided to establish a sales office in Dallas, Texas, to try again to break into the market. With a major U.S. AC manufacturer, McQuay, as our partner, our business in the U.S. market is finally taking off.

As for business strategies in the U.S., we believe it is important to create the demand for and increase the sales of ductless units and VRV systems (multi systems for commercial buildings), which are Daikin's strength, as well as to increase the volume of large AC units, which are McQuay's leading products, and to provide our customers with not only equipment, but also systems and suggestions for energy-saving solutions.

Q. Has this recession made expansion of your business in the U.S. difficult?

A. It is true that the U.S. AC industry in general is not performing well. However, we do feel that the American society's interest in environment and energy conservation has definitely heightened under the Obama administration. There is a plan to change the industrial structure into one that emphasizes more energy conservation and other environmental aspects. Also, the need for energy conservation in buildings is definitely growing. This is not only for new buildings. There is a movement to promote renovation of existing buildings for energy conservation.

When you look at energy consumption in a building, air conditioning and hot water supply account for over half of total energy consumption. Energy-saving technology is the strength of Daikin's air conditioning equipment. In 2008, Daikin established a product development facility called the Applied Development Center in Minnesota, to develop new products, applying Daikin's excellent energy-saving technologies to McQuay products. Our goal is to create attractive products that can withstand economic recession.

Promoting energy conservation in American society with heat pump and inverter control technologies

Q. What are the specific energy-saving technologies that you use?

A. They are high-efficiency heat pump technology and inverter control technology.

Heat pump technology, which heats the room by recovering heat from the air, is a very efficient energy-saving technology. It can produce more than three times the heat (energy) than the energy used. In Europe, heat pump technology is recognized as an excellent renewable energy, since it uses heat recovered from the air. Compared to equipment that recovers heat by simply burning fuel, heat pumps have a much greater advantage in energy conservation, and also contribute to lower environmental impact.

Inverter control technology is used in almost 100% of all RAC equipment in Japan, but it is rarely used in the United States. This technology can save a lot of energy through smooth control of AC equipment. Just by introducing the inverter control technology to AC equipment, you can save energy by as much as 30%. And, the increase in cost is limited. We want to contribute to the development of the U.S. AC market, by introducing these excellent technologies.

By using heat pump and inverter technologies, you can save energy without sacrificing consumers' comfort. It is like hybrid automobiles. Hybrid cars save energy without sacrificing their function and comfort as automobiles, and the users may not even be aware of that energy-saving process.

If AC units with heat pump technology and inverter technology become popular in American society, we can promote energy conservation and CO2 reduction, without sacrificing consumers' comfort. Daikin's heat pump system, called Altherma, applies the heat pump technology to heating, and can greatly contribute to energy-savings and CO2 reduction. We would like to introduce this heat pump system to the U.S. market, too. We are working to create a new market, so that American society will accept AC equipment. We would also like to contribute to energy conservation in American society that Americans are not familiar with yet.

Q. Are you planning more partnerships with American companies in the future?

A. We wish to participate fully in the residential AC market, too. However, the world of residential AC is rooted in the American way of life. Therefore, we think it is important to approach business in a way that fits the American market. Daikin's AC products using heat pump and inverter technologies can definitely conserve energy in American homes, without adversely affecting the American way of life. We would like to deepen our relationships with American companies that support our products and philosophy.

We also believe that distribution strategy is very important in order to increase the visibility of our excellent AC equipment. However, it takes time to be accepted in a distribution system, since American business practices and personal relationships play an important role in the distribution of AC equipment. We plan to take our time in forming partnerships with American companies and establishing our own distribution methods, so that our energy-saving AC products will become popular in American society.