TRAVERSE CITY, Mich. - To many people in Michigan, resort towns like Traverse City are considered part of the “Up North” region. Yet despite the geographical differences, the two areas have been suffering through some challenging economic times as Michigan reels from job losses, decreasing property values, and out-of-state migration.

Those similarities were discussed during a recent dinner roundtable meeting of seven Traverse City-area HVAC contractors. The group included Bob Roe and Scott Klco of Precision Plumbing & Heating Systems Inc.; Mike Janowiak and Steve Ennis of Premier Heating & Cooling Co.; Jim Holstine and Rex Ambs of GeoFurnace Heating & Cooling LLC; and Jeff Aiken of D&W Mechanical.

SAD STATE OF FINANCING

Most of the contractors agreed that customer financing was a big concern to them. The days of easy-to-get credit are gone and lots of people who might normally qualify for a loan for new HVAC equipment are getting turned down. “We are concerned about our customers getting financing to upgrade,” said Ambs.

“A lot of people who would use equity in their home to borrow money no longer have that equity,” said Aiken.

Ennis said a lot of people have to take money out of their retirement income to pay for replacement equipment while others are being more creative with their financing. “We’ve been going further out than 12-months financing in some cases,” he said. “But we are seeing a lot of people fixing 15-year-old furnaces, too.”

Ambs is concerned about the future of the new construction market in his area. While most contractors at the roundtable agreed that people would continue to build million dollar homes, there will be fewer of the other ones.

“New construction has dried up in the middle market,” said Roe. “People may still be building million dollar homes, but we aren’t seeing many $280,000 homes.

“I’ve heard a lot of fear in builders’ voices. Some are good through mid-year but are not sure what is going to happen after that.”

REPAIRING AND OTHER WOES

Holstine said his business has seen a lot of equipment repairs and not as many replacements. “We are doing more heat exchanger replacements than usual this year,” he said. “Some of these people can’t quite get over the financing hurdle in order to afford a new system.

“Even our maintenance agreements have slowed down. You can only hit up your customers so many times about renewals.”

The contractors agreed that there are more price shoppers looking for weekend work and that collections are a problem, too. “You have to have people get paid at the time of the service,” said Klco.

Janowiak said a lot of contractors in the area have downsized or changed hands. That has left some skilled workers on the market and finding qualified people, at least for the short term, has not been a problem. “We used to do appliance repair but that business dried up and two of our employees were gone,” he said.

Employees are also looking for health benefits, which are becoming more in demand as the work force is getting older. “Health benefits are a big priority,” said Ennis. “Guys are getting older and have families. And single guys are watching health costs, too.”

One contractor said his company is taking on work it would not normally do. “Guys are willing to work nights and weekends to get the work done and get paid,” said Aiken.

Educating consumers was another topic discussed by the Traverse City contractors. It was agreed that the more the customer knows, the easier it is to make a sale. “It is easier to sell an educated customer a new system over a person who might be out there trying to sell 80 percent furnaces,” said Ennis.

“Energy prices have spurred an interest in heat pumps and geothermal systems,” said Janowiak.

But Ambs noted that even people in the most expensive homes need to be sold on energy efficiency and green systems. “These people need to be shown how green can benefit them,” he said.

Despite a lot of doom and gloom, Roe said there are signs that everything is not as bad as it may seem. “The malls were still very busy around here during the holidays,” he said. “There are a lot of opportunities available if you look for them. People are staying home and not traveling, which means they are spending more money on upgrading their houses.”

Publication Date: 02/23/2009