BANGOR, Maine — A local heat pump manufacturing business that initially experienced rapid growth has significantly scaled back its operations and is seeking to restructure amid growing customer complaints about its service, the company’s president confirmed.
Hallowell International LLC, which makes residential and commercial heat pumps that run on electricity, got its start five years ago with financing help from the city of Bangor. Its pumps, including the Acadia heating and cooling system that is marketed specifically to colder climates, are among the latest heating alternatives for a nation heavily dependent on fossil fuels.
Although Hallowell grew fast in 2008 to coincide with high fuel prices, the company has struggled of late. Those struggles have been compounded by customer frustration, including from one of the company’s biggest customers, a military housing project in New Jersey that has purchased 1,370 Hallowell units — 30 percent of which have failed — over the past three years.
Duane Hallowell, the company’s president, CEO and namesake, said he has just three full-time employees on staff, down from 40 less than three years ago. He said he has been so focused on stabilizing his business that he has not been able to keep enough staff members on payroll to keep up with customer complaints.
“Hallowell International is currently operating at a reduced capacity to conserve spending through a restructuring period,” Hallowell said in a statement this week to the Bangor Daily News. “Through this period, Hallowell has continued to offer distributor and dealer support for our products and will continue to work aggressively to expedite all time frames associated with this effort.
“We remain focused on a long-term solution for our customers.”
One of those customers is New Jersey-based Architectural Renovation and Construction, a private military housing contractor for Fort Dix-McGuire Air Force base in New Jersey. The contractor bought 1,370 units beginning in 2007, and a spokesman said problems arose within six months.
“Despite holding a warranty for the units, the additional labor, and headaches resulting from removing, re-installing, packing, shipping, stocking and warehousing the hundreds of failed units became overwhelming and costly,” Matthew Haydinger of ARC said in an e-mail.
Haydinger said failures resulted from blown compressors, faulty coils, poorly designed fan shrouds, and missing and underengineered components.
“Notwithstanding, the financial losses ARC has suffered, the company and the housing community it operates under has suffered adversely in the eyes of dissatisfied and uncomfortable residents of the military housing community,” Haydinger said.
Several customers also have contacted the Bangor Daily News in recent months indicating that they have had various problems with Hallowell heating systems and that they have tried unsuccessfully to reach Hallowell International.
Richard Murray of Newbury, Mass., contacted the BDN and said he invested about $15,000 in 2008 to purchase a heat pump system from Hallowell International. Murray said it failed 15 months after he purchased it. He said the company replaced the system and it failed on Jan. 17, 2011. Murray said he has since had problems getting in touch with Hallowell.
Murray said he contacted an authorized service provider that informed him it would have to rebuild the system and was reluctant to do so.
“The cost of this approach is prohibitive,” Murray said. “The unit should be replaced.”
Another customer, Ed Cron, who didn’t give his place of residence, said he has had problems with a heat pump system as well and cannot get through to Hallowell. Other customers who declined to provide their names have expressed concerns over the company’s financial well-being.
In several online forums, Hallowell has been criticized as being unresponsive to service calls. Some customers are threatening to sue.
Haydinger said ARC, which has invested $5 million in Hallowell systems, has decided to abandon using those heat pumps for the remaining military homes to be built and is considering legal action as well.
“In ARC’s pursuit of remuneration for their losses, the company has been communicating with other adversely affected Hallowell International Heat Pump users in various states as well as the suppliers of the sourced components” to build its case, Haydinger said.
Duane Hallowell said he understands concerns but stressed that customers need to contact their local Hallowell dealer for assistance per language of the warranty. Hallowell has designated installers in every state in which its pumps have been sold.
Not everyone is dissatisfied with Hallowell’s pumps.
Bangor Hydro-Electric Co. purchased several systems for its corporate offices off Union Street. Company spokeswoman Susan Faloon said this week that the systems have required some maintenance but overall have saved Bangor Hydro money.
Heat pumps are a popular source of heat in southern parts of the country but are relatively new to Maine. At Hallowell, the pumps are designed to harvest heat from the outside air even when it’s cold and deliver hot air inside to warm homes. In the summer, the process reverses, sucking heat and humidity from the inside air and blowing it outside.
The initial investment is large — between $10,000 and $15,000 — but the payback is strong because fuel costs are eliminated.
Hallowell leases property on Hildreth Street from the city of Bangor and also is on the hook to the city for an equipment loan. All told, the city provided conditional finances in the amount of $200,000 back in 2006.
The company is still making unspecified monthly lease payments to the city, according to Economic Development Director Rodney McKay, but he didn’t know what the company’s status was. According to McKay, the city provided Hallowell conditional financing with the stipulation that some of the loans would be forgiven if the company met certain employment thresholds. McKay said in the first year, Hallowell met the threshold but has failed to do so in the years since.
When Hallowell first was granted city financing in 2006, its president and CEO said the company could create up to 900 jobs. In 2008, the company employed as many as 40 people and sold 1,600 units. Now, the company is not selling any new units.
Also in 2008, Hallowell and another local company, Nyle Special Products LLC of Brewer, fought over a heat pump patent. The dispute resulted in an out-of-court settlement. Duane Hallowell was general manager at Nyle before 2005, when he branched off to form his own company.
In 2009, Hallowell got a boost from Maine’s congressional delegation, which lobbied on the company’s behalf to secure a Department of Energy-recognized energy-efficiency rating that would pave the way for a host of incentives.
A big setback to Hallowell’s growth, according to its president, came last year when it failed to qualify for American Reinvestment and Recovery Act funds. Hallowell said he believes despite recent challenges his business will remain viable long term because it provides a unique opportunity to innovate solutions in an ever-changing energy industry.