What is in this article?:
Sixteen HVACR industry leaders say that although the industry faces some challenges, HVACR contractors who have solid business practices and stay trained on the latest technologies have good reason to anticipate a bright future.
What is the main challenge facing business today? Would you have given the same answer 5 years ago?
Gary Clark: Everyone has less time today and is more connected electronically than ever before, and this trend will continue. Dealers need to be aware that homeowners are searching for information regarding HVAC systems, HVAC manufacturers, and the dealers themselves in greater frequency than possible prior to mobile communication devices and the Internet. HVAC dealers need to be easy to find and have a great story to tell about their company and services both on the Internet and social media services. The rapid increase of electronic and Internet based media requires greater effort by dealers than when the choices for lead generation tools was simply a decision between print or broadcast media outlets. Five year ago, I would not have given this answer.
Brian Cobble: The primary challenge to businesses today is undoubtedly government influence, intervention, and interference in virtually every aspect of business. In reality, there is probably not now any function or process in business that is left untouched by one or more components of government regulation. In many instances, including within our industry, the involvement of government creates significant uncertainty and/or disruption in the normal stream of commerce, and in the introduction of new products and services. What seemed to be guided much more by an “invisible-hand,” and the natural forces of supply and demand in a freer market environment, is now heavily influenced by lobbying and the very visible hand of government — changing the dynamics in business radically. This answer perhaps would not have been the same one given five years ago, but the writing was on the wall then, and appears to be coming to fruition today.
John Galyen: Managing business in an environment of exceptional uncertainty and complexity is a tremendous challenge. Today, contractors and manufacturers alike are facing an unstable economy, government regulation, and a patchwork of refrigerants combined with a shortage of skilled contractors. While the contractor skills gap and a declining workforce have been long-standing industry issues, it’s my perception that we have been losing ground on both fronts. Five years ago we were just in front of the “great recession,” so although we didn’t have the economic uncertainty, the shortage of skilled contractors was a problem for the industry.
Jerry Hurwitz: The challenge is the same that it always has been: good competitors, and our keeping our eyes on the ball! I don’t think that the government policies at this time have any impact on my business’ future because legislation keeps us all on the same level playing field.
Hugh Joyce: No, I wouldn’t have given the same answer five years ago. The biggest challenge is government regulation, government rules, and bad government policy. If we had that out of the way, there would be great opportunities — not for just heating and cooling but for most American businesses.
David Kesterton: On a contractor level, capital is still a very big challenge. From an industry point of view, navigating between regulation changes, environmental concerns, and technological product changes are all big challenges.
Mark Kuntz: We have new technologies that cut against people’s expectation of what you can do with a heating and air conditioning system. The challenge is making them aware and getting that message communicated when there are so many distractions in our environment. And that’s true not only from a manufacturer’s standpoint but also from a contractor’s standpoint. Today there are an almost infinite number of ways that you can attempt to reach the customer, be it conventional means such as TV and radio or the new social media means such as Facebook and Linkedin. It’s a huge challenge to come up with the formula that gets people to sit up and pay attention, and then moves them to action. And we’re working hard to clarify and unify our message to the marketplace, tying that in with what out Diamond Contractors and our contracting base is doing, having a message that really gets the homeowner or the building owner interested in looking at a new technology and trying to do things differently.
Is that the same as five years ago? Many of these new technologies didn’t even exist five years ago so we’re really working to integrate as many of those into a unified message and work with our contractors to generate interest.
Rich Mathews: A big challenge facing HVACR businesses today is the workforce shortage. It seems like fewer people are choosing to make a career in this industry and I believe other skilled labor industries are facing this same dilemma. Those of us in this industry have a responsibility to encourage careers in HVACR. One way hilmor is doing this is through a scholarship contest that will provide financial assistance to those pursuing education for a career in HVACR. Additionally, our RETOOL representatives are making visits to trade schools to not only demonstrate our tools, but to discuss all the different career paths — from technicians to distributors to manufacturers — available to someone with solid HVACR training and skills.
David Meyers: Change! If we look back five years, we would have just come off of the 2006 DOE efficiency standard change from 10 to 13 SEER, obsoleting more than 80% of industry products overnight. This was followed by significant economic turmoil, where we saw industry shipments cut in half. Then came the American Recovery and Reinvestment Act tax credits that created a massive mix shift in 2009/2010, which was followed by the 2010 phase-out of R-22 and finally, the end of tax credits in 2011. And today, we are in the process of dealing with the change in regional standards.
Chris Peel: Rheem is unique in that we manufacture both HVAC and water heating equipment. Both of these industries have been faced with sweeping regulation over the past four to five years. The number of rulemakings that the U.S. Department of Energy (DOE) and other regulatory bodies have issued to manufacturers has spiked dramatically. What’s been especially challenging is to see a number of rules get started, stopped, delayed and sometimes never finalized. It’s difficult to plan and invest for future product development when there’s so much uncertainty about the industry’s regulatory environment.
On the HVAC side, we’ve seen how uncertainty can cause great concern with regulations such as the implementation of regional standards and the enforcement rules for regional standards. When issues like these are not settled in a timely manner, it puts manufacturers in limbo trying to figure out where we need to invest our resources. We also can’t give an accurate perspective to our customers about how these regulations will impact their business when there’s so much uncertainty.
We’re in a similar quandary on the water heating side. In 2015, new EF standards go into effect as part of National Appliance Energy Conservation Act (NAECA). However, the DOE is also in the process of recommending new test procedures for residential water heaters, which would require uniform test procedures to determine the efficiency of water heaters. It is crucial that the industry and DOE reach an agreement on the test procedures as soon as possible so that manufacturers can have enough time to test and validate products before 2015 NAECA deadline.
Rheem believes that the regulatory environment will remain intense for years to come, and we can expect to see more regulation in our industry, not less. Therefore, it will be imperative that manufacturers, distributors and contractors initiate open dialogues about the real-world impact of proposed rules and the uncertainty that can accompany any new regulations.
Ed Purvis: In one word, the main challenge facing our business is growth. If you look at a kind of “scorecard” for us over the last five years, in areas such as technology implementation, operational performance, developing world-class plants, and globalization of our business, we have had a great run. I often remind my team of this, reflect back and show them the dramatic changes that have occurred in our business. In my biased opinion, their performance has been nothing short of spectacular. But we haven’t grown as fast as we need to.
The unitary market was over 9 million units in 2005, and while we have seen a slow recovery over the last few years we will only reach about 6.4 million units shipped in 2013, based on our current projections. Europe is a mess, has been for the past three years, and probably will be for two more years. At the end of the day our challenge is to navigate around and through those issues and to find ways to grow. Certainly we have done some very good things related to growing in adjacent markets such as industrial refrigeration, and electronics. Those are good things, and frankly, they have met or exceeded our expectations. But they just haven’t been enough. The game is growth.
Would I have done something differently over the past five years? In terms of making the sometimes painful investments in electronics and facility management/business model investments, and all the investments associated with globalization, I think I would have done everything the same. I would probably do a little better job of calibrating the expectations of me and my team on the time and effort required to execute on these initiatives.
If I could have done one thing differently I think we would have tried to execute faster. Every business faces risk/reward decisions as far as how fast to go forward. We have traditionally been a conservative company and that has served us well for many years, but I wish we had done some things faster, especially in emerging markets. There are several examples where we consciously elected to focus in certain areas, such as India and China, in lieu of other regions. Given what we know now I think I might have also taken a little more aggressive strategy in some of our vertical markets investments, and in some of our international markets in terms of investing faster in the people we needed to grow.
We’ve grown; our operation performance has been very good, and I would say although we haven’t grown as fast as we would like, in my opinion we get a solid “A” in terms of doing the right things in the past five years to position ourselves for the next five years. I think that’s the most important part of that question.
Mark Wagner: A main challenge is to keep up with the ever-changing consumer demands. The current economic pressures in the U.S. have changed homeowner confidence, spending, long-term vs. short-term prioritization, etc. that continues to greatly affect our industry. Government efficiency standards continue to reshape product refrigerant and efficiency standards. This is nothing new, but the 80% furnace regulations, lawsuit, and countersuits were new for our industry and are greatly impacting our inventory decisions, production levels, and which products our dealers promote. For the past five years, finding, attracting and retaining qualified personnel remains a huge challenge for many industries.