DESA Heating Finds Economies of Scale by Moving Manufacturing Back Home

U.S.-based manufacturer of heating products signs two-year
contract with Sheet Metal Workers' Union, leads new American-made
resurgence
BOWLING GREEN, Ky.--(Business Wire)--
Americans have gotten used to waving goodbye to U.S.-based
manufacturers that moved their operations overseas to places like
China in order to cut costs; but now American workers are starting to
roll out the welcome mat as the old trend appears to be reversing
itself, at least in some areas of manufacturing. A prime example of a
company leading this new trend is DESA Heating, which produces
consumer and professional heaters out of Bowling Green, KY. Its
two-year contract with the Sheet Metal Workers' International
Association (SMWIA) confirms it.

Over the last year DESA has begun bringing back a significant
percentage of its manufacturing from China, owing to changing tides in
the world economy.

"Three major phenomenon are primarily responsible for our decision
to bring back a lot of our manufacturing to the United States," said
Claude Hayes, president of retail heating for DESA. "That our decision
also helps the economy by creating hundreds of new jobs is icing on
the cake."

According to Hayes, the weakening of the U.S. dollar compared to
foreign currency makes DESA's exports more cost effective for buyers
abroad, particularly Canadians. That, coupled with the recent rise in
the minimum wage for Chinese workers and the spike in the cost of oil,
means manufacturing in China is no longer as economical as it once
was.

"The increase in Chinese wages were small for us on direct labor,
but taken as a whole those are huge numbers," said Hayes.

The continuing spikes in the cost of oil are making transportation
increasingly expensive, especially for larger, heavier products such
as the consumer and professional heaters that DESA produces. Hayes
said it traditionally costs $4,200 to ship a container to the U.S. and
that he expects a 25 percent increase in the near future. The already
high cost of diesel fuel is making transportation from Long Beach,
California--where most Chinese exports first land on American soil--to
Bowling Green extremely expensive.

"Last year at this time diesel fuel cost about $2.73 per gallon,"
said Hayes. "Now it's $4.05 per gallon and by the middle of summer the
price of a barrel will be $150, rising to $200 before the end of the
year."

Thanks to its centralized location, Hayes said DESA is poised to
ride out the summer spike in fuel costs. But that's not the only
benefit of manufacturing back home. The company now can ship products
to over half of the United States in about one day. The average amount
of time to ship from China is six to eight weeks.

"From our location we can reach 65 to 70 percent of the United
States in 12 hours," he said. "That's tremendous for distribution
because we are much closer to our retailers. If a buyer needs stock
immediately, we can get it to them fast."

Looking beyond the horizon

From past experience, DESA anticipated it would have to make major
changes about a year ago when executives at the company noticed a
confluence of the economic factors mentioned by Hayes.

"This happened once before in the early 80s," he said. "We knew
what we were seeing a year ago and made changes in anticipation. We
looked at every function and we streamlined. We even made some great
new hires."

With much of its manufacturing now taking place in the U.S., DESA
recently wrapped up an agreement with the SMWIA to use their logo on
DESA products.

"The Sheet Metal Workers' International Association's commitment
to quality is well-known," said Hayes. "We're excited to grow our
relationship with them and have their logo on our products."

Despite the current sluggish economy, the prescient moves made by
DESA gives Hayes confidence that the rest of this year and next year
will be successful for the company.

"In our line of business, to stay competitive and be successful
you have to do more than anticipate the heating needs of the end users
and engineer heating solutions for them," said Hayes. "You also have
to anticipate future economic trends to make the bold business
decisions necessary to stay in the game and remain healthy and
competitive while meeting consumers' needs."

About DESA LLC Heating Division

DESA LLC Heating Division is based in Bowling Green, Kentucky and
manufactures heating products for consumers and professional markets
in the United States and abroad. DESA's heating brands--which include
Reddy Heater, Master, Vanguard, All-Pro, Outdoor Leisure, GloWarm, and
Comfort Glow--are designed to serve a wide variety of heating needs
from homeowners, contractors and outdoor enthusiasts.

for DESA LLC Heating Division
Zak Mazur
414-727-8731
zak@caffeinecomm.com

Copyright Business Wire 2008