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October 2016 - Similarities in the Gap and GE Warehouse Fire Losses

In 2015 and 2016 two large warehouse property fires occurred to General Electric (GE) in Louisville, KY and Gap in Fishkill, NY.

GE Louisville, KY Fire - Appliance Park
Fire Occurred April 3, 2015

An approximately 854,000 sq. ft. office/warehouse (Bldg. 6) was consumed in a fire. At the time GE leased a majority of this building to Derby Supply Chain Solutions (Derby). Derby provides all five GE plants at this location with parts received from overseas suppliers. These parts are owned by Derby. In addition, GE occupies a portion of Bldg. 6 for some administrative functions, printing center and light storage.

In addition to Bldg. 6, minor smoke/water damage was sustained to Warehouse Bldg. 6A. The adjacent manufacturing Bldgs. 1 - 5 sustained varying degrees of smoke damage, with Bldg. 5 sustaining heavy smoke damage.

At the time of the loss, GE was in the process of selling this appliance division, which made the loss at this facility even more of a problem. The sale occurred to Haier for $5.4B in January 2016.

As a result of the fire and lack of available supply parts from Derby, GE had to stop production at Appliance Park. The total property loss was estimated at $60M for the Building and $50M for the Contents. There was also an additional $135M of lost sales (Business Interruption {BI}) that occurred. GE normally manufactures on a just-in-time basis at this complex and maintains little to no inventory of appliances. Derby reportedly had approximately six weeks of supply parts needed by GE for all of the product lines manufactured at Appliance Park.

In an effort to mitigate their BI loss & resume production, both GE & Derby contacted suppliers in Asia to obtain replacement supply parts on an expedited basis. In addition, Derby leased a new facility 20 miles from Appliance Park.

With regards to the loss, a sprinkler water flow alarm was reported just before 7 a.m. Alarms were monitored on the property and reported to the fire department via 911 after confirmation by plant security. The fire investigation reported there may have been a delay in notification of the fire department by plant security. The official cause of the fire was undetermined. However, there was speculation that lightning could have been the cause. The roof in Building 6 was also leaking water in a many places, giving rise to the theory that an electrical short circuit caused by water leakage may have also been the cause of the fire.

Fire investigators said GE's insurance company, which inspects the building yearly, has told the company for more than a decade that sprinklers need to be updated. In response to the concerns from the insurers, GE instituted a campus-wide multi-million dollar fire protection improvement plan. "I believe the sprinkler system would've held the fire in check, which would've allowed the firefighters to get in and have been able to extinguish the fire," said Ott, the lead investigator from the arson squad. However, four of the eight pumps were out-of-service at the time of the loss as they were being replaced as part of a fire protection upgrade program. Only one pump was operating to meet the plant demands. When a plant operator attempted to start the three remaining pumps during the fire, the pumps failed to start. To make a bad situation worse, it appears that much of the water from the operating pump was being dumped through a pressure relief valve that was stuck in the open position.

"Some of those recommendations were made in 2001 to make these changes and they had started the process," Ott said.

GE indicated they gave the recommendation to Derby Industries, it was their responsibility as lessee to make those upgrades and they did not do so.

FM Global was the insurance carrier for GE at the time of the loss. Typically, their loss prevention engineer spends six to eight weeks a year inspecting GE's buildings for the annual insurance renewal. They wrote in a 2014 review that the shift to plastic from metal parts posed a risk because of its "higher heat release," three times that of ordinary combustible material, according to a summary notes by investigators.

Also, the fire occurred on Good Friday morning when there was a skeleton staff on hand.

Gap Fire - Fishkill, NY
August 29, 2016

More than 100 firefighters from more than 20 departments across three counties battled the Gap blaze, which erupted late in the evening on Aug. 29, 2016. The fire destroyed a 990,000 sq. ft. facility. Approx. 600 employees were out of work after the fire occurred.

Authorities say a massive blaze that ripped through a Gap Inc. distribution center in New York was intentionally set.

State police and the federal Bureau of Alcohol, Tobacco, Firearms and Explosives determined the origin of the fire was "arson."

Gap, which reported a 3% decrease in August comparable sales, said it was working to mitigate the impact of the fire on its business continuity plan.

The facility serves the Gap's northeast region. It opened in 2000.

It ripped through the facility on August 29th while 100 employees were inside, but luckily they were evacuated safely.

The Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) is offering up to a $7,500 reward for information on the fire in Fishkill. Gap Inc. is matching that bringing the reward for information up to $15,000. One rumor indicates a disgruntled employee set the fire with a picture provided on social media.

Reportedly the alarms were shut off when this fire started and this was normal practice so there would be no trouble "nuisance" alarms.

More details will follow as this large loss fire is further investigated.

What similarities are there in these losses?

Risk Logic provides unbundled Property Loss Prevention services. Our staff of trained engineers average over 25+ experience and can provide detailed property risk assessments at your facility. Loss Prevention may have prevented these losses.

References:

Courier Journal - Broken Hydrants, Hot Plastic made GE fire worse, 7/29/15

Sam Dannaway - with Coffman Engineers - Louisville Fire Loss

Will Robinson - Daily Mail.com 9/7/16