ONAN'S PHYSICAL FACILITIES
Nothing demonstrates the dramatic growth of the
Onan company more than the startling changes in its physical plants during the
past 60 years.
From D. W. Onan's
basement to a converted garage to a converted barn to a converted house to a
sprawling hodge-podge of less - than-efficient industrial buildings used during
World War II, Onan's operations are finally located in a series of
strategically located, modern manufacturing facilities. After nearly a half
century of occupying plants that originally were built for other purposes and
adapted as best could be for Onan's use, most of the company's facilities today
were specifically designed for its operations.
Onan currently occupies more than a dozen buildings
in the Twin Cities, Huntsville, Alabama, and San Diego, California, with total
floor space of 1,563,600 square feet.
The company also has leased field offices in Ft. Lauderdale, Florida;
London, England; Dubai, United Arab Emirates; and Singapore.
Onan's largest facility is in Fridley, a northern
suburb of Minneapolis. In the mid 1960s, after more than 20 years in its
University Avenue plant in Minneapolis, Onan management decided a new, modern
facility was needed to keep up with anticipated growth. A 147-acre site in Fridley was purchased in
1967. Constructed on the site at Central Avenue and 73rd Avenue Northeast, were
a manufacturing plant of 473,600 square feet, a three-story office building of
85,000 square feet and an engineering building of 66,000 square feet. The new headquarters plant was fully occupied
By then the Onan company was one of the world's
largest manufacturers of electric generator sets, having produced more than a
million units since its founding, and it was operating out of the most
efficient generator set facility in the world.
Only slightly smaller than the Fridley facility is
Onans ' s manufacturing plant at Huntsville, constructed in 1974. Located on 90 acres of land adjacent to the
Huntsville-Madison County Airport, the $20 million installation was primarily
designed originally to manufacture generator sets for recreational
vehicles. Since then Onan has turned the
facility into an engine plant by investing another $100 million in equipment
and increased warehouse space for the production of Onan's L Series family of
Onan's third manufacturing facility is in San
Diego, operated by a subsidiary, Elgar Corporation, acquired in 1979. Elgar, which occupies five buildings in the
Kearney Mesa area in San Diego, produces AC power conditioning equipment and
uninterruptible power systems. Most of
Elgar's products are designed to correct power variations, voltage drops, line
noises and other problems that can plague sensitive electronic equipment. Elgar manufactures high isolation
transformers to eliminate common power problems, precision AC line conditioners
for laboratory and instrumentation applications, and power regulators for
computer and high technology loads. Its
uninterruptible power systems protect against the effects of brownouts and
blackouts on sensitive electronic gear such as computers and process
controllers, and, when installed in conjunction with emergency standby power
generator sets, provide power during the interim period between when a power
outage occurs and when the standby generator
set (s) starts and reaches operating RPM and frequency.
Other buildings owned or leased by Onan in
Minneapolis and Huntsville provide various support functions for the company's
manufacturing and marketing operations. Among these are the James C. Hoiby
Technical Center, located on the Onan site in Fridley, and the Central Parts
Distribution Center in Brooklyn Park, a Minneapolis suburb not far from
The James C. Hoiby Technical Center, dedicated in
June, 1979, and constructed and equipped at a cost of $6 million, is Onan's
research and development facility. The
30,000 square-foot, two-story building houses materials research laboratories,
electrical and electronic labs, and computerized engine development test cells.
More than two dozen engineers and technicians staff the Hoiby Technical Center.
James C. Hoiby retired in 1977 after a 43-year career with Onan, during which
he was honored for the many engineering contributions he made to the company
and its products.
At the Central Parts Distribution Center, Onan, in
1981, consolidated all the functions relating to parts and service in one building.
More than 25,000 different items are controlled and handled at the 115,000
square-foot Center with the help of a modern computer system. The Center receives more than 150 orders for
parts daily from 215 Onan distributor and dealer accounts in the U.S. and
overseas. Also housed in this leased
facility is Onan's Service Training School, which provides training in formal
courses on all aspects of servicing and maintaining all of Onan's products for
distributors, dealers, customers and Onan employees. Onan also has two
warehouses in Minneapolis, one that is 90,000 square feet and the other 42,000
square feet. It also has a 58,000
square-foot warehouse in Huntsville.
Although all of Onan ' s products are now
manufactured in the U. S., a few years back Onan had manufacturing facilities
in Brazil and Canada. However,
manufacturing operations in these countries proved financially disappointing,
and both plants have been sold.
The Brazil operation involved Onan's first
experience in acquiring another company.
In 1972 Onan purchased a Sao Paulo firm called Montgomery-Cisa, Maquinas
e Motores S/A, Brazil's leading producer of small gasoline engines. It was
doing about $5 million in sales annually at the time Onan acquired it. The
product line was expanded to include gasoline engines, diesel engines,
alternate fuel engines, and a variety of small generator sets and pumps. A small profit was made by Onan-Montgomery in
the first two years after the acquisition, but losses were experienced from
then on, and the company was sold in 1980.
Tom Valenty, president and chief executive officer
during the years Onan owned the Brazilian company, said, "Shortly after
the acquisition, we were soon to became intimately aware of the problems of
doing business in a country with an inflation rate that reached 50 percent
annually, coupled with the impacts of government controls on prices, wages,
benefits, imports, duties, deposits, etc."
Onan started its manufacturing in Canada in 1964 at
Guelph, Ontario. It already had a healthy volume of sales in Canada, and the
Guelph operation was started with the objective of serving Canadian
distributors better and to satisfy the "Buy Canadian" trend that was
growing in that country. Sales did
increase during the first three years of Onan-Canada's operations and a new
manufacturing facility was constructed in 1967. Even though the product line
was expanded, sales did not meet the company's projections following completion
of the new plant and in April, 1970, the plant was closed and later sold. Onan currently supplies its Canadian market
with products manufactured in the U.S.
Onan's employment during the late 1970s and early
1980s at its three locations has ranged between 2,500 and 3,000, with the bulk
of the workers— about 1,800— in the Minneapolis locations. Employment at Huntsville is about 500, but
that number could increase to over 1,000 as Onan's L diesel engine business
reaches maturity. There are about 350
employees at the Elgar facilities in San Diego.
Elgar was acquired to complement Onan's generator
set line with power conditioning and uninterruptible power products, While the performance of the Elgar subsidiary
has been only moderately successful since the 1979 acquisition, a reorganization
and plant updating were in process during 1981 - 1983 and a strong contribution
to Onan profits is anticipated from Elgar in the future. Elgar is hampered by having facilities spread
out in five separate buildings, and a consolidation of facilities would be
Unexpected economic developments shortly after
construction started at Huntsville very nearly killed that project before it
was completed. Original plans called for
production of aluminum gasoline-powered engines and the generator sets powered
by those engines at Huntsville. The
generator sets were in high demand by the motor home market, an industry that
had been growing spectacularly during the late 1960s and early 1970s. There also was a heavy demand for engines for
garden tractors. Both the motor home and garden tractor business mushroomed
after the new plant at Fridley was constructed, and it soon became obvious Onan
couldn't meet all the new demand with production facilities in the Twin Cities.
About six months into the construction of the
Huntsville plant, however, the Arabs imposed their oil embargo in October 1973,
resulting in soaring gasoline prices, and the motor home market practically
collapsed overnight. The severe 1974 recession soon followed, and garden
tractor demand also fell off sharply.
Tom Valenty said he seriously considered stopping
the Huntsville project, but cancellation charges would have cost Onan about $11
million, so the construction continued.
As the economy recovered beginning in 1976, sales of motor home
generator sets and garden tractor engines improved dramatically, providing a
good demand for Onan products manufactured at Huntsville.
Then the development by Onan of its diesel engine
program occurred a few years after the Huntsville plant was completed, and L
series engine operations now dominate
production in the ultra-modern Alabama plant.
The new plant easily could have been constructed in
the Twin Cities instead of Huntsville, had it not been for a very unfavorable
business climate in Minnesota. The Fridley complex had been designed to allow
for future expansion, and it originally was planned to enlarge that facility
when sales volume would require additional manufacturing space. There was ample
land available at Fridley and many other factors in favor of expansion there,
but Minnesota, under its then new governor, Wendell Anderson, had just decided
to shift the state's tax burden from home owners to business. Corporate income taxes, personal income taxes
and the sales tax were boosted so real estate taxes could be cut and state spending
could be increased.
At about the time Onan was deciding where to
construct a new plant, its tax liability in Minnesota rose by almost 50
percent. And while Minnesota was
increasing Onan's tax liability, officials at Huntsville came up with several
ideas to make a move there exceptionally attractive from an economic
standpoint. The decision to build in
Alabama instead of Minnesota saved Onan about $3 million immediately, and an
amount substantially exceeding that with the planned expansion into diesel
Tom Valenty didn't allow the situation to escape
the notice of Minnesota's new governor,
in a letter to Gov. Anderson, Valenty stated, "The proposal to meet
the rising cost of operating the state government by massive increases in taxes
is likely to ‘kill the goose that lays the golden egg’. The state derives its
income form business and individuals. The individuals derive their income from
the businesses, whether it be manufacturing, farming, banking, or services. The
critical item in this chain is business. Without business there are not jobs –
no income – no tax money.”