Commercial contractors enjoy Detroit's construction renaissance
As one reminisces about the golden years of manufacturing — auto making in particular — one of the first cities that comes to mind is Detroit.
Long known as the “automobile capital of the world,” this city embraced the giants of the automotive and related industries. Giant manufacturing facilities sprouted within its boundaries and beyond. Steel mills rose along the Detroit River, an important link to the Great Lakes via the St. Lawrence Seaway.
Detroit had it all — jobs, homes, and retail services for everyone.
Then the bottom fell out.
In the late 1960s and into the late 80s, the city suffered plant closings, high unemployment, a population shift to the suburbs, and a decaying, tenant-starved downtown district. Workers drove a migratory route to beckoning prosperity in Texas and similar warm, southern regions.
A big comebackBut as the millenium comes to a close, Detroit is approaching a new renaissance. Spurred on by redevelopment of the downtown district, businesses are moving back into the city limits and new construction is evident everywhere.
Manufacturing giants like General Motors and high-tech companies like Compuware are reinvesting in the city, creating new jobs and sparking related services. Detroit is welcoming a new sports stadium and casinos into the downtown, and new home construction has emerged from years of hibernation.
An exaggeration? Not at all. Detroit is coming back, and businesses such as hvacr contractors are reaping the benefits. New construction and retrofit-replacement work are the buzzwords. Not even a shortage of qualified people is stopping the forward momentum.
“We have never seen such a renaissance as we are seeing now,” said David Williams, vice president of Kropf Service Co., Detroit. “Contractors in our area are hiring people from all over the country.”
The appeal of a resurgent Detroit market also has drawn the attention of national consolidators. But some of the established commercial contractors are taking a wait-and-see approach to the Wall Street competitors.
In this first installment on the Detroit market, we’ll look at two commercial contractors who are eagerly setting their tables for an expected upturn in the local economy.
J.A. Marble Co.Jim Marble, owner of J.A. Marble Co., Detroit, has been around the hvac business 40 years. He started as a sales rep for Industrial Combustion Co., calling on accounts in the Detroit area and eventually moving up to northern Michigan when natural gas became more readily available up there.
It made for a lot of fun travel for daughter Mary, now president of the company. “My parents had a travel trailer and we went all around the state. It was a wonderful experience.”
Jim eventually got into contracting and continued working in the two regions of Michigan. He did a lot of two-step design-build business for the government. A lot of the work was out of state.
As that business died off, he started doing more a/c work in Detroit. He planted his roots on the west side of the city 30 years ago. Today the business generates $3 million and keeps 20 people employed. All the while he has steadfastly served one market.
“I don’t think we’ve ever done a new construction project,” he said. “All of our work is retrofit. Our customers include the Detroit Board of Education, institutional work, and church work.”
Mary Marble prefers this type of work because it seems to fit their niche. She is not interested in some of the larger, high-profile jobs in town. “I think we are too small.”
Jim added, “While all of the bigger guys are tied up with downtown projects, more of the smaller jobs will be available for us.”
Boilers and ductless comfortWhile the company is active in boiler repair and replacement in many of the older area buildings, Marble sees less of a demand for this type of work, partly due to the lack of experienced boiler system designers, and partly because new construction puts different demands on the market.
“We are still actively involved in the boiler retrofit business,” he said. “But all of the buildings today are going to have to have air conditioners. It’s pretty tough to put an a/c system in a building designed for a steam boiler.
“Now we are seeing retrofit jobs involving ductless systems. There are a lot of buildings, like churches, that have no ductwork system because of the boilers.”
Mary added that some building owners are going for more efficiency and are installing newer, smaller boiler systems. “A lot of older facilities are changing out older, larger boilers for multiple systems, two or three smaller units that run a lot more efficiently.”
“In the Detroit area, there are only three or four contractors with qualified people to work on this industrial-type boiler work,” Jim said. “That is to our advantage. It is a niche market now.”
Marble said he prefers to do all design-build work but there isn’t enough in the area to sustain his business. With the resurgence of the Detroit market, he may soon find enough of this work to devote all of his time to it.
Union loyaltyUnlike so many others, Marble doesn’t seem to worry about getting enough workers for all these jobs.
“We are a union shop,” he said. “When we need people, we pull them from the union hall. Tomorrow we could have a job that required 15 people and we would be able to get them from the union hall.
“We protect our people and try to hold on to them. Some have been with us for over 20 years.”
Mary stated that the union is responsible for supplying the workers and they usually do a good job. “In Detroit, Local 636 is the best of the best. They have very good people and they train them well. They seek out people at jobsites and talk to them about the benefits of joining the union.”
What about joining a consolidator?
Jim Marble is comfortable sharing the duties with his daughter. But what about his plans down the road? “If it wasn’t for Mary, it [selling to a consolidator] would be a great idea for me.”
Another industry trend in its early stages is utility competition. “The utilities have a lot of money to invest,” Marble said. “They are not going to sit around. They are looking at other markets to get into. I’ve been saying all along that if you don’t think they’re going to get into the commercial market, you’re crazy.”
Marble added that he has already partnered with a local utility in the past on various projects and plans to do so in the future.
“They [utilities] will come to us and ask if we could help them out on a project,” he said. “We will give them the numbers and if they like what they see, they will sit down with us and their customer and work out the details.”
Kropf Service Co.You’ll have to excuse David Williams for being a name dropper. Many of his company’s clients are well known in the Detroit area.
The vice president of the Kropf Service Co. is proud of a client list that includes Ford Motor Co., Chrysler, Mazda, TRW, and local TV stations WXYZ, WDIV, and WKBD.
The commercial-industrial contractor also takes time to do special residential jobs. “We service the hvac system in Edsel Ford II’s house,” he said. Ford is the grandson of auto pioneer Henry Ford.
Kropf specializes in commercial service work and some installations. The company was founded in 1977 by Alan Johnson, who still owns the business but runs a sister company, Johnson Mechanical. Johnson bought the business from Joe Kropf, a well-known mechanical contractor.
Johnson hired Williams’ father, Tom, to run the business. The younger Williams eventually took over as vice president in 1992. David Williams now runs the day-to-day operations, which topped the $2 million mark last year.
“Tom surrounded himself with good people,” said Johnson. “And Dave has done the same thing. Right now I’d match our people with anybody else in town.”
One of the keys to Kropf’s success is an old-fashioned sales tool: cold calling. “Cold calling works,” Williams insisted. “What are the odds of someone looking in the phone book and picking your company out? We can’t depend on that.”
Service work for installing contractorsKropf also has a number of competitive contractors who are considered customers. Kropf does service work for contractors whose jobs include installation and service of process piping and related refrigeration projects.
“Other contractors will call and ask us to do check tests and starts,” Williams said. “We do a lot of warranty-type work. We have a good rapport with our competition.”
There are perks to having close relationships with other contractors, union contractors. Companies can share manpower when the need arises. Since Detroit is a strong union town, there are usually enough workers to go around.
Williams said he will only put on extra help if he can guarantee the people they will be able to work year around.
“Detroit has one of the greatest workforces in the country,” he added. “We probably have the best skilled tradespeople and mechanics anywhere.”
Even with a big workforce, there is still a need for more workers because of high-profile jobs like the new Comerica Park baseball stadium, downtown casinos, and Metropolitan Airport renovations.
“Contractors are hiring from all over the country,” said Johnson. “I have never seen such a renaissance as there is now in Detroit. I have seen good times before, but nothing like this.”
Controlling destinyWith business running at a smooth and fairly quick pace, it is a wonder that consolidators haven’t taken a hard look at Kropf. The truth is, no one has called Williams, which suits him fine. “We like to control our own destiny.”
Johnson added that he didn’t want to follow the example of a failed California consolidator. “JPW was buying contractors and eventually went down the tube. People like us are strong and wish to stay independent. We seek our own ground, our own territories, and our own customers, and we service the hell out of them.”
Speaking of service, another concern for Kropf is the competition with local utilities for service contracts. Williams doesn’t mind as long as the playing field is level.
The best thing for Kropf to do is keep its staff well-trained and motivated to perform the best service work possible. This includes continuous upgrade classes and technical training, as well as a strong emphasis on safety training.
Williams said that one of the keys to landing new service work is to have a good safety record. He cited a recent example of the care his company takes when performing a potentially risky job.
“We had to change the compressor on the roof of one of our customers. I had the option of having four guys muscle it up a flight of stairs or hire a crane to lift it. I used a crane. Did it cost more? Absolutely. Was it a lot safer? Of course.”
Williams’ plans for the company do not include rapid growth or expansion. In fact, he would feel comfortable with the company staying about the same size it is right now.
“We would like to keep our size manageable. If you grow too fast, you lose control. It’s not worth a little more profit.”