Baldor Program Pays for Itself

Baldor Electric Co. officials have always prided themselves on the energy-efficient motors produced at the company’s plants worldwide and at its headquarters in Fort Smith. But as rising energy costs began to threaten unit pricing and Baldor’s bottom line, company officials decided to make their own process more energy-efficient as well.r

All told, the company decided to invest $1.5 million over three years in energy conservation methods — an investment that already has more than paid for itself.r

In mid-2000, the company re-evaluated the $4 million it spent in 1999 on electricity and examined projections that the costs were increasing dramatically at Baldor’s foreign and domestic plants and offices.r

“We decided at that time we needed to get this under control,” Baldor President and CEO John McFarland said. “And unless we could get a handle on it, [our energy bills were] going to be $7.5 million that year.”r

Instead, Baldor’s electricity bill for 2000 was slightly more than $3.6 million. Three years later, the projected total electric cost for 2003 is less than $2.8 million.r

To head the cost-reduction project, Baldor chose its financial point man, Ed Ralston, who serves as the company’s director of audit services.r

After first studying the company’s energy needs and usage, Ralston asked employees to suggest ways to minimize energy waste. The suggestions poured in — from motion detecting lights in rooms that were often vacant to solar panels.r

Ralston thanked each employee and considered each suggestion on its merits to conserve energy. Some of these were actually implemented, such as putting motion detectors on restroom lighting and the simple request that employees turn off all computers and fans before leaving for the day.r

Its Own Mediciner

But Ralston admits that these cost-cutting methods were just drops in the bucket of actual energy consumption at Baldor facilities. The real cost came from its 13 U.S. manufacturing facilities, including seven in Arkansas.r

Electricity alone represented $2 of the cost of manufacturing each of the 2.5 million motors Baldor produced in 2000. The manufacturing process accounted for two-thirds of the company’s electric bills.r

Ironically, Baldor was using not-so-efficient machines to produce the highly efficient motors it sells to customers, McFarland said.r

“A lot of people think electricity is not a controllable expense, but you can control the cost of electricity with higher-efficiency motors and drives,” he said.r

Recognizing this, Baldor spent $200,000 to replace hundreds of its production motors.r

“We’re putting our money were our mouth is,” Ralston said of the company’s sales pitch for efficient motors.r

Since the remaining one-third of Baldor’s electric bill came from the cost of lighting, Ralston met with consultants from American Lighting in Fort Smith about energy-efficient lighting options.r

In 2001, Baldor spent $1.3 million to replace hundreds of overhead lighting units with a new fluorescent technology that produces twice as much light using less than half as much energy, Ralston said. The old ballasts each consumed 450 kilowatts an hour. The replacements, which consist of a metal reflector and six bulbs, use only 180 kilowatts an hour.r

And since the new bulbs last 50 percent longer, Ralston said maintenance crews now spend more time solving real problems and less time replacing light bulbs. Even if up to three of the six bulbs in each unit burn out, the lighting is sufficient to continue operating. It will be three years before all newly installed bulbs must be replaced, he said.r

Many of these units in the warehouses also are connected to motion sensors.r

The third major piece of Baldor’s energy cost-control program may be viable only to those manufacturing companies operating within electric cooperative boundaries, Ralston said, since co-ops are more likely to make deals with manufacturers because they are less likely to produce their own power.r

Because Baldor’s Westville, Okla., plant has some of the highest energy bills, company officials teamed up with an electric cooperative in Oklahoma to reduce costs by installing “peak shaving” generators.r

The partnership has resulted in an easy cost-saving model for other manufacturing companies.r

For two months in the summer, Baldor production switched to generator-produced electricity for five hours a day, reducing the strain on the electric company during peak hours, Ralston said. During this time, about half of all processes inside the plant, including air conditioning, are run off generators that use diesel fuel.r

“Peak shaving” saved the company more than $100,000 over the course of a year, Ralston said. In exchange for running at about half of its normal energy level, Baldor received a lower electric rate from the co-op.r

“Why in the world would you spend this money if you didn’t have to?” Ralston asked.r

“There’s a lot of opportunities for companies to save. There’s some really big things you can do to reduce your energy costs if you just address them,” Ralston said.r

Companies nationwide could benefit by restructuring their energy programs, helping them keep pace with competition.r

“There’s no downside to using less electricity and natural gas,” said McFarland. “Wasting money on electricity doesn’t secure our jobs and our future.”r

By implementing these three energy-reducing and cost-cutting strategies, Baldor expects to spend 40 cents less per motor on energy in 2003, increasing earnings per share and offsetting other cost increases in materials or labor. The price of energy is at a 20-year high, Ralston said.r

“It’s more and more important to manufacturing companies like ours and others in the state to find ways to save energy,” McFarland said.r

Baldor is just one of a couple dozen Arkansas companies that have earned entry into the federal government’s Energy Star program. r

Baldor had previously earned the designation for its efficient motors but made the commitment to strive for total production efficiency.r

McFarland said the partnership will allow his and companies like his to share cost-cutting ideas and implement new programs.r

“Even though we’ve done a lot, there’s still a lot more that we can do. We can’t give up yet,” he said.r